How much should you charge for your services? Freelance pricing is tricky, and no one ever talks about it. We'll cover the various approaches you can take when to charge at each level and why it's essential to think about charging when you're trying to start.
This question has been raised by many beginning freelancers of how to charge, how much to charge, how to be competitive without undercutting everyone else in the same field, how not to be the cheapest etc.
Let's get started,
Is the cheapest the best?
"Being cheaper than the next guy is not a recipe for success."
There's no simple answer to whether the cheapest is always the best. It depends on several factors, including the nature of the project, the client's budget, and your level of experience and expertise.
If you're starting as a freelancer, it's understandable that you might be tempted to charge the lowest possible rate to attract clients. However, it would help if you were careful not to undervalue your services.
Pricing yourself too low is a common mistake among young freelancers.
- If you charge too little, you risk being taken advantage of by clients who may try to get more work out of you than they're paying for.
- On the other hand, if you charge too much, you may price yourself out of the market.
The best way to determine the correct rate to charge is to research what other freelancers in your field are charging for similar projects. Once you have a general idea of the going rate, you can adjust your price based on your experience and expertise.
"Be confident in what you charge, don't sell yourself short, value your services, and charge accordingly. Don't be the cheapest, and you'll attract the right clients."
If you're significantly lower than the going rate, you may want to consider raising your rate. Ultimately, it's up to you to decide what you're worth and what you're comfortable charging.
- You should never be the cheapest freelancer in any niche.
- You must be the best in your niche.
- Always be transparent about your prices.
- Focus on your strengths and create a better value for your clients.
Let's dig more into it!
The dangers of undercharging!
If you're thinking of undercharging your products or services, think again! While it may seem like a good idea to keep your prices low to attract more customers, you are doing more harm than good.
Undercharging is only doing yourself a disservice but also putting your business at risk.
- Undercharging can make your business seem unprofessional and amateurish.
- If your prices are too low, customers may question the quality of your products or services. After all, why would someone charge so little for something if it was worth anything?
Undercharging leads to:
- Financial problems down the road. If you're not making enough money - you'll eventually run into cash flow issues.
- You'll be undervalued, underutilized, overworked, underappreciated, taken for granted, and demotivated.
- You'll be paid less than you are worth, which translates to more time wasted than necessary.
- It leads to low quality of work, burnout, and having to work more hours to make ends meet.
- Potential clients will also assume you're not professional enough to charge a higher rate.
"Sell your value, not your hours."
So, while it may be tempting to undercharge, it's essential to think about the long-term effects of doing so. It's not worth sacrificing the quality of your business or putting your financial health at risk to save a few bucks.
Why charge more? Why choose between time or value?
Don't get it wrong!
It's not just about charging higher than the competition; it's also about charging the right amount. The right price is somewhere in the middle, so you can make your business profitable.
Charge a higher rate:
- To stay motivated and attract better clients.
- To prevent yourself from being a servant.
- To stop the competition from undercutting you.
- To attract high-quality clients who value what you've to offer.
- To set reasonable rates for your time, experience, and services.
- Because you deserve to and if you should.
Avoid being the cheapest. Price yourself intelligently.
How to decide what to charge for your services?
When deciding what to charge for your services, it is essential to consider your customer experience. You can provide a lower price for a more basic product and charge a premium for somebody who wants an all-inclusive experience.
By doing this, you'll always be catering to your clientele and ensuring you are charging what the market will bear.
Common factors to consider:
- Understand your target market.
- You need to know what your customer will be willing to pay for your service.
- Determining if you are working on an hourly or fixed price basis.
- Determining a minimum gross margin of your service.
- Know your expected cost of capital to show a profit.
- Decide whether to use a cost-plus approach or value-based pricing.
- Know the market price range for your services.
- Consider the time, effort, and expertise needed to provide your service.
- Learn how to negotiate fees with your clients.
- Consult with experts in the same field or someone you believe is your mentor.
How to calculate the value of your service:
- How much do you earn with your service or product?
- Divide it by 30 (days in a month) to know your per-day value.
- Divide your per-day value by the working hours (9 hours, or the number of hours you dedicate to work).
- Now, determine the time and number of days you’ll need to finish the project. For example, if it takes 7 days, multiply your per day value by 7. Or, multiply the estimated hours by 7 days.
Why set your hourly rate?
As a freelance, one of the most important decisions you'll make is setting your hourly rate; this will determine how much you make per hour of work and will be a critical factor in your overall earnings.
