Freelancer Pricing Techniques
Regardless of the scope of your activity, your status as a freelancer means that you will inevitably be faced with the question: How should my work be paid for? Is it worth taking an hour? For the project? For the stage of work? Based on the cost of previous projects? Based on the needs?
Firstly, you should not be pricing based solely on your whim, because you are in business. The choice of other options depends on the wishes of the client, your wishes and experience in freelancing. Each freelancer forms its own pricing style.
There are five basic pricing methods that you can use to find the perfect scheme. Each of the five types of pricing has its own set of pros and cons and can be customized for individual needs.
When you understand how each of the pricing methods works, what it gives to the customer, what advantages and disadvantages it has, you can easily choose the pricing strategy you need.
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Before we delve into pricing schemes, you need to figure out what your base hourly rate should be. Regardless of whether you choose a model with an hourly fee in the future or not. Your hourly rate will be the basis for calculation when using other pricing methods.
1. hour rate freelancer
It may seem to you that this is the easiest way to work with clients, but the method has both advantages and pitfalls.
The benefits of an hourly rate
1. The ability to show a low price on your site
Because $ 75 looks much more attractive than $ 600 per day of work or $ 6000 for a project.
2. You retain flexibility for your projects.
Hourly rates give flexibility to those working in areas that do not have standard deadlines for each task. For example, writing a short note can take 30 minutes, and writing a highly specialized article with complex data analysis can take several weeks.
The flexibility of hourly pay may seem attractive to beginner freelancers, who still cannot say for sure how long the project will last. You can provide the client with an approximate estimate of the required number of hours. Do not forget about the time required to implement the changes, edits that the client asks to do. A web designer, for example, may need 5 hours to develop a page design and an additional one to two hours for changes that the customer requests.
3. Increase personal effectiveness
From the point of view of management, organization of work processes, this method may be difficult for you. He will demand more responsibility from you in terms of consumption and time tracking. You will need to start using time tracker to track your work time (for example, primaERP Time Tracking or Toggl ), other programs that will help increase productivity will help you manage your time. Perhaps such a challenge for you is not so bad. It will help you work more efficiently, professionally, and in the end you will benefit from its use.
Cons of hourly rates
1. Your hourly rate may seem high.
Your hourly rate will look very high against the background of paying employees working in companies on a permanent basis. You have to include in your rate the cost of running your business, take into account that you will not always work every day for 8 hours. In addition, you take into account the time spent in negotiations with customers, working with e-mail, spending time on administrative tasks (accounting, marketing, etc.), on training.
2. The client can start using you as your employee.
When you agree to work with the hourly rate, without negotiating additional terms of the project, the client can begin to give you tasks unpredictably and with varying degrees of urgency. Such unpredictability and multitasking can greatly complicate your work.
A client who assigns you tasks with an “urgent” note reduces your productivity. This will prevent you from carrying out large long-term projects for other clients. As a freelancer, you need to strive to increase the density of your work schedule, to diversify your customer base.
3. The client is likely to underestimate how long the project will take.
In creative professions it is often difficult to take into account all the time spent on a project. Requires creative search, inspiration. The time spent can be a source of conflict if the customer does not know all the details of the creative process.
4. If you work quickly and efficiently, then you earn less
If two freelancers with the same hourly rate and the same quality spend a different amount of time on a task, then the one who spends more time earns more. If you work efficiently and effectively, then you can get less money than you deserve.
5. Closer control over the work process by the client
The downside may be the client’s desire to tightly control the time spent on tasks. On some freelance exchanges (for example, Upwork , Freelancer ) you will be obliged to supply a time tracker with a function of taking screenshots of the screen. The same condition can be delivered to you by a client whom you find not through the exchange. You may be asked to use a time tracker and send daily reports to the client on the tasks performed and the time spent on them. And it may be a soft control option. In severe cases, customers have a desire to see at any moment what is happening on your computer screen, which programs you use, which websites you go to. You may not like this approach to cooperation.
