How much should you charge? It’s a question most freelancers struggle with at some point. Charge too little and you could come across as an amateur. Charge too much and you’ll price yourself out of the market. It’s a difficult balancing act.
In this chapter you’ll identify three approaches to pricing; the practical methods you can use to set your rates, how to communicate your worth and develop your negotiating skills.
Identify an approach
1. Work backwards
In this first approach, you start by deciding how much you want to earn. What annual salary are you aiming for? Maybe you want to make more than you did in your previous employment or enough to be comfortable so you can have a better quality of life.
Whatever your reasoning, working backwards is useful because it gives you an actual figure you can use as a starting point. You then work backwards to work out a day or hourly rate.
What you can do
Start by deciding how much you want to earn for your first year. Let’s say that figure is:
£30,000
Next, calculate your monthly outgoings. On a personal level, this will include things such as rent or mortgage payments, insurance and pension premiums, and utility bills.
Your business will also have outgoings. This could be the cost of web-hosting, office space (if you aren’t working from home), broadband and phone costs. Let’s say that’s £2000 per month.
30,000 + (2000 x 12) = 54,000
You'll need an income of £54,000 to achieve a salary of £30,000. But remember these figures are gross amounts (before taxes).
2. Copy your competitors
Another way to set your price is to research what your competitors charge, then set your own fees at the same level.
What you can do
Ask ex-work colleagues what they pay for freelance staff or contact freelancers direct to ask their fees. Check freelance job ads. Some companies will state how much they pay per day or per project.
3. Estimate a project’s value
This is more difficult to gauge because it involves estimating how much value your work will bring to the company who has commissioned you.
Imagine you were approached to come up with this advertising campaign for Coca-Cola:
Ok, so this is a BIG example. But it perfectly illustrates what this approach is all about.
The campaign was created by an Australian advertising agency and was one of the most successful in Coca-Cola’s history. Because if it there were 378,000 personalised Coke cans printed across Australia and 76,000 virtual cans shared on social media. Additionally, consumption rose by 7%, and it created a positive brand image.
These stats add significant value to the Coca-Cola brand in sales, market visibility and perception. In setting its fee the agency would have estimated how much of the potential added value would be down to its work.
What you can do
If you think your work could add value to your client, ask what outcomes they’re expecting from the project and over what time frame. Take this into account when setting your fee.
Choose how to charge
There are three basic fee structures to consider. These are:
1. Charge by the day or week
In 2018, there are 261 actual working days. So using the same figure as above, to earn a £30,000 gross salary, you’d need an income of around £54,000.
£54,000 ➗261 = £206
Your day rate would need to start at around £200. However, this rate doesn’t take into account the working days you won’t be paid for (doing admin, looking for new work, etc.), holiday or sick days.
2. An hourly rate
This is useful when you have no idea how much time a project will take to complete. It’s a way of establishing how long a job will take so you can price similar projects more accurately in the future, either for the same or other clients.
3. A fixed fee
These can be great if the work takes less time to complete than you’ve allocated, but can also work against you if the job takes far longer than planned. You also have to agree the specifics.
I rarely offer fixed fees, but will consider them if a client has a set budget for a piece of work and I’m sure it isn’t going to take me longer than the time allocated to complete it.
Sometimes, setting fees can be down to perception and trust. For example, if a designer quotes £100 per hour to design a logo, this might sound a lot to a client, especially if they have no idea how long it will take. But if the designer quotes a £300 fixed fee because she knows it will take her three hours to complete this instantly sounds more affordable.
What’s the best one to choose?
No one fee structure is better than another. And, you’ll probably use all three at some point. For example, I tend to charge a day rate for training work since the sessions are usually a day or two long. I then charge extra for preparation time.
For manuscript editing, I charge by the hour because I’m never sure how much (or how little) editing it’ll need until I start work on it.
Recently, I accepted a fixed fee to write a university prospectus because the client had a set budget. It was the second prospectus I’d written for them so knew that their fee accurately reflected the amount of time it would take to complete.
Develop your negotiating skills
Convincing someone you’ve never met that you’re right for their project isn’t easy. But it’s a skill that’s as important as the job itself if you’re to get your foot through the door.
Only you are aware of the knowledge, abilities and value you’ll bring to a client. So how can you get that message across? Here are four ways to do this:
Communicate your worth
Work with clients you like or admire
Say how you can make a difference
Speak their language
1. Communicate your worth
What problem are they trying to solve and how can you help? How do your skills specifically fit the project? Who have you worked with before? Who do you continue to work with? Think about similar work you’ve done in the past and explain how you approached it. Using practical examples will give you the chance to show experiential learning. How did you approach challenges? What did you do? How did you overcome them?
2. Approach clients you like or admire
Your passion will naturally shine through if you already like what they do, and the chances are you’ll already know quite a bit about their company. Do additional research. Find out as much about them as you can before you pitch for the work. Clients are impressed when you demonstrate your knowledge of their company. And ‘being in the know’ puts you in a strong position to negotiate an attractive fee.
3. Know your rate
Know what your rate is and confidently stick to it. This doesn’t exclude starting at a higher rate and negotiating down, but don’t compromise on your actual rate. If you’ve communicated your worth, you’ve demonstrated why your fee is what it is. Agreeing to work for a lot less sends the wrong message to your client.
4. Speak their language
If they’re looking to you for expert advice on a project, approach them as an expert. Don’t be afraid to tell them if you think they’re going about something in the wrong way and always explain why. If they’re interested in increasing sales, research their customers. Find out what motivates them and explain how you can capture or address this in your work.
Now you’ve managed to get a few clients on board and started working for them, how do you manage those relationships? You’ll explore this in the next chapter.
