The thing about how to price freelance services is that it is so complicated. How do you price your own time, effort and expertise? How do we price fairly so as not to devalue ourselves or over-charge our clients?
I honestly think that I don’t have the “right” answer to this question, but what I can share with you today is how I do it for my own freelancing services.
The Basics of Pricing
One of the most common questions is, “What should I consider in pricing my freelancing gig?” The answer to this depends on the (1) services you provide, (2) the market or customers that you want to attract, and (3) your target duration for the engagement or for how long you will do it.
As a freelancer, you can consider two approaches: B2C and the B2B approach. The B2C approach is the business to consumer approach where you offer your services to individuals. The other approach is the business to business or B2B approach where you offer your services to businesses and large corporations (sometimes called “enterprise” services / offerings).
These two approaches matter, because of the costs per conversion (for this specific article, a conversion is a client that avails your services) will certainly be different for each approach.
4 Things to Consider on How to Price Freelance Services
#1 Check on what method you’d like to use after identifying your customer or the market that you want to tap.
There are two kinds of pricing methods that you can use:
One is the cost-plus pricing.
In this process, you will first try to figure out the basic or the total cost of your service while considering your time and the amount or weight of work. Then, after having a total cost price, you may now add a certain percentage which will serve as your profit.
I personally look at the total variable costs and top up a percentage on the total variable costs. Then, I come up with a floor price and a ceiling price for reference.
Most of the tools that we use as freelancers are online, Software-as-a-Service products. I usually use my PayPal account to pay for these services. This allows me to conveniently track my online expenses. This helps me collate all of my costs easily.
If you don’t have a PayPal account yet, you can click on this link to sign up: http://bit.ly/GA_O_PayPalSignUp
Usually, for the B2B approach, you can use a more value-based pricing strategy. This means that you need to look at the value that you can give to the customer, and then without forgetting your costs, come up with a price that you feel best “quantifies” the value that you can give.
No matter what strategy you use, what matters most is that you give justice to whatever the client is paying for you to do.
Consider your monthly budget and try to figure out how many hours you will have to work to achieve that budget. By doing this, you can avoid overpricing.
#2 Check on the current Market Price for services like yours.
Surf the net and research on the price of your competitor’s services.
It would be much better if you will come up with a spreadsheet and list down all the freelancers, services and prices you’ve seen. From there, try to identify the value or set of values that you can give that your competitors can’t (unique value proposition). Check on how much value this can give the customer, try to again “quantify” it, and then see what an appropriate price will be given its uniqueness.
Pro tip: You may charge higher or lower than your competitors and it’s perfectly fine! Your pricing will depend on the value that you bring and on how efficiently you run your freelancing business.
#3 There’s no harm in asking your Client for a Budget
You can also ask the client about his/her allotted budget if you’re unsure of how to price freelance services. Then, go through the steps I indicated above.
See if that budget is something that you can work with. Also, money is not the only thing that matters. If you see that servicing this customer will get you more clients in the future, or if you think this will be a good addition to your portfolio, then go ahead and grab the deal.
#4 Don’t be Afraid to Negotiate
As a freelancer, you need to learn how to face and deal with clients. This career entails you mastering the art of negotiation, and also, knowing how to deal with rejection.
There will also be some clients who will ask for lower rates. Some may even ask you why you’re charging higher when your previous work required much less pay.
You need to know your worth for you to come up with a fair price for you and your client. And to do that, you need to have an estimated target income. This way, you can estimate how many clients you need to achieve that goal.
Instead of becoming defensive or triggered, it is best to focus on creating a relationship with your client first. Make sure you make them feel that you’re genuinely interested in their business and enthusiastic about working with them.
In closing for How to Price Freelance Services…
Remember, it’s the quality of clients that count more than the quantity. So focus on the positive and keep on connecting with potential clients.
Also, always have a clear view of your cash flow. At the end of the day, your net income will be based on how much you earn less how much you spend.
Paypal also has a feature that gives you valuable insights on your income and expenses. With Reports, you get to see your average monthly income and other financial reports. This will help you keep track of your earnings and see if you’re reaching your target amounts.
Here is how you pull reports on PayPal:
Tracking your financial reports will also give you a glimpse of which acquisition strategies to use. If you’re doing the same thing and getting the same results, then it’s time to up the ante and change strategies. Then take note of which strategies work and then bank on them.
Learning how to price freelance services can be tricky at first.
But trust me, once you’ve learned and implemented the process and the strategies above, it will be a ride in the park. Good luck in coming up with prices for your services and if you need anything from me, just let me know in the comments section below.