Correctly pricing your services is imperative. But it’s something most freelancers struggle with. Most freelance pricing strategies are relatively simple, but there is no one-size-fits-all.
Throughout my more than five years working as a freelancer in various industries, I’ve found that appropriately pricing yourself is key to balancing income and workload.
Pricing yourself too high or too low can cause you to lose new clients. Similarly, only having one pricing option available can cause you to lose out on work.
Let’s take a deeper look at why your freelance pricing strategy matters so much and how you can incorporate different models for success, including:
- Hourly pricing
- Project-based pricing
- Retainer agreements
- Value-based pricing
- Tiered pricing
- Combination agreements
Why Choosing the Right Pricing Strategy Matters
The Impact on Your Income and Clients
Your pricing strategy plays a big role in attracting clients to you.
You want to be charging as much as possible to make sure that your income is as high as you can get it; otherwise, you are just leaving money on the table.
But, if you’re priced too high, many clients who can’t afford you won’t even bother negotiating down; they’ll just move on.
Be careful, though. I’ve recently noticed that pricing myself too low not only means that I need to work longer hours for the same income but can also turn clients away as they perceive the work as lower quality.
However, the overall cost of the work is just one factor in your pricing that plays a role in your income and clients. You also need to consider the different pricing models.
Some clients may be on tight budgets and will want to settle on a price for the entire project up-front, while others may want to make sure they are getting the best value possible and would prefer to pay an hourly rate.
Having some level of flexibility in your pricing structure will make sure you are considered for more gigs.
Common Pitfalls Freelancers Face
The specific pricing challenges you face will likely be industry-specific. But, there are some universal challenges that we can address.
I often find that freelancers are more likely to undervalue their services than overvalue them, especially if they are newer to the industry and want to remain competitive.
This means you’ll end up working longer hours.
It is also very easy to overcommit your time. The result is that you produce poor quality work to get it done on time, or you work extreme hours, so you burn yourself out. This quickly leads to lower-quality work as well.
This can quickly lead to a negative effect on your overall reputation.
Understanding the Basics of Pricing
How to Assess Your Value
The first step to figuring out your pricing is figuring out how you can benefit your clients.
When you know how much your services will benefit them in terms of cost and time savings, you’ll be able to value yourself appropriately.
Factors That Influence Your Rates
You need to research market rates for your industry. External factors like your location, demand, and client budgets will all influence your pricing. Usually, a search for this can be done online. Popular freelance platforms and job sites are a good place to start.
You also need to consider factors like your own expenses when calculating your rates.
Remember to include the cost of your subscriptions, account for taxes, and even factors like depreciation or wear and tear on equipment.
Top Freelance Pricing Strategies (and How to Choose the Best for You)
Hourly Pricing
Hourly pricing is relatively simple to explain. You figure out an hourly rate and charge for every hour that you work. You could work on trust, or you may need to have software that records your hours for you.
It’s a great model as it is straightforward and easy to calculate. It also offers transparency for your clients as you can easily let them know what times you worked on what portions of the project.
This gives clients more insight into where their money goes, making them more comfortable.
However, you may encounter some challenges. You tie your income to the number of hours that you work each day, so your income is capped if you are new to the industry and forced to ask for a lower rate.
Best for: Short-term projects and unclear scopes. Works well when your tasks vary in complexity and timeline, too.
Project-Based (Fixed) Pricing
Project-based pricing is when you decide on a fixed price before you start working on the project. No matter how much time it takes you (or how little time it takes you to do it), that price stays the same.
For example, on my website, I offer fixed pricing per word for my ghostwriting services. Before the project starts, we agree on both the word count and the price. I receive the agreed sum, regardless of how long it takes me.
This is great as it gives you a predictable income and means you really don’t have to track your hours. However, it only works if you have enough experience to estimate the project scope accurately.
It is very easy to underestimate the amount of time or resources that you will need. This can affect your profits.
You also need to have processes in place to finalize a project’s requirements before you start. I’ve had many clients try to make changes to the scope later on, costing me time and money.
But, at the same time, your contracts should allow for reasonable adjustments, specifying the additional compensation.
Best for: Predictable workloads and well-defined projects.
Retainer Agreements
I rarely use retainer agreements, but the few times that I have, the clients have stuck around for more than a year on average.
There are various ways you can use retainer agreements. With this work-for-hire model, your clients can either pay you a fee at a set interval (like a weekly or monthly salary), or they can pay in intervals after a given amount of work.
I have found that the second option is sometimes what most of my clients refer to as a retainer. For example, some clients pay me for every 30,000 words I write, with the idea that they ‘top-up’ the retainer when I run out. You can do the same for billable hours.
This guarantees a consistent income for you and helps you build long-term relationships with your clients without needing to be hired permanently.
However, you need to maintain good communication, even when work is a little slower. Otherwise, you won’t be able to maintain a client’s trust and satisfaction over time.
Best for: Ongoing work like content creation, social media management, or consulting.
Value-Based Pricing
Value-based pricing occurs when you consider the value that your clients will gain from your services and price them according to that.
Employers who understand what they stand to gain in relation to the cost will be more than happy with your pricing. It also allows you to earn more money based purely on the value of your work rather than the hours you put in.
