My business is growing and I’m (finally) taking on better clients. The only thing that still gets me is, how should I be pricing my work? I know I can’t be the only one who hates quoting prices.
There are several different ways to go about this and I’ve found that the method that makes the most sense sometimes varies from client to client. I’ll cover the three that I tend to use — hourly, flat rate (project based), and by the page/word pricing, along with my insight into the pros and cons of each one.
The client brings you their work, you estimate the number of hours it will take you to complete and then you track your time.
Pros: Charging by the hour is the most straight-forward billing method. You know that if you spend 10 hours on a project, you’ll get paid for that 10 hours. It’s great for freelancers who are just starting out and aren’t familiar with any other way of billing.
This is also great because your client might decide halfway through the job that they need to add on a few things. You still get paid if the scope of the project changes because you’re on the clock.
Cons: Charging by the hour means you need to track your time accurately so you can bill accurately. It’s just one more step in your process and some clients may be leery about the hours you’re billing them for.
It can also be difficult to sell your hourly rate. $65 an hour, for example, can sound pricey to some clients, where a flat rate of $650 (ten hours at $65/hour) might not if they find value in the finished product.
Billing hourly also limits your earning potential. There are only so many billable hours in the day.
When does this make sense? When you’re first starting out this is a good way to go. It helps you get a handle on the market and as you gain experience, you can increase your hourly rate.
I also find an hourly rate useful for clients who have a hard time nailing down project scope. Sometimes, they just might not know exactly how much work they’re going to be sending your way. If they don’t know and you can’t tease it out of them, you can’t give them an accurate quote. Hourly it is.
Once you get a feel for your client, you can then work out a flat rate for them if you’ll be working with them long-term. The downside to this is that the client may now have a preconceived notion of how much things cost. You may have a hard time increasing your pricing from there.
Flat rate pricing
The client outlines their project scope and you quote them a price for either the whole job, or by milestones.
Pros: You’re not basing your fees on how much time it will take you to complete the project, but rather on how much value you’re providing them with the finished work. And you have full discretion over how much you charge each client.
Pro tip: Flat rate pricing is a great way to avoid those pesky squabbles over how much time you actually spent on a project. You’re not tracking your time to begin with.
You also don’t have to try to justify an hourly rate that looks high to a client who’s used to seeing much lower rates on the corporate side.
Cons: It can be damn difficult to come up with that flat rate. There really is no formula. You have to really understand how long a project is going to take you along with how much effort it will require.
You also need to understand your client’s budget and what the finished project is worth to them. Check out this post — the author speaks eloquently on all things flat rate pricing.
When does this make sense? If you have a client who sends mostly project work and you have a good understanding of the project scope, this is a good option.
This also seems to be the most popular method of billing with experienced freelancers. This may be because it ties your price to the value you’re providing your client rather than the time you spend completing the work.
Pricing by the page/word
Very similar to project-based pricing but micro. You literally charge them a rate per page or word.
Pros: No need to quote anything. Your client understands when they send you something exactly what they will be billed for based on pre-agreed-upon prices.
Cons: Oh, how tedious this can become. You really need to nail down exactly what constitutes a page. For example, at a particular font size, if the page is only approximately ¾ of the way filled, and a train is moving south along the track at a speed of 45 mph, does that still count as a full page? It can get nit-picky.
When does this make sense? I love this for laid back clients who send me small things to edit consistently. It’s quick and I can just take a 4-page document and get it edited, sent back and billed. It also means that a client can send me a last minute job and know exactly what they will be paying for it.
A few final thoughts
There are several strategies for pricing and I generally choose the method that works best for each client. As your client base develops and you grow as a freelancer, you may find that your preferences change.
There is no rule that states you must charge every client the exact same rate. You may take into consideration whether the client is high- or low-maintenance. Or whether they’re likely to change the scope of the project as work progresses. You may even consider whether you like working with them.
These things may all play into how and how much you decide to bill a client for your time.
At the end of the day, your client is not going to be as interested in how much it costs to get the work done, but rather the value of the finished product. Remind yourself of this when considering pricing strategies. I do. Otherwise, I would never be brave enough to charge what I feel my time is worth.