2. Calculation based on "starting prices"
When the content of the work is more predictable, and there is not much creativity in it, and you want your services to be more structured in terms of prices, you can set basic, initial rates. For example, logo design development - $ 100, business card design development $ 25. The client receives a clear set of services for a fixed price. Separately, the cost of additional services is recorded (for example, the number of additional design changes).
Advantages of pricing based on "starting prices"
1. You show your customers base prices right now.
With an hourly rate, the client may feel that he is losing his money, that the number of hours is unreasonably high. Since the client does not know exactly how much time is really needed to create a video or logo. The pricing method with starting prices and the list of works included in the price will give a better idea of ​​what the customer should expect, even though the prices are approximate.
2. You set the basic parameters of the project
When you “pack” the list of services in the starting prices, you set the basic parameters of the project and form the client's expectations. In addition, you define the scope of the project, which limits the desires and excessive appetite of the client. Very often, in the process of project implementation, customers have new desires, endless edits are made. The boundaries of the project crawl away and your precious time begins to evaporate.
3. You retain flexibility in project implementation.
Starting prices are set for the base list of works. This list of works clearly prescribed. In addition, you need to create a list of additional work for an additional fee. You and the client will be able to combine them.
Cons pricing based on "starting prices"
1. The customer concentrates on the base price.
Any prices above the starting price, called the customer, seem high to him, no matter how many additional desires the customer has. This is human psychology, which fixes in our memory the first number we have seen, and we are disappointed in the price when this number begins to grow.
2. Uncertainty of the client in how much the real price will differ from the base
Although base prices give a better idea of ​​the cost of a project than hourly rates, a client who knows that he will need additional changes or additions does not know exactly how much it will cost. When the client is not sure how much the work will ultimately cost, he may refuse to cooperate.
3. The client may request a detailed price list for additional work.
A client with a certain budget wants to get the most out of the money spent. It is not always clear how much additional benefits and at what prices the client will receive. You may find yourself in an unpleasant situation discussing additional small details, their cost, the need for a project, and efficiency. The discussion itself may take longer than the work. For many combinations of small changes, it will be difficult to set prices.
3. Setting prices in the range
Can setting prices in the range help to reduce customer anxiety arising from "starting prices" that could theoretically grow to infinity? To some extent, yes, but this leads to a limitation of potential income, and you may not like it.
Pros of setting the price range
1. You offer the client a clear minimum and maximum costs.
When customers see your “price from”, they may feel that you are trying to lure them with an unrealistically low price level that will quickly grow due to individual customer requirements. When the client sees the price range, it is easier for him to assess whether he can afford such expenses.
2. You remain flexible and can adapt to customer requirements.
When you offer a price range, the client understands that not all projects are of the same type, it helps to choose the right scale of the project. The price range will allow you to create the right project content that meets the needs of the client on the one hand, and your payment expectations on the other.
3. Within the price range, you can form service packages with gradual price increases.
Unlike the basic price level, in the price range you can, for example, create packages for low, medium and high prices to give customers a better idea of ​​how much different levels cost and what they give to the customer.
Cons of setting the price range
1. The minimum price in the range attracts customer attention
In the established price range the client will be attracted by a lower price, it acts as a point to which customers are tied. As with the “price from ...”, the client may feel a certain disappointment when he sees the final price that is different from the minimum.
2. Limitations for potential earnings
What to do if you got a client who starts to want a lot of new additional options for his project, or when the project is more difficult than you thought? It may turn out that you will exceed the maximum price you set, and you will have to start an unpleasant conversation with the client, explaining to him the need to pay beyond the maximum set price.
The established price range can be comfortable for the client, but limits the freelancer. This is especially dangerous for beginners who take on large projects and do not accurately represent the entire scope of work.
3. “Step prices” require a clear description of service packages.
If you want to break your price range into several levels, several packages, then you need to even write what exactly is included in each price package. Otherwise there will be confusion, you will have to negotiate what is included and what is not. This will create additional tension and lead to additional time costs. Create an infographic where the content of works in different packages will be reflected in an accessible visual form.