However, you need to be able to communicate well and justify your pricing. This can be difficult if you are just starting out and have little to no data to work with.
Best for: Projects that will greatly impact your clients, like brand designs, strategy development, or permanent systems.
Tiered Pricing
Tiered systems do not follow linear pricing models. Instead, pricing is often calculated exponentially and offered in ‘packages.’
A good example of this was when I first started working as a freelance writer on Fiverr. I would charge a set amount for 10,000 words but would offer a package for 30,000 words that would work out significantly cheaper than if clients simply ordered three of the smaller packages.
This is great as it lets you cater to a wide variety of clients. Some only need a small job and have a smaller budget, while others are happy to see bigger options available immediately.
You don’t even have to offer different rates or discounts for larger packages if you don’t want to. However, I’ve found that this can make a big difference when you are new to freelancing.
The additional money that you end up earning from the smaller packages makes them worthwhile for you – especially from an administrative point of view – while the discounts you might give for larger packages are offset by the larger quantity of work overall.
Explaining your tiers can be tricky, though, so make sure that you are clear about it upfront.
Best for: Services that can be categorized into different levels of service or packages with ease. This can include photography, writing, teaching, and much more.
Combination Pricing
Combination pricing is what most seasoned freelancers end up going with, and it is what I use now. Essentially, you combine multiple strategies to adapt to the needs of different clients or projects.
However, you need to be aware that this requires careful planning and clear communication. You may also have to draw up new contracts for each project rather than being able to rely on a template.
Best for: Seasoned freelancers who handle a variety of projects.
How to Blend Strategies for Maximum Effect
The best way to implement combination pricing is to let your clients know that you offer different models. You could advertise that you work both hourly and per project through cold emails, etc.
Alternatively, you could mention alternative strategies for payment when speaking to a client; if you think another strategy would work better, of course.
It is important to work on a case-by-case basis and to take your clients’ preferences into account.
Bonus Tips for Setting and Adjusting Your Rates
Regularly Review and Update Your Rates
I would recommend that you schedule reviews of your pricing every six to twelve months. Put it on your calendar if you need to.
Your skills will constantly change as your experience grows, and your rates should evolve, too. Your rates should also keep the changing industry averages in mind.
How to Negotiate Rates Confidently
It can be intimidating to negotiate your rates as a beginner. The most important thing is that you understand your value and are prepared to communicate it to your clients.
You need to have examples of past successes to prove your reasoning behind your rates if clients question you.
However, the biggest confidence booster I’ve found lies in the willingness to let clients go. If a client won’t pay you what you are worth, you should be happy to move on.
Your business should benefit you as much as it does them. Otherwise, it isn’t the right fit.
Offering Discounts: When It Makes Sense
When clients ask for discounts, go ahead. Of course, this should be within reason.
If you have a client who will offer you long-term work or a client who is willing to pay upfront, discounts are a great way to build a positive business relationship.
I’ve also offered a discount before for existing clients who could not afford rate increases.
However, make sure that these discounts still make sense for your business goals.
Tools to Simplify Freelance Pricing
Calculators, Spreadsheets, and Apps
Although pricing your freelance services can seem overwhelming, there are several tools that you can use to make the process easier.
You can check out online calculators to figure out what you should be charging your clients. Azure is a great option for this. But these calculators don’t work for everyone.
Invoicing apps, on the other hand, work for most people. FreshBooks and QuickBooks are very popular and help you keep track of your payments and expenses.
In most cases, you’ll find you could benefit from some sort of spreadsheet. I have spreadsheets for my budget, hourly rates, individual clients, income, expenses, and a myriad of other things.
These spreadsheets are not only useful when tax season rolls around but also help you see through all of the noise to figure out how you are doing.
Automating Your Invoices
Automating your invoices is definitely not necessary, but it can be helpful. I wouldn’t worry about it until you are getting at least five clients on a monthly basis. Until that point, it’s fairly easy to do manually.
We’ve already mentioned some great options that can help you do this, but make sure that you explore a couple to figure out what the best fit is for you.
Wrap-Up Crafting Your Perfect Pricing Plan
Crafting your perfect freelance pricing strategy is an art. You’ll need to look at the markets, try to figure out what your competitors are doing, and also figure out how much your clients will benefit.
But, the likelihood that you will fall into the perfect pricing strategy from the start is very slim. It is going to be a case of trial and error. Remain flexible, and try not to get discouraged if you have to make adjustments.
Remember, everyone starts somewhere.
If you’d like some personalized advice or have anything to add, feel free to leave a comment and let us know.
FAQ
How do I know if I’m charging the right amount as a freelancer?
To know if you’re charging the right amount as a freelancer, you need to research market trends for your niche, location, and experience. Also, consider your expenses and the value of your services.
What’s the best pricing strategy for new freelancers?
The best pricing strategy for new freelancers is hourly pricing. It’s simple and accepted by most clients.
How should I handle clients who say my rates are too high?
When clients say your rates are too high, you should elaborate on the value that your work will provide for them. If it comes to it, you can negotiate and compromise, but sometimes, it’s better to walk away and take on other work instead.
