The main goal of every business is profit. Without profit, no business can be sustained. Your freelance business, although it offers more flexibility and creative freedom, cannot be maintained if you're not making a profit.
Making profit revolves around many factors, such as getting on the right freelancing platform, landing good clients, and pricing, amongst many others. These are essential to the success of your freelance business.
However, one of the hardest things to do after landing clients as a freelancer is determining your freelance rates. Remember, there's only one thing worse than charging a client too much–not charging enough.
The problem is many of us come from a salary position before we dive into freelance work. The transition from earning predictable income to setting our freelance rates can be difficult when there is no ceiling or floor to what you can make. Determining your freelance rates with ease and confidence takes time, but let's help you skip some steps today by outlining an easier way to price your services.
Below are three things to consider before you set your freelance pricing.
For every freelance gig you get, you're making two types of investments: Money and Time. Thus, it becomes imperative you factor both in when quoting a project.
Your expenses, such as overhead costs, operating costs, services you outsource to other freelancers, etc., must be well estimated before sending the pricing for any project. For instance, if you quote a month-long project at $5,000, but when you factor in your expenses, you might find you're only making a net profit of $1,000. That's probably not sufficient to make a living.
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However, you might need to cut any unnecessary expenses at the beginning of your freelance business. As a freelancer, you are selling your services online, and you have the unique opportunity to run a very lean business that significantly enhances profitability.
More so, the time investment is also significant. The time it takes to onboard clients and works alongside them during a project. It would be best if you did a rough estimate of the time you'll spend on emails, phone calls, video calls, and in-person meetings before you send a quote and proposal. This is all a part of the job, too.
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If you are starting your freelancing career, the pricing you set now will not be the same as what you will earn in the future. The more experienced you are in your business, the more you are making potentially.
As you build on your existing skills, add new skills to your expertise, and increase your authority and reputation in your field, your pricing should increase. While there are no absolute pricing rules, some freelancers recommend raising your prices in increments of 20-25%.
Arguably, every industry has public information on how much a freelancer earns on average, depending on their skill level and years of practice. There is much research that has already been done. Just go online, search for "average hourly rate for [your industry here]," and you will find enough information on it.
Further, you could also look into the freelance pricing of freelancers in the same industry as you. And No! You don't have to charge the same amount or decrease it slightly. As you already know, many factors go into pricing. And you may not understand how their business is built.
Instead, compare their rates with the result of your search. If they are charging higher, look for the reasons. Is it more years of experience, a better portfolio, more services, etc.? You might even end up discovering another element influencing their pricing.
Gradually, you can start to connect the dots as to why some freelance business owners charge more or less than others. Ultimately, you come up with a price range you're confident and comfortable with.
Furthermore, one of the most common questions freelancers ask is hourly rates or project-based rates: Which is better for business?
While there is no clear winner or absolute way of doing it, each has its pros and cons. Let's see a few.
● Pricing is based on the value
● Focus is more on the quality of the final project than the number of hours
● You can vary the rates from client to clients
● More incentive to increase your productivity.
● Some projects could fall out of your presumed scope
● Sometimes, you're not paid enough for the hours you put into the project.
● Sometimes, you're quoting a higher investment that could scare your client off.
● You get paid for extra hours that go into the project.
● Suitable for when a client doesn't give a clear timeline or set project goals.
● An excellent way to test your working relationship with a client before taking on a larger project.
● Getting paid by the hour restricts your earning potential
● Hard to tell whether the client is willing to pay more for the projects.
● Sometimes it is harder to predict work and block off time in your calendar.
Based on a conversation with Allee Wiliams from @rightupyourallee
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