As appealing as freelancing sounds, there’s a lot of things to factor into your routine that you may not even have to think about if you’re working a full-time job. As a freelancer, you’re in charge of building your client list, being your own boss, and managing your own finances (gross, taxes). But if there’s one thing that probably causes the most stress (OK, aside from doing your taxes), it’s having the responsibility of figuring out how to price your services.
While there’s a lot of factors that go into figuring out your pay structure, we’ve gathered a few simple guidelines you should keep in mind before you send over your prices to a new (or old!) client. Whether you’re starting your freelance career or just need to refresh your pricing system, below are five tips you need to consider when pricing out your services.
1. You’re not talking with your fellow freelance friends
One of the best ways to understand exactly what you should be charging is by connecting with other freelance friends who are in the same (or similar) industry as you. While you may not be comfortable being transparent about your finances, you could be undercharging or not finding new methods to make more money for your business.
However, don’t fret if you don’t have friends in the biz. You can join online freelancing groups to get as much feedback as possible. Having a support system, whether IRL or far away, will help you understand the market and assist you in feeling more confident and prepared when it comes to your pricing practices.
2. You’re not taking into account your other financial obligations
When dictating your pricing for potential clients, you need to be mindful of not only the number of hours you’re going to be working on the project, but your personal financial obligations as well. This means you should be considering how much your bills cost, your livelihood, and the amount you plan on taking out for taxes.
An easy way to figure this out is to create an excel sheet and add all of your financial obligations (yes, this means including gas and groceries as well) together. Once you have a total number, you’ll have a clearer idea of what exactly you need to make each month — after taxes — to sustain the life you want to live. Pro tip: set up a money meeting with yourself once a week. As time goes on, your priorities and financial responsibilities could fluctuate, and it’s important to maintain this knowledge by doing weekly audits of your bank statements. Yes, this may be stressful, but nothing is more stressful than realizing you didn’t charge enough this month and you’re behind on your bills.
3. You’re only charging hourly rates
While most freelancers tend to charge an hourly rate at the beginning of their careers, it doesn’t mean you’re forced to continue this method forever. Depending on the type of job you’re being commissioned for, you do have the option of charging a day rate or project-based rate. These kinds of methods can get you the most bang for your buck because you’re not restricting yourself from viewing your work in a time-restrictive point of view. There are so many invisible factors that go into the work (i.e. communications with the client, research for the project, your expertise, etc.) that you do that could take up your time and actually cost you more money in the long run, and it’s important to think of the project a whole instead diminishing these little tasks that make up your business.
4. You’re not considering where you’re living
Where you live should absolutely dictate how much you should be charging for your services. Someone who freelances in New York should be charging way more than someone who lives in North Dakota (sorry, but not sorry). While the person may be doing a similar job, the market is drastically different and the cost of living varies from state to state. Luckily, most clients will understand this when providing your prices, especially if your client works in the same city as you, but it’s important to keep this in mind as most freelancers might not even consider this factor at the beginning of their new careers.
5. You’re not charging based on the value you bring
Not to get too deep or anything, but how you’ll bring value to your client’s company, your self-worth, and your skills should 100 percent be factored into your pricing. Lately, a lot of freelancers have been implementing “value-based pricing” as their new method to encompasses a 360-approach to their business — and it seems to be working. Value-based pricing gives you the room to charge based on what you provide, not how long it takes you to complete a project. Just because it takes you a shorter amount of time to complete a task doesn’t mean you should be charging your client less. It means you should be charging more because you’ve established your skills enough to be able to complete said project faster than other people.
How you value yourself and your business determines how you’ll bring value to your client. When you provide quality work, you can make a difference for your client’s business, which is the thing your client will value the most. When quality work is provided and it can provide an ROI for them, you’re able to establish a healthy pricing system that works for both you and the client.