4. Pricing based on previously completed projects
If you do not want to use price packages and want to maintain flexibility for projects, you should indicate the cost of previously completed projects. But this method of pricing may require longer negotiations with each client, and these negotiations may end on conditions that are not the best for you.
Advantages of pricing based on previously completed projects
1. The ability to show your experience, your level of expertise
When you specify prices for previously completed projects, you do not just show the estimated expenses of the client, but also show your experience and your level as an expert. Customers can see how you worked, what were the results, quality. This will help justify high prices.
2. Your pricing can be as flexible as possible.
If you believe that each of your projects should be assessed individually, and you feel uncomfortable when using price packages, this pricing method may be preferable. Your latest projects will serve as a price guide for the client. In addition, you leave room for maneuver, because A new project may differ in content from already completed.
3. A more realistic picture in terms of price.
The pricing method based on the “starting prices” or the price range attracts the client with its low price option, but pricing based on completed projects shows the client a more realistic picture. It is unlikely that your previous projects were basic options with minimal costs and at minimal prices.
Cons pricing based on previously completed projects
1. Projects will require more detailed discussion, you will spend more time negotiating
When you offer a basic price level or service packages at fixed prices, it is easier for the customer to choose the right set for him. Focusing on previously completed projects, you will have to discuss the price and content of each project in order to agree on a price. If you do not like to communicate with customers on the subject of prices, to negotiate, then you need to think about whether this method of pricing will suit you.
2. Prices for previously completed projects may seem high.
The price for the project, of course, will look high against the background of the price per hour, the “starting price”, the minimum price from the prices in the range, and even the package prices, since the project can be divided into several stages, and the price for the package will reflect only one stage. Since you will be showing examples of real projects with your own characteristics, the price may seem high to the client if, for example, he does not need some functions and is interested in a simpler option.
3. It is assumed that you have a portfolio that you can show
It is assumed that you will use the real prices for the projects you have actually completed. If you are a freelancer without experience, then you will not be able to use this method of pricing. If you have few completed projects and you performed them at reduced prices, then later these projects will be difficult to use as baseline for determining prices. As you gain experience, low prices for past projects will prevent you from raising prices.
5. Lack of prices
Some freelancers specify only the list of services, without naming the price. On the one hand, this method does not limit you, but on the other hand, it can give a wrong idea of ​​your work.
Pluses of lack of prices
1. You set prices for each client individually.
Without giving examples of prices, you can estimate the client’s budget without first setting a framework, without any expectations from the client. Or, for example, you have a client with a small budget, and you want to take this project because you have low income this month or this project is interesting for you. You can provide the customer with lower than usual prices without giving the impression that you are dumping.
2. You do not scare anyone with your prices
When you do not specify prices, this can stimulate the client to contact you, which opens up opportunities for negotiation, convincing and selling your services.
Downsides
1. Lack of prices can make a client think that they are too high.
Remember how clothes shops look like. Shops with cheap clothes set large price tags in a shop window, they attract a customer who is primarily interested in price. Boutiques with expensive clothes may not indicate prices for clothes displayed in a shop window, since if you are interested in price, then most likely you will not be able to afford it. There is a danger that the lack of prices can lead clients to such thoughts that you are too expensive for them.
2. Some potential customers will simply be lost.
For example, a manager instructs his subordinate or secretary to find out how much one service or another costs. If the competition is high and the employee is lazy enough, then he will simply follow the easiest path and collect data with prices, services that are posted on the sites, he will not call. At the next stage, he will call the already formed list, if you need to know some details. And only then, if the results do not satisfy him, and you need to look for someone else, it will be your turn.
3. A waste of time and a focus shift.
If they call you, the first question that is most likely to be asked to you is a question about prices.You will spend time discussing prices, working with objections to prices, instead of talking about the content of the work, about quality. In addition, people who have too little money will still call you. They will distract you and waste your time. If your prices are known, then some people will not be interested.
You now have five pricing strategies. Choose a pricing method based on your experience and knowledge in your area, experience in dealing with customers. Try different ways, adapt them for yourself. I will be happy to comment on what schemes you use, what advantages and disadvantages they have.
