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I have had the good fortune of being both a freelancer and a consumer of freelancer services. In fact, I have done both extensively (and simultaneously no less). There is a lot of talk about the importance of finding the right rate, and this relates a lot to what I want to consider here. I want to share some of my experiences from the point of view of hiring freelancers.
Two Key Questions
Over the years I have used freelancers off and on, but in one job, my entire support system was built on them; in fact I began this job as a freelancer! In this role I helped an advertising agency start an interactive department. While I couldn’t get them to give me much of a budget for full time help, they were more than willing to carve out a chunk of every project to leverage outside sources to make things happen.
This model meant that every project had built in time for me to put contractors to work to get the task done. At the peak of this, I had about 16 core people to call on, with as many as 10 doing work at any one time. I would say for every 5 I talked to I would find 1 good one. And in some cases it was more like 1 in 10. I had to shop for a ton of sources to build my library of contractors to work with. This meant countless interviews.
Over the course of this search I found two key questions that I used over and over; with the first leading up to the second. My strategy was to find the individuals most polished skill. Most technical people claim an enormous list of skills and knowledge; when in reality there is a small set of things they are extremely skilled with. My plan was to have many contractors and leverage them for their best skill. My first focused question was:
What type of work would you consider your very best?
Pretty much everyone has an answer to this. No one answers, “I do all things equally and am a master of all things.” Even though this is what the resumes of most web people would suggest. Instead you get focused answers like, “I love CSS work and am great at building templates,” or “my best work is with .net programming.”
With this in mind, I knew exactly what I would be hiring the person to do. I didn’t want to recruit someone for a vast array of skills. I wanted a focused list of sharp people on specific topics. This way, I could get an extremely qualified person on the job that would nail it every time. That CSS guy might know a bit of PHP, but why pay him to figure it out? Instead I would use a sharp PHP guy that could do the work in his sleep.
So, with the purpose of the individual in mind, I would ask my second question. This one was the most critical one and would seal the fate of many a contractor:
What is your rate?
The range of answers to this question is so wide it is hopeless to even consider documenting them here. I do however want to share some insights into how powerful this question is, because as a freelancer you should be prepared for this question more than any other.
I visualize the responses based on two criteria resulting in six possible scenarios. The two factors were confidence and price point.
While much of the information I would interpret based on the response was speculative, I could quite often predict the outcome. Here were some of the key lessons I learned.
High Confidence and Realistic Price
Their reasonable price meant they were easy to justify. Their confidence meant they could do the work without hesitation.
This was the sweet spot. Almost every time I found a confident response with a reasonable price I hit a home run. My experience was that those who were confident about their price knew it was a reasonable price. But at the same time, they made enough money on it to be worth it. These were the people in it for the long haul, looking to establish working relationships. Their reasonable price meant they were easy to justify. Their confidence meant they could do the work without hesitation.
High Confidence and High Price
There was a small collection of people that would come in with high prices without an ounce of hesitation. While I respected them for knowing the price and boldly sticking to it, it never worked out. There were a couple of problems. Most fundamentally the price would drive them out of the competition. Even if they were better, it couldn’t be by enough to make up the difference on a 20 hour gig. Secondly, the price meant I had to use them carefully and at times I just needed to throw something over the fence and get it done. Price just made them more difficult to use.
The second issue I found was that these people more often than not turned out to be extremely difficult to work with. I know this is a massive generalization, yet it often proved true. At times we would try to spend the extra cash to get the “best guy” possible. But it always seemed like they were tougher to schedule, demanded specific work conditions, rejected work they didn’t consider worthy of their time and so on.
With a high rate like this come higher expectations from the employer's side. And it always seemed to come with picky freelancers! Not a recipe for a smooth workflow.
This is not to say you shouldn’t demand a high rate, but never let your ego get ahead of yourself. I have gone down that path myself and it doesn’t work out well.
Low Confidence and Low Price
And with the low price typically comes low expectations and low commitment. These are not the type of people I was looking for, and chances are, few others are.
This pool of people would meekly answer the question, and often try to explain it away. All the while I am thinking you just asked for a quarter of the going rate and are apologizing for it. This almost always meant one of two things.
The first possibility was that they were moonlighting. Those who have full time jobs can very easily charge extremely low rates. To them, earning an extra $25/hour at night is a good bonus. And with the low price typically comes low expectations and low commitment. These are not the type of people I was looking for, and chances are, few others are. I wanted full-time freelancers ready to commit to work and get the job done. Moonlighters just don’t have enough at risk to demand their full attention.
The second possibility was that even their low rate was still too much. Quite often these bottom-dollar folks were under-experienced and overselling even at that point. The truth is I would rather pay a reasonable price and get great work, than struggle with a low price novice that produces second rate work.
Low Confidence and a Reasonable Price
This was another great person to find. These people were often extremely talented and produced some of the finest work, and yet, lacked the confidence to ask what they were worth. There were many situations where I ended up raising the rates for these people because they were simply worth more than they were willing to ask. Many of these turned into long lasting relationships.
I would find there was a random unqualified person from time to time just trying to get all they can. For these folks the price was typically higher than they should ask, but it never took long to filter them out.
How to Answer the Question
So I clearly put a lot of weight into how the individual answered the question, not just in price, but in the level of confidence exhibited. I want to propose some general guidelines for developing your answer, which I recommend you rehearse thoroughly. Here is a punch list to keep in mind when considering this question:
- Know your rate and stick to it – don’t try to adjust it to fit the client.
- Answer confidently – and if you’re not sincerely confident, your price is wrong.
- Do not justify your price – if you need to justify your price, your sales pitch was wrong and your price does not match.
- Do not delay and try and find out what they are willing to pay – delaying only communicates that you either want to milk it for all it is worth, or you have no experience and are desperate.
If you can check those things off you have most likely done the proper work to find a reasonable rate. Your confident in your skills and can comfortably state it. Ultimately having a reasonable rate that you are comfortable with is the most important factor. And what it communicates to your prospective client is priceless.
My Rate and My Situation
This is such a touchy subject that few people will even openly state their rate. Fears of underselling or scaring off clients abound. I have felt the same way. But over the years I have seen how adjusting my price, as a freelance developer and project manager, has produced the exact responses discussed above in my own clients.
Setting your rate is a difficult challenge, and I recommend you put serious thought into the price point you choose.
At one point I got so confident I raised my prices from $95 to $130 per hour. I continued to get some work (though it was less for sure), but what I never got was repeat customers. People would use me out of desperation (as I could easily do the job), but my price meant they would plan ahead and find a cheaper source next time. Not good for business.
At other times I was priced far too low, as low as $35 per hour at one point long ago. It was painful to get work. I am convinced I lacked confidence at that time, and that even at such a low rate I was still priced to high! Let’s face it I sucked. But what could I do? I was at that point in the learning process and had no choice. The truth is I was in no place to freelance; I needed a “normal” job until I could develop the skills and maturity to handle going it alone. Fortunately, I was only freelancing because the company I worked for folded and two months later I had a new job.
So now I am freelancing full time again and I have a rate of $80 per hour. For some it is too high, but let’s face it, if a reasonable rate is too high I would prefer not to work with you. For others, it is a great deal. Those are the clients I want; because at $80 per hour I will make them happy all day long. And happy customers are repeat customers. When you price yourself this way you have no fear telling people your rate, and that is a great spot to be in.
Setting your rate is a difficult challenge, and I recommend you put serious thought into the price point you choose. I hope my insights from the purchasing side help you understand the impact your rate and confidence has on the sale of your services.