There are a few things to keep in mind when setting your rate:
- First, consider your experience and skillset. If you're starting, you'll likely want to set a lower rate to attract clients. As you gain more experience and hone your skills, you can gradually increase your rate.
- Next, think about the type of work you'll be doing. If it's something that is relatively simple and doesn't require a lot of time or effort, you'll want to set a lower rate. If it's more complex or time-consuming, you can charge more.
- Finally, research the going rates for similar work. It will give you a good idea of what others in your field are charging and help you set a competitive rate.
With these factors in mind, you can set your hourly rate and start earning as a freelancer.
Set your worth, how?
There's no one-size-fits-all answer to how to set your worth, but there are some general principles you can follow.
3 steps to charging what you're worth:
- Charge based on your value and your competitor's pricing.
First, consider what value you bring to the table and how that compares to your competitors. You can charge more than your competitors if you're offering a unique service or product.
In other words, do your research and know your worth. Know what businesses in your area are charging for similar products or services, and use that as a starting point. From there, you can either price yourself slightly below or above the competition, depending on your unique selling points and what you feel your target market is willing to pay.
- Charge based on your client's budget.
Think of the clients' budgets. If they require a more budget-friendly option, you can charge less and strategies your service to align with their budget. But if they require a high-end service or product, you'll need to charge accordingly.
- Avoid being the cheapest or overcharging.
Don't be afraid to adjust your prices and services as needed. If you find that you're consistently getting clients willing to pay more, raise your prices.
If you're having trouble getting clients, lower your prices (not to the cheapest but aligning to industry averages). By being flexible with your pricing, you'll be able to find the sweet spot that works for you and your business.
Finally, regularly evaluating your pricing strategy will help ensure that you're neither undercutting yourself nor overcharging your customers.
"Set your worth; the price is just a reflection of that."
How to explain the value you bring to the table.
You may have heard that people don't pay for what they need! It can be true in some situations, but people have difficulty paying for something they've never heard of before.
How will they know it's worth their money?
You need to educate prospective customers on the value of your product or service. Then, you can gauge whether or not they're willing to pay for it.
Learn to negotiate!
Many freelancers and small business owners find charging their clients a chore. The process usually starts with you quoting out the job, and they think it's too expensive, so you have to negotiate.
If you're lucky, they accept the quote, and it's smooth sailing.
But what happens when they offer less than you think is fair?
It's essential to start with a transparent quote in your mind and stick to it, but being able to negotiate is a vital skill for any freelancer or business owner.
You'll have to have thick skin and be prepared to turn down jobs if necessary to stay true to your quote!
What's the point of negotiating, and how can you learn?
"There is no such thing as a free lunch."
Negotiation is critical for getting the best possible deals for your business. Building a solid relationship with suppliers, partners, and customers is also crucial.
The best way to learn to negotiate is to practice. Start by trying to negotiate small deals, such as with a local business. Once you've gained experience, you can start tackling bigger deals from more significant markets.
Remember that in any negotiation, both parties must feel like they've won. Also, I'd say convince your clients that they've won, and they'll get ROI anyhow.
So, don't be too rigid in your demands. Be willing to give and take, and you'll be more likely to reach an agreement that everyone is happy with.
Freelance marketplace, why use them?
There are many reasons to use a freelance marketplace.
- For one, it gives you access to a broader range of clients and projects. You can also search for projects matching your skills and expertise and get paid more quickly and efficiently than going alone.
- Another significant advantage of using a freelance marketplace is the build-in support and protection they offer. Most marketplaces have a dispute resolution process in place to protect freelancers and clients, and they also offer payment protection in case a client doesn't pay up. This peace of mind can be worth its weight in gold, particularly for new freelancers just starting.
So, if you're thinking of freelancing, check out some of the top freelance marketplaces to get started. You could save yourself a lot of time and hassle in the long run.
You can check out Gig4U since you've come so far. Gig4U offers - an ESCROW payment mechanism - where the client has to make an advance payment, which a third-party account will hold. The amount gets released into your account as soon you've accomplished the project.
Try it out ; ) and so share your experience with us!
"You deserve to be paid what you are worth, so charge a fair rate."
Picking the correct pricing for your work is very important and is essential to the success of your freelancing business. If you want to do freelance work, you will need to be able to price your work in a way that does not leave you penniless.
By considering all of these factors, you can set a fair price that meets everyone's needs.