Firstly, you should not be pricing based solely on your whim, because you are in business. The choice of other options depends on the wishes of the client, your wishes and experience in freelancing. Each freelancer forms its own pricing style.
There are five basic pricing methods that you can use to find the perfect scheme. Each of the five types of pricing has its own set of pros and cons and can be customized for individual needs.
When you understand how each of the pricing methods works, what it gives to the customer, what advantages and disadvantages it has, you can easily choose the pricing strategy you need.
')
Before we delve into pricing schemes, you need to figure out what your base hourly rate should be. Regardless of whether you choose a model with an hourly fee in the future or not. Your hourly rate will be the basis for calculation when using other pricing methods.
1. hour rate freelancer
It may seem to you that this is the easiest way to work with clients, but the method has both advantages and pitfalls.
The benefits of an hourly rate
1. The ability to show a low price on your site
Because $ 75 looks much more attractive than $ 600 per day of work or $ 6000 for a project.
2. You retain flexibility for your projects.
Hourly rates give flexibility to those working in areas that do not have standard deadlines for each task. For example, writing a short note can take 30 minutes, and writing a highly specialized article with complex data analysis can take several weeks.
The flexibility of hourly pay may seem attractive to beginner freelancers, who still cannot say for sure how long the project will last. You can provide the client with an approximate estimate of the required number of hours. Do not forget about the time required to implement the changes, edits that the client asks to do. A web designer, for example, may need 5 hours to develop a page design and an additional one to two hours for changes that the customer requests.
3. Increase personal effectiveness
From the point of view of management, organization of work processes, this method may be difficult for you. He will demand more responsibility from you in terms of consumption and time tracking. You will need to start using time tracker to track your work time (for example, primaERP Time Tracking or Toggl ), other programs that will help increase productivity will help you manage your time. Perhaps such a challenge for you is not so bad. It will help you work more efficiently, professionally, and in the end you will benefit from its use.
Cons of hourly rates
1. Your hourly rate may seem high.
Your hourly rate will look very high against the background of paying employees working in companies on a permanent basis. You have to include in your rate the cost of running your business, take into account that you will not always work every day for 8 hours. In addition, you take into account the time spent in negotiations with customers, working with e-mail, spending time on administrative tasks (accounting, marketing, etc.), on training.
2. The client can start using you as your employee.
When you agree to work with the hourly rate, without negotiating additional terms of the project, the client can begin to give you tasks unpredictably and with varying degrees of urgency. Such unpredictability and multitasking can greatly complicate your work.
A client who assigns you tasks with an “urgent” note reduces your productivity. This will prevent you from carrying out large long-term projects for other clients. As a freelancer, you need to strive to increase the density of your work schedule, to diversify your customer base.
3. The client is likely to underestimate how long the project will take.
In creative professions it is often difficult to take into account all the time spent on a project. Requires creative search, inspiration. The time spent can be a source of conflict if the customer does not know all the details of the creative process.
4. If you work quickly and efficiently, then you earn less
If two freelancers with the same hourly rate and the same quality spend a different amount of time on a task, then the one who spends more time earns more. If you work efficiently and effectively, then you can get less money than you deserve.
5. Closer control over the work process by the client
The downside may be the client’s desire to tightly control the time spent on tasks. On some freelance exchanges (for example, Upwork , Freelancer ) you will be obliged to supply a time tracker with a function of taking screenshots of the screen. The same condition can be delivered to you by a client whom you find not through the exchange. You may be asked to use a time tracker and send daily reports to the client on the tasks performed and the time spent on them. And it may be a soft control option. In severe cases, customers have a desire to see at any moment what is happening on your computer screen, which programs you use, which websites you go to. You may not like this approach to cooperation.
2. Calculation based on "starting prices"
When the content of the work is more predictable, and there is not much creativity in it, and you want your services to be more structured in terms of prices, you can set basic, initial rates. For example, logo design development - $ 100, business card design development $ 25. The client receives a clear set of services for a fixed price. Separately, the cost of additional services is recorded (for example, the number of additional design changes).
