How to price your freelance services the smart way
You want to win clients, but you don’t want to work for peanuts. You want to earn a decent living, but you don’t want to rip people off. Pricing your services as a freelancer is tricky business. If you’re struggling to strike a balance or just starting out as a freelancer, it’s time to go back to basics and set your rates the smart way. Here’s how...
First things first
Pricing your services will ultimately depend on how you position yourself in the market.
But no matter how long you’ve been in the freelance game, you need to make a living. And since there are only so many hours in a day, getting it right will make or break your business.
Poor pricing boils down to three main issues:
• You are taking on the wrong projects
• You don’t know how to price your services to reflect their value
• Demand for your service in its current form is too low
This guide will focus mainly on the first two. But the first question you need to ask is this:
How much would you like to earn?
This will be your income after tax, not your salary. Take into consideration living costs, savings, unexpected costs, and of course the things you like to do. Envisage the life you want but be realistic when you decide this number.
Let’s say it’s £35,000.
Now work out your business expenses
Find out what tax bracket your desired income falls into.
As of 2019, £35,000 falls into the basic tax rate of 20%.
20% tax on £35,000 is £7000.
Now deduct running costs like equipment, website and hosting, software licences, business insurance, marketing, commuting, and accounting and bookkeeping. Whatever your business needs to run.
For the sake of argument let’s put this figure at £5,000 per year.
£7,000 plus £5,000 = £12,000 in tax and expenses.
£35,000 plus £12,000 is £47,000
Or £3,917 per month. That’s how much you need to earn.
Work out how many hours are in a working week
40 hours is a good place to work from. Assuming you’d like a healthy work-life balance.
Now work out how much of that 40 hours will be spent doing client work. Consider the time you’ll spend marketing yourself, going back and forth with clients, chasing leads, general admin, trying to get your hard drive to work, taking your cat to the vet. You get the idea.
Suddenly your 40-hour working week is more like 30 hours. So roughly 120 hours a month to make your money.
Desired monthly income = £3,917
Working hours = 120
So £3,917 divided by 120 = 33 (rounded up from 32.6)
With that, your minimum hourly rate should be around £33.
Depending on where you position your product in your market, this figure might even undervalue your work. So let’s assume your work is kickass and round it up to £40.
No two projects are the same so this wiggle room is worth factoring in.
Charge by the project
Unless you’re contracted to regular hours, you want to avoid charging by the hour. Hourly pricing only ensures that the more efficient you become, the less money you’re going to make.
In addition to that, £40 an hour (depending on what you do) can sound like a huge sum of money to budget-conscious clients. Especially if they aren’t sure how much of your time they need.
That’s why charging by the project is the way forward because it focusses on the end product and the value it generates.
It’s always nice to know how much something will cost from the get-go, and it takes the pressure off you to complete the work in a set amount of time.
Work out roughly how many hours a project will take, then add a buffer in case anything goes wrong, and to account for time spent on communication. Be mindful that charging by the project runs the risk of eating up additional hours and lowering your earning potential.
Do your research and find out the average rate for others in your industry. Taking into account where they are geographically and how experienced they are.
Run the number past some friends or family who understand what you do and gauge their reaction.
If you’re still unsure whether you’ve struck the right balance, sleep on it and then trust your gut when you revisit the cost in the morning.
Which brings us nicely to the final point.
Justify your worth
It’s understandable to think that if you turn work around in a flash, people are going to begin to question your pricing.
Instead of lowering your price or giving out freebies, demonstrate your value in other ways:
• Communicate your progress often, and explain your decision-making process. For a few minutes extra work you’re proving that you are invested in the project and care about its success.
• Invite clients to a fancy location to discuss the project or present work. Co-working spaces are a great way to create positive associations with your brand.
At about workinc you can hire desks or private meeting rooms by the day, with perks like unlimited Wi-fi, 24/7 access, and no lengthy contracts to worry about.
Now you’ve got a good idea how to price your freelance services and justify your fees, it’s time to hit the ground running.
Remember to join our mailing list to learn about workinc locations opening near you.
Share this post: