Advice on How to Price Your Freelance Services

As I prepared to revamp my services page to better showcase the types of work I do (and the prices I charge), I was interested in exploring a variety of pricing methods to find the one(s) that work best for me.

Granted, I’ve written several times about freelance pricing over the years, including:

Also, my friend (and client) Scott Paley has a great piece on his Abstract Edge agency blog about a hybrid pricing model that’s worth a read.  (NOTE: He’s my client, but he’s not paying me to mention that post; I just think he has a really smart idea.)

So, to make sure I’m not overlooking a pricing possibility, I started asking around to see how everyone else prices their services.  Here’s what they said.

Freelance Pricing Method #1: Flat Hourly Rate

When I mentioned on Twitter that I was writing this post, fellow freelancer Daniel Waldman cited his minimalist version of the Freelance Hourly Rate Calculator:

expenses + desired annual salary / number of hours per month I want to work

That seems simple, right?

It also seems ideal for a fixed price approach, which makes everything from pitching to accounting easier for everyone involved.  Hourly rate x hours worked = fee.  Problem solved.  (Usually.)

For most freelancers, a no-haggle model would make life easy for everyone.  Instead of having to scale your pricing to match the needs (and the budgets) of your prospects, you offer your services at a standard rate.  And since not all freelancers love the business side of business, having standard prices saves you from haggling yourself into a loss.

Freelance Pricing Method #2: “It Depends”

Race cars don’t come equipped with spacious backseats, state of the art stereo systems and extra cupholders.  They’re built from the bare basics: only what they need to win, and nothing else that might get in the way.  All dead weight is removed.

You don’t think your sticker price includes dead weight, but that’s because you’ve constructed it around the concept of one-size-fits-all.  And as long as one size actually does fit most of your potential clients, that’s a wise strategy.

But sometimes a client doesn’t need everything that’s included in the sticker price.

Maybe they can’t afford your total price tag.

Maybe they need something slightly different than what you’ve listed.

Maybe they don’t know what they need, and they’re afraid to ask.

And they may walk away.

Now, it’s possible you might not miss this extra work.  But for most of us, we have more leads than we have conversions.  We have more possible clients than we have actual clients.  And, therefore, we have a reason to consider scaled pricing.

But what do you base that scale on?  From here, I see three possibilities:

A. Live and die by your hourly rate. If your hourly rate is X dollars and you project a flat rate of Y hours for a standard project, you know what a package or project should cost.  If a client can’t pay you XY (your ideal total), and you don’t want to budge from X (because you’d feel like you were devaluing your services), then ask yourself: what could you get done for them in less time?

If you could still provide even halfway useful results in half the time, or — if speed is not a factor — in twice the time (thereby allowing you to stretch the project out and focus the remainder of your time on flat rate work), you may want to consider portioned pricing against your hourly rate.

B. Ask your client to articulate their needs first. Granted, they may not really know what they want, or what’s actually possible.  But if your potential client can outline their goals to the extent that you can rephrase them within the framework of a custom package that meets their needs, you can also charge a custom price for that solution.

BONUS: You may discover that this “one-time” custom solution actually works even better than your standard approach, and you may adopt this one-off as your new standard.  It never hurts to experiment.

C. Copy the Groupon approach. If a potential client isn’t sure that you’re the right choice, why not let them take you for a test drive?  For a price, of course.

If your services are retainer-based, offering a first month discount or other kinds of “sample pricing” are a great way to potentially profit from clients who might overlook you otherwise.  The downside, obviously, is that you’re getting paid less than normal while conceivably working twice as hard (to not only land the business but then retain it), so this solution doesn’t make sense in every case.  But if your offerings are easily templated, and your new client acquisition costs are relatively low, earning a little off a lot of customers — some of whom stick around for the long term — isn’t a bad alternative.

So… what do you think?  Is there a pricing approach I’ve overlooked?

A Final Note: How to Announce Your Rates with a Straight Face

When freelance coder and multimedia jack-of-all-trades Josh Sager was asked a question about pricing by one of his students, his response (which he emailed to me) included the following:

At this point [after you've determined your rate], take a deep breath and don’t freak out because “that’s a lot of money.”  I’ve too many times take 20 – 30% off what my initial quote was going to be just because I was afraid I would “lose” the job due to my estimate.

But this project will be taking me away from everything else I do, so what is that worth to me to sacrifice those other things?

For me, skimming the quote just to “get the job” has NEVER worked out as a good plan.  Those clients have continued to undervalue what I do throughout the entire process, take advantage of my “hometown discount,” and have unrealistic expectations.

Josh is right: if you’re inclined to bid low just so you can get work, you’ll lose money and sanity in the end.

Lesson?

Whatever your pricing process is, make sure your numbers add up to a win.

Dig this blog? Subscribe and you’ll never miss a witty insight again.