Advantages of pricing based on "starting prices"
1. You show your customers base prices right now.
With an hourly rate, the client may feel that he is losing his money, that the number of hours is unreasonably high. Since the client does not know exactly how much time is really needed to create a video or logo. The pricing method with starting prices and the list of works included in the price will give a better idea of ​​what the customer should expect, even though the prices are approximate.
2. You set the basic parameters of the project
When you “pack” the list of services in the starting prices, you set the basic parameters of the project and form the client's expectations. In addition, you define the scope of the project, which limits the desires and excessive appetite of the client. Very often, in the process of project implementation, customers have new desires, endless edits are made. The boundaries of the project crawl away and your precious time begins to evaporate.
3. You retain flexibility in project implementation.
Starting prices are set for the base list of works. This list of works clearly prescribed. In addition, you need to create a list of additional work for an additional fee. You and the client will be able to combine them.
Cons pricing based on "starting prices"
1. The customer concentrates on the base price.
Any prices above the starting price, called the customer, seem high to him, no matter how many additional desires the customer has. This is human psychology, which fixes in our memory the first number we have seen, and we are disappointed in the price when this number begins to grow.
2. Uncertainty of the client in how much the real price will differ from the base
Although base prices give a better idea of ​​the cost of a project than hourly rates, a client who knows that he will need additional changes or additions does not know exactly how much it will cost. When the client is not sure how much the work will ultimately cost, he may refuse to cooperate.
3. The client may request a detailed price list for additional work.
A client with a certain budget wants to get the most out of the money spent. It is not always clear how much additional benefits and at what prices the client will receive. You may find yourself in an unpleasant situation discussing additional small details, their cost, the need for a project, and efficiency. The discussion itself may take longer than the work. For many combinations of small changes, it will be difficult to set prices.
3. Setting prices in the range
Can setting prices in the range help to reduce customer anxiety arising from "starting prices" that could theoretically grow to infinity? To some extent, yes, but this leads to a limitation of potential income, and you may not like it.
Pros of setting the price range
1. You offer the client a clear minimum and maximum costs.
When customers see your “price from”, they may feel that you are trying to lure them with an unrealistically low price level that will quickly grow due to individual customer requirements. When the client sees the price range, it is easier for him to assess whether he can afford such expenses.
2. You remain flexible and can adapt to customer requirements.
When you offer a price range, the client understands that not all projects are of the same type, it helps to choose the right scale of the project. The price range will allow you to create the right project content that meets the needs of the client on the one hand, and your payment expectations on the other.
3. Within the price range, you can form service packages with gradual price increases.
Unlike the basic price level, in the price range you can, for example, create packages for low, medium and high prices to give customers a better idea of ​​how much different levels cost and what they give to the customer.
Cons of setting the price range
1. The minimum price in the range attracts customer attention
In the established price range the client will be attracted by a lower price, it acts as a point to which customers are tied. As with the “price from ...”, the client may feel a certain disappointment when he sees the final price that is different from the minimum.
2. Limitations for potential earnings
What to do if you got a client who starts to want a lot of new additional options for his project, or when the project is more difficult than you thought? It may turn out that you will exceed the maximum price you set, and you will have to start an unpleasant conversation with the client, explaining to him the need to pay beyond the maximum set price.
The established price range can be comfortable for the client, but limits the freelancer. This is especially dangerous for beginners who take on large projects and do not accurately represent the entire scope of work.
3. “Step prices” require a clear description of service packages.
If you want to break your price range into several levels, several packages, then you need to even write what exactly is included in each price package. Otherwise there will be confusion, you will have to negotiate what is included and what is not. This will create additional tension and lead to additional time costs. Create an infographic where the content of works in different packages will be reflected in an accessible visual form.
4. Pricing based on previously completed projects
If you do not want to use price packages and want to maintain flexibility for projects, you should indicate the cost of previously completed projects. But this method of pricing may require longer negotiations with each client, and these negotiations may end on conditions that are not the best for you.
