How to Price Your Freelance Services

Freelancing is an increasingly popular way to make a living yet many freelancers (whilst knowledgeable about their craft) are making fatal pricing errors that will doom their business from the start. Here is a look at the major pricing mistakes many freelancers make and how to fix them.

6 pricing dos and don’ts for freelancers

  1. Stop targeting cheap clients. Not all clients are created equal. There are some clients who want the absolute cheapest freelancers they can find – and then they’re still not happy. Paraphrasing Oscar Wilde, these clients “know the price of everything and the value of nothing”. These are not your target market. You want to target high-quality clients who: understand the value of your work; appreciate the skill involved and are more interested in a quality outcome than an hourly rate. Speaking of which…
  2. Never quote an hourly rate. Charging an hourly rate is the biggest mistake you can make as a freelancer. If you’re doing it, stop. It’s a terrible idea for several reasons:
    • You’re training your clients to value time over results. Suddenly, all your clients can see is that hourly rate and not the quality of your work. Before you know it, you’re on the slippery slope of trying to win work based on price alone. You’re teaching clients to judge you based on a timesheet, not on skill, quality or results;
    • You’ve given clients a stick to beat you with. Clients start to quibble about how long it “should” take to design a flyer, write some copy or code a website. In addition, it becomes near-impossible to charge for essential creative time, i.e. many freelancers put in large amounts of thinking time – hours sitting there brainstorming effective solutions for your client. (Good luck trying to include that in your invoice: “Thinking time”, $300…);
    • If you charge hourly rates it’s likely you won’t charge the full amount. An assignment can take a long time and the hours become difficult to justify (even though they are correctly due). So you end up doing at least some unpaid work;
    • If you can work quickly that’s to your credit. There’s no reason why you should automatically pass the savings on to the client. Many freelancers think, “Well, that logo design only took me two hours. My hourly rate is $20, so I’ll bill them$40…”. Wrong. This approach does not factor in the time it took to learn your craft; the trial and error involved; the added risk of being a freelancer (e.g. no paid holidays, no sick leave etc); the quiet periods… $40 for your skill is why you’re struggling. Chronic undercharging will kill your business and make you miserable.
    • You’re drastically limiting your earnings and, even worse, you create this limitation for yourself. You’re limiting your income by time, by client expectations, by that damn hourly rate. Get rid of it!

    Instead of charging an hourly rate, charge for a result.

  3. Stop thinking price is all that matters. Repeat the following: price is not the main concern for many clients. If it was, every freelance job would go to the designer charging $5/hr. That is clearly not the case.In business, there are things that good clients value more than a low price, e.g.
    • You fully understand the design brief;
    • You deliver quality results and have good ideas;
    • You make the client look good in front of others and have their interests at heart;
    • You are an expert in your field;
    • You’re dependable, a “safe pair of hands”;
    • You’re likeable, easy to work with.

    Think of all the times when you made choices based on something other than price: the clothes you wear, the food you eat, the house you live in, the car you drive and so on. Price plays a part but it’s not the sole determinant in your choice. Why do people pay many times the price of economy to fly first class? Why do people buy watches that cost tens of thousands of dollars when they can buy one for $7? Clearly price is not everything but too many freelancers think and act as if it is.

  4. Stop pricing so low. There are times when being the cheapest or too cheap will absolutely hurt your business. If your price is too low, clients think:
    • There must be something wrong with your service;
    • You must be delivering inferior quality;
    • You have not fully understood the brief;
    • They can’t take you seriously.

    In any case, you won’t get the work.You need to price according to your clients (you’re serving HQCs, right?) and your chosen industry. HQCs expect to pay higher prices. They’re use to “playing a bigger game” and paying for “the best” where four/five-figure sums are the norm.

  5. Don’t play the price game. If I walk into a Bentley showroom and say, “My budget is $10K” I will be politely told I’m in the wrong dealership. Bentley are not in the business of catering to $10K car buyers. There’s no question of them lowering their price to get the sale. I’m not their target customer, period.Not everyone will be your customer. Yet many designers are so desperate for the work that they never turn clients away and try to be all things to all people. “Any work at any cost” is a mistake. When you try to be everyone’s choice, you lose business. Your service will not be for everyone nor should it be.Being selective about who you work with is a powerful mindset and many of the world’s leading companies actually vet the client to see if they want to work for them. The successful freelancers have a price point in mind to make the business worth their while. Higher prices is just one way of filtering out non-target clients. The unspoken thinking behind charging high is, “If you can’t afford this, I’m not the freelancer for you”. In other words, the large, successful freelancers aggressively target high-quality clients for whom price is not their main concern.These freelancers want to leave behind the world of always having to justify every penny of their quotation and focus on delivering results, not price. They’re not chasing every client because they know most of them are not in their target market. You should adopt the same tactic.This is a complete contrast to how many struggling freelancers work. You may not be one of the successful freelancers now but  the lesson still applies: charge higher prices and target high-quality clients who are not obsessed with price.
  1. Not charging when you should. When you’re a freelancer, you only have a finite amount of billable time in the day. Any activity that takes you away from doing billable work must therefore be billed as compensation. Charge for:
    • Time on the phone;
    • Substantive replies to emails;
    • Attending meetings called by the client;
    • Out-of-hours work (charge a premium);
    • Urgent work (charge a premium);
    • Revisions beyond the agreed scope;
    • Detailed proposals.

    This type of pricing is standard in many industries. However, make sure you send new clients a copy of your terms detailing the above when they hire you so there is no dispute down the line.

Takeaway points

  1. Never quote an hourly rate or similar time-based price (e.g. words per minute). When you submit a proposal, simply show a final total.
  2. If clients push you for an hourly rate (and, really, there is no valid reason for them to do so – they should be able to judge if the outcome justifies the fee), state that you are charging to produce a result, not your time. If that does not satisfy them, consider refusing the work.
  3. Always target high-quality clients. Not everyone can be your customer and that’s fine. Focus your attention on attracting clients who want a quality outcome, not just a low price.

Action steps

  1. Work out your hourly rate (for your personal use). What hourly rate must you charge to make freelancing a viable option for you? Keep this figure to yourself – don’t ever let a client know what it is. Your job is to now find high-quality clients for whom this hourly rate is not a problem.
  2. Get comfortable charging higher rates. There’s no secret to this, you just start charging more. It’s easier to charge new clients higher prices (rather than existing ones). If you’re far from the hourly rate you need to charge (calculated in #1), you need to double or treble your prices immediately. You’d be surprised at how many people won’t even question the price.
  3. Build your portfolio. Create content relevant to the clients you want to work with and their industry. When you pitch for work, send a sample of what you can do.

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