As a freelancer, there are many different things you need to work out as you begin your career. You need to establish what type of freelancing you are doing, narrow down your niche, and start networking to find clients. Another important step in the freelancing process is figuring out how much you want to charge for your services.
Knowing how to price your services is one of the most difficult steps when starting a freelance career, and it can feel overwhelming. Thankfully, there are some steps you can take and models you can follow in order to accurately price your time and worth.
Why Pricing is Important for Freelancers
As a freelancer, you are completely in charge of setting your prices. Rather than a traditional office job where you are given a salary to negotiate around, you are responsible for telling clients what they must pay you.
This can be a struggle for new freelancers who are trying to find the best rate that doesn’t undervalue their work while, at the same time, isn’t so high that clients don’t end up walking away.
Making sure you get fair compensation for your work is an important part of freelancing, and setting up the right type of pricing model for your business is key to the long-term success of your freelance practice.
Factors that Impact Every Pricing Model
Before you begin looking into the different pricing models, you first need to start by examining a few factors that will impact every pricing model.
The first thing you need to do is research your industry and what the average salary or hourly pay is for freelancers in that sector. That will impact what your pricing ranges are.
Another factor to consider is your level of experience. If you have good reviews from respected clients in the industry and years of experience behind you, you can charge more than if you are just beginning to work in freelancing and don’t have a portfolio of work.
These factors will impact the pricing models we’ll discuss, so keep this information in mind as you create your pricing strategy.
6 Ways to Price Your Services as a Freelancer
There are six different types of pricing models you can use as a freelancer. Some are more common than others, and there are different benefits and negatives to each option. Let’s dive into your options and discuss how to price your services.
1. By the Hour
The first pricing model is by the hour. This is a popular pricing model for freelancers who are just beginning, and it’s very easy to manage. Simply set an hourly rate, then track the time you spend on each client during the billing cycle.
While this model works well for some freelancers, it can also have issues, especially if you are working on projects that require a lot of thought and strategic thinking but don’t take that long to complete. That could mean that you aren’t being paid according to your worth.
2. By the Day
The next method is to charge by the day. Rather than tracking every hour and minute you work for a client, you simply charge a daily rate for the days on which you work for them.
This model works well when you are completing short-term projects for clients that will take up a few days of your time to complete.
However, this model doesn’t account for pricing if your service and time are worth more, and if you end up working more hours than a typical working day for the client.
3. By the Word
Charging by the word is another method that many beginner freelancers start with, as it is a simple way to track project pricing. This method ensures that you are compensated for the length of the work you do, but doesn’t account for projects that might take a lot of time to complete but only use a few words, like social media posts or technical blogs and projects with short word counts but complicated subject material.
4. By the Project
The next pricing model is to charge by the project. Rather than depending on the time or word count for your revenue, you create a set price for an individual project or request from a client.
This allows you to charge a lump sum without needing to track every minute of work or word that you write, but there are still risks.
You could underestimate the amount of work or time that a project is going to take you when you initially set the price, only to find out that you will end up losing money by the time the project is finished.
5. By the Client (Retainer Packages)
The next pricing method is to charge by the client, also known as retainer packaging.
This method of pricing looks at each of your clients and creates a recurring monthly or annual cost for the use of your services, usually in the form of a set number of hours or specific types of projects that fall under the scope of the retainer agreement.
This type of model is great for when you have repetitive work from your clients and helps you predict how much revenue you will generate for the next month or year.
However, this also has some negatives, particularly if you end up with a rolling retainer where a client builds up unused hours over the months and then drops several large projects on you in order to use the remaining hours.
6. By the Added Value You Bring
One final type of pricing model is to charge for added value, otherwise known as value-based pricing.
This type of pricing works best for freelancers who have been working for a long time and have many years of experience in a particular industry.
During your pitches to customers, you highlight the value you bring to the table and emphasize the specific results you can guarantee them. You can then multiply your typical rate by whatever you feel is right and what your clients agree with in order to compensate you for your value.
Freelance Pricing Best Practices
Now that you understand more about what the different freelance pricing models are, let’s look at some best practices to follow when you are learning how to price your services.
Start from Your Desired Salary
A great way to begin your pricing process is to start with what you want your salary to be. If you want to earn $70,000 a year, how does that break down in each pricing model in order to reach your goals?
Don’t Work for Free
If you are beginning work as a freelancer, it can be tempting to allow some hours to slip or to do extra work for clients outside of the original project scope in order to build goodwill.
However, this method can lead to your clients undervaluing your work and leave you scrambling to justify higher prices down the road.
Set Boundaries with Your Clients
Set clear boundaries with your clients about the exact services they are getting for what they are paying.
You want to make sure that you aren’t being taken advantage of and that both you and the client know what to expect from the relationship. Creating a basic contract with each client is a great way to start.
Know Your Worth
Don’t get lost in imposter syndrome, where you think that you are overcharging or thinking too highly of your own worth.
Be confident in the value that you bring to your clients and have faith in your abilities when creating a pricing model. The rest will fall into place.
How to Increase Your Prices
Another common challenge that freelancers face is increasing prices.
If you have been working with the same clients for a while, but realize that your time is now worth more than when you originally started with them, you may need to have a conversation about a rate increase.
Here are a few tips to keep in mind when increasing your pricing:
- Increase pricing at renewals: Wait until a contract or renewal period comes up before increasing the rate of your services
- Explain yourself: Make it clear to clients that there is a good reason for your rates going up
- Give clients warnings: Don’t surprise a client with the next bill or give them little to no time to make up their minds. Instead, give them notices of price increases before it happens
- Be consistent: If you are increasing your rates, you should do it across the board so clients don’t feel as though you are favoring others
You may also be interested in these articles:
- Freelancers ROI: How to calculate the ROI of your freelance projects
- 10 Key Questions Freelancers Should Ask Clients to Succeed
- 9 Finance Tips for Freelancers to Help You Reach Your Goals
Setting your rates and creating pricing models to charge for your services is one of the more difficult parts of being a freelancer. However, once you have determined what models work best for you, you can start to establish yourself in the industry and create the best system for your needs.
Another challenging part of beginning work as a freelancer is having the right tools and resources in order to complete your work and do your job better.
If you are wondering what types of programs will be the most helpful to your freelance career, check out our blog on the best freelancer tools. There you’ll learn about the best tools to use to help advance your freelancing dreams.