Advantages of pricing based on previously completed projects
1. The ability to show your experience, your level of expertise
When you specify prices for previously completed projects, you do not just show the estimated expenses of the client, but also show your experience and your level as an expert. Customers can see how you worked, what were the results, quality. This will help justify high prices.
2. Your pricing can be as flexible as possible.
If you believe that each of your projects should be assessed individually, and you feel uncomfortable when using price packages, this pricing method may be preferable. Your latest projects will serve as a price guide for the client. In addition, you leave room for maneuver, because A new project may differ in content from already completed.
3. A more realistic picture in terms of price.
The pricing method based on the “starting prices” or the price range attracts the client with its low price option, but pricing based on completed projects shows the client a more realistic picture. It is unlikely that your previous projects were basic options with minimal costs and at minimal prices.
Cons pricing based on previously completed projects
1. Projects will require more detailed discussion, you will spend more time negotiating
When you offer a basic price level or service packages at fixed prices, it is easier for the customer to choose the right set for him. Focusing on previously completed projects, you will have to discuss the price and content of each project in order to agree on a price. If you do not like to communicate with customers on the subject of prices, to negotiate, then you need to think about whether this method of pricing will suit you.
2. Prices for previously completed projects may seem high.
The price for the project, of course, will look high against the background of the price per hour, the “starting price”, the minimum price from the prices in the range, and even the package prices, since the project can be divided into several stages, and the price for the package will reflect only one stage. Since you will be showing examples of real projects with your own characteristics, the price may seem high to the client if, for example, he does not need some functions and is interested in a simpler option.
3. It is assumed that you have a portfolio that you can show
It is assumed that you will use the real prices for the projects you have actually completed. If you are a freelancer without experience, then you will not be able to use this method of pricing. If you have few completed projects and you performed them at reduced prices, then later these projects will be difficult to use as baseline for determining prices. As you gain experience, low prices for past projects will prevent you from raising prices.
5. Lack of prices
Some freelancers specify only the list of services, without naming the price. On the one hand, this method does not limit you, but on the other hand, it can give a wrong idea of ​​your work.
Pluses of lack of prices
1. You set prices for each client individually.
Without giving examples of prices, you can estimate the client’s budget without first setting a framework, without any expectations from the client. Or, for example, you have a client with a small budget, and you want to take this project because you have low income this month or this project is interesting for you. You can provide the customer with lower than usual prices without giving the impression that you are dumping.
2. You do not scare anyone with your prices
When you do not specify prices, this can stimulate the client to contact you, which opens up opportunities for negotiation, convincing and selling your services.
Downsides
1. Lack of prices can make a client think that they are too high.
Remember how clothes shops look like. Shops with cheap clothes set large price tags in a shop window, they attract a customer who is primarily interested in price. Boutiques with expensive clothes may not indicate prices for clothes displayed in a shop window, since if you are interested in price, then most likely you will not be able to afford it. There is a danger that the lack of prices can lead clients to such thoughts that you are too expensive for them.
2. Some potential customers will simply be lost.
For example, a manager instructs his subordinate or secretary to find out how much one service or another costs. If the competition is high and the employee is lazy enough, then he will simply follow the easiest path and collect data with prices, services that are posted on the sites, he will not call. At the next stage, he will call the already formed list, if you need to know some details. And only then, if the results do not satisfy him, and you need to look for someone else, it will be your turn.
3. A waste of time and a focus shift.
If they call you, the first question that is most likely to be asked to you is a question about prices.You will spend time discussing prices, working with objections to prices, instead of talking about the content of the work, about quality. In addition, people who have too little money will still call you. They will distract you and waste your time. If your prices are known, then some people will not be interested.
You now have five pricing strategies. Choose a pricing method based on your experience and knowledge in your area, experience in dealing with customers. Try different ways, adapt them for yourself. I will be happy to comment on what schemes you use, what advantages and disadvantages they have.
Source: https://habr.com/ru/post/297872/
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