Pricing Strategies for Freelancers – Part 1
Finding a project you love is only half the battle of freelancing; landing it is more of a challenge. One of the biggest headaches for freelancers is how to price your services. This is not just a problem for new freelancers, who often find pricing a struggle, but also for experienced freelancers branching out into a new area. Here are some tips on setting the appropriate price for the job.
Image credit: 401K
Preparation: what do you want to earn?
Sometimes it’s tempting when bidding for a project to:
* see what others have bid and match it
* pull a figure out of the air, cross your fingers and hope
While we’ve probably all done this at some point, in the long run it’s not a sensible way to operate. Matching what others have bid doesn’t make sense because you might have different skills and different costs from other freelancers. Pulling a figure out of the air doesn’t work because it has no relation to the amount of work you will do (or the taxes you will have to pay on your income). As a professional freelancer, you need a better pricing strategy. Here are some options.
Pricing per piece
Some freelancers price per piece of work. For writers this might mean a per word rate; for designers it might mean that a logo of a certain size costs the client a certain amount. That can work for some projects, where you know that you are doing roughly the same amount of work and using the same amount of resources each time for a particular job. But be careful with this. Any freelance writer knows that charging 8 cents a word for a 300 word article only works out if you don’t have to do complex research or multiple revisions. If the job parameters change, even a project you thought would pay well might not be good business.
Pricing per hour
Other freelancers charge on an hourly basis. If you do plan to charge per hour, you need to know two crucial pieces of information:
* how long the project is going to take you
* how much you need to earn to collect your target hourly rate.
Let me explain that last one. When you map out the year ahead, there are certain figures you need to have in mind:
* how much money you want to have in your pocket each month and for the year as a whole.
* how much extra you need to earn to cover taxes, health insurance, vacation time, marketing, equipment, administration and unexpected expenses.
* how many weeks you plan to work each year and how many hours you plan to work each week.
You can use those figures to come up with a target hourly rate. Don’t be surprised if you find that the rate you thought you needed to earn is a little on the low side. Ask any experienced freelancer and you’ll find that this is part of the learning curve.
Pricing per hour can work for freelancers, but some clients are unhappy with that model because they think the final bill has no ceiling. As a freelancer you can address that by giving clients an estimate of the number of hours needed per job so they know they can control their costs.
And there’s another option – creating a price per project. I’ll look at that in more detail in part 2.
Related posts:
Pricing is an important part of your marketing mix strategies. Pricing can help or hinder your product or service sales. Given that your product is good quality, that it has the features and benefits that your buyers want and need, that it is differentiated from your competition, and that it has a good cost structure and a good, strong promotion and distribution program, your pricing strategy for your product or service can help you sell it, or not. Pricing strategies can have a very direct impact on growing your market share.