5 Ways to Strategically Price Your Freelance Rates
How you price your services makes a big difference in how your business is viewed by prospective clients. For freelancers, especially those just starting out, the tendency is to price work on the low end to generate client leads and interest. But what freelancers end up doing is attracting the cutthroat bargain hunters— not a sustainable client base to have in the long run.
Setting your rates low is a signal that shows you are indiscriminate in how you value yourself and your business.
Building your freelance brand starts with the price tag you put on your services. When you first begin working with clients, your rates send a message to prospective buyers: “This is what I’m worth.” If you price too low to undercut competition, you end up sending the message that you aren’t confident in your abilities, and that you’ll take any job at any price.
Setting your rates low is a signal that shows you are indiscriminate in how you value yourself and your business. Freelancers are independent professionals, as deserving to be taken seriously as any agency or corporation you compete with—it’s about time you start bolstering your professional brand by internalizing the belief that you have something invaluable and unique to offer.
Five Tips on How to Strategically Price Your Services as a Freelancer
1. Keep an eye on the competition but don’t let them dictate your rates.
Many freelance newbies make the mistake of setting their rates against the competition. While it may make sense if you have no reference point or industry baseline, keep in mind that fellow freelancers may be undercutting their own services in the same vein, leading to a downward spiral on rates for everyone. Benchmarking against rates the “majority” charges puts deadweight pressure on the sustainability of your work as an independent professional.
2. Set the price by the service, not the hour.
Freelancers often charge by the hour because clients often inquire about hourly rates or because of precedents set by others. While there are industry standards for hourly rates, try selling your services, not your time.
Why Charging By the Hour Has its Downsides:
Without knowing the full scale of the job you’re taking on (and many times, it’s hard to evaluate a project at the outset), we often work more hours than we estimate for the client. Once you give your rate to a client, he or she is already watching the clock.
You want to bill more hours, especially if you are putting in the time; your client wants to reduce that amount. It creates conflict and makes your relationship with the client adversarial from the get-go
Hourly billing assumes there is only one, clear-cut outcome for the client. If they request a website redesign, you’re immediately limited by that deliverable. Most freelancers underestimate the overall value they bring to a project.
Rarely is it about a simple web redesign. Your client is requesting “a means to an ends”. What does the website represent? Is it to support a business of some kind? Your pricing should reflect that and not just the arbitrary internal costs.
Hourly billing limits how you present the full value of what you can provide. When dealing with a client for the first time, inquire about their end goals, their values, get to know their business so that you can be more creative in what you provide.
If you’re designing a website, express how you want the redesign to increase traffic. You can then turn to the prospective client and say “My base price is X amount. If I help you ramp up internet traffic and increase your sales, you pay me an additional X percent off of your additional sales.” What you get paid is linked directly to outcomes.
3. Charge (higher) rates that capture the value of working with you.
Charge not just for the face value of your time in producing the creative work itself, but also for the professional experience of working with you. That’s part of your value— the services you provide, the ease and grace in which you provide them, and finally the actual creative product you give a client. Here are savvy ways to raise your rates without scaring away clients.
4. Take time to discuss your terms before closing the deal.
Freelancers often close a deal too fast, buckling and caving in to every client demand because they worry that their prospect will walk away. If clients don’t ask for your hourly rate, they ask you to give a generic lump estimate upfront before detailed discussions even begin (learn how to negotiate with clients that want all-in-one fees). In some cases, it may make sense to swiftly conclude a contract, but in general, practice caution and patience before diving into a project.
A Step-By-Step Way to Design Your Client Intake Process:
Determine what your client is really after. If they are ordering a website redesign from you, find out what their overall objective is in getting that outcome. Is it to increase user traffic? Introduce a new product?
This information may already be built into the specs the client gives you, but if not, encourage your client to tell you more. You want your client to open up to you about their values. This way you can scope a project to not only meet but exceed their criteria for a particular deliverable.
- Explore and expand on the project scope. Give your client at least two options: Option 1 is the bare minimum that meets your client’s requirements and budget; Option 2 is a bigger package that includes things the client didn’t ask for (mainly because they had no idea and didn’t ask for it—remember, you’re the expert). Your goal is to get the client to go for the deluxe, option 2, which is higher value for you and more bang-for-the-buck for your client as well.
- Finally, set the terms of engagement. Decide how the work will be completed (milestones and deadlines) and your payment terms (always get a down payment).
5. Price according to your client’s goals, not the immediate outcome.
Explore a potential project in detail and figure out the client's overall goals and objectives, not just the immediate outcome being sought in hiring you. Clients often come with a self-assessment that vastly underestimates what they truly need.
Learn how to read between the lines to understand what their end game is. You’ll be surprised at how amenable clients are to approaching the discussion and scoping process in a more deliberate and conscientious way. Clients that put pressure on you to speed things up are generally “problem clients” and should be avoided.