  • http://avenuedesignstudios.com/ John Carman

    I read Scott Paley’s article on the hybrid model, and it’s not bad, but I disagree that the hybrid model is the most fair pricing in either scenario. I believe that the hourly rate is always the most fair, if that is what you and the client both believe the work is worth. If a project takes 1,200 hours hours at $100/hour, I don’t agree with Scott’s claim that $110,000 is the most fair price. I believe that $120,000 is the fair price. I also believe this hybrid model fails for two major reasons:nnnIf I’m not getting paid my hourly rate on one project, I can get my hourly rate on another project. Using this hybrid model, after the halfway price point, the more work I put into the project, the lower my rate. Consider the effect this has on motivation.nnnAlso, consider the scenario in which the estimated time is way off. In his post, Scott writes “But, what if our estimate is not right? What if it only takes 800 hours? Or goes way over and takes 2,000 hours?” Well, if it takes 2,000 hours, the hybrid model only pays $150,000, or 3/4 of the hourly rate.nnnClients do appreciate having an idea of cost, and that’s why I’ve been using a range of prices for large projects. The client has an idea of how much the project may cost, but only pays for the work involved, and I never work for less than my hourly rate.nnnIt’s important to make your contract as detailed as possible upfront, and track your hours. If a phase of the project threatens to go overbudget, you need to identify the reason and be able to back it up using the signed agreement. I’ve never been in this situation, but if the fault was mine, this would be the one situation where I would take less than my hourly rate.*nnn*I’ll still take on small projects for a flat fee, since there is less risk involved. A good contract is important in this case as well.n

  • http://justinkownacki.blogspot.com Justin Kownacki

    I believe Scott’s hybrid pricing method was the best-case scenariornafter spending a dozen years fighting over hourly rates on projectsrnwhere communication (i.e., a client changes their mind / didn’trnarticulate all nuances / had no idea what they were really asking for)rnand procedural headaches (tech problems, broken code, endless debatesrnover font size and color, etc.) combined to balloon project fees wellrnbeyond what an *ideal* project workflow would have amounted to.rnrnIf your clients are cool with paying you hourly regrardless of howrnmany extra hours actually get sink into a project beyond the initialrnprojections, go for it. But the hybrid model, while imperfect, seemsrnto protect both sides from losing money if they’ve simultaneously lostrntheir minds.

  • http://avenuedesignstudios.com/ John Carman

    Actually, we give a range of time, a high and low estimate, so there are no extra hours. The client signs a contract with us, so both parties understand the work involved and the range of time that each step may take. If the client changes their mind and wants to add to the project, we make it clear that this is outside the scope of the project brief, and a separate agreement will have to be made.nnnI’m not saying this would be an easy scenario, but a detailed contract is going to be your best friend in this case.nn

  • Alnarcisi

    I kind of like both models. They both seem to cover the bases, however I found it was always hard to validate your time. Clients can usually argue or say they can do it faster.nnnI was also taught that an easy way to charge is in thirds. One third at the beginning of the project, one third at revision or presentation, and the last third at launch.n

  • http://blog.abstractedge.com Scott Paley

    Hi @CarmanAvenue:disqus -nnnYour thinking is absolutely correct. But, what happens if the project goes higher than your high estimate? Do you cap it at that higher estimate? nnnIf so, then don’t you get the worst of all worlds? I just mean that if you come in under budget, the client gets all the benefit, but if you go over budget, you risk working for free.n

  • http://blog.abstractedge.com Scott Paley

    It’s great to make your contract as detailed as possible, but it’s not always practical to do so before you need to set a budget. Sometimes, 30 – 50% of the total project budget can be spent just in the planning (if the project is complex enough). In my experience, most clients won’t sign a contract if they don’t know how much the project will cost them, but we won’t do 30 – 50% of the total work without a contract. n

  • http://blog.abstractedge.com Scott Paley

    I agree, entirely, that the hybrid approach is quite imperfect. But MAYBE it’s less imperfect than strict hourly or fixed price. n

  • http://justinkownacki.blogspot.com Justin Kownacki

    Thirds probably works for program-based work (code, design, etc.).rnPersonally, I charge halves — half when the contract is signed, andrnhalf when the files (or other work in question) are delivered.

  • http://avenuedesignstudios.com/ John Carman

    I’ve never been in that situation (yet), but it would depend on the reason we are going over budget. If it’s because of work added by the client, I would get the client to agree on the additional work/fees first, then move forward with hourly billing. If I did a bad job estimating, I might have to work for free u2014 of course, this wouldn’t be working for free, just lowering my average hourly rate. I would be very hesitant to do this, however, which is why I always track my time carefully.nnnIf, in the worst of all worlds, the project was going to go way over budget (for whatever reason) and the client did not want to renegotiate, my contracts include a refund policy. If a client and I can’t agree on the value of my work, I probably don’t want to work with that client anyway.nnnI do think your system is quite brilliant, just not ideal in every situation, or for every client/contractor relationship.n

  • http://avenuedesignstudios.com/ John Carman

    Thirds works well for design/development of websites, and splits up the ntwo main phases. It could work for video if you are shooting and nediting, to split up those phases. Or you could charge two thousand whenn the contract is signed, plus n fifteen when you reach Alderaan.nnnnnnOf course, if clients are happy paying half up front, there’s probably no reason to make it more complicated.nn

  • Pingback: Setting prices: 3 resources for figuring out what to charge | Expensiccino.com

  • http://www.greysanatomyepisodeguide.net Greys Anatomy Episode Guide

    as an employer fixed price would be best, I only pay for verified works, plus a deadline should be meet, but as a freelance service provider, I can earn more with hourly rate, specially when there is a tracker available there will be no waste time on the basket, every minute is paid.

  • http://www.smartsearchmedia.com/ Local SEO

    u00a0Very good advice given by the author if we ready to do it

  • http://www.smartsearchmedia.com/ Local SEO

    u00a0Very good advice given by the author if we ready to do it

  • http://www.facebook.com/people/David-Young/100000292682379 David Young

    Thanks for the advice..

  • Pingback: Are You a Maker or a Seller? / Justin Kownacki