10 Things to Know (How to Do) to Be a Freelancer - Page 5 of 13

4.
And How Much Should I Charge?

Another essential piece in the puzzle – yet one of the most complex to determine – is to know how and how much to bill for our services. There’s of course no single answer to this because it all depends on the industry, the client, the country, our experience and reputation, etc. However here are a couple of things to keep in mind:

Before starting out, it’s very important to know your industry’s standard practices (how to bill and how much). This knowledge can be obtained from various sources: talking with established freelancers, looking for price lists online and in books… And it’s a good idea to store that info somewhere.
The goal is to have in mind a general price scale and a good understanding of the industry’s standard practices, in order to be able to sort project sources between those that pay well and those that don’t. Additionally, this helps avoiding to price ourselves too low (thus losing money and eroding fees for the whole industry) or too high (thus missing contracts or winning contracts that are beyond our current skills).

It’s equally important to store a list of all agreed-upon rates for all jobs done, to get a more accurate idea of the market and one’s own worth.

It’s extremely difficult to increase our fee for future projects from a given customer if we started out too low. It’s usually best to simply move on to another customer.
For those still wishing to try to offer a low introductory price to get the client before increasing it later on, my advice is to make that extremely clear right off the bat (by talking about “special rates” for instance). You should then repeat the unusual nature of that fee in your invoice; write down the real fee, add a line that says “special discount for first order” or something, and indicate the discounted price agreed on. You basically want your customer to understand early on that this is not your standard fee.

Any pricing structure can be divided between invoicing the work done (script length for voice over, number of words for translations, number of hours spent, etc.) or invoicing the value created (how much is the outcome of my intervention worth for my customer?).
The former is easier to implement and is thus the most common, but it’s also the most limited. The latter can lead to much higher fees (and equally – or sometimes more – satisfied customers) but requires a strong relationship with the customer and higher negotiation skills. Alan Weiss discussed this topic at length – what he calls “value-based pricing”.
In an ideal world, you’d base your minimum fee on the work done, then boost it up as much as possible based on your value to your customer.

Similarly, any pricing structure can be divided between invoicing a project as a whole or the time spent on it.
Invoicing time units is almost always a bad idea because it creates a conflict of interest between ourselves and our customer (i.e the more skilled you are, the faster you work, and the less you are paid. And the opposite is also true). The one situation I can think of that may justify it is the case of a project that is invoiced based on work done (value-based pricing can’t be based on time units), and the amount of work is just impossible to determine. And so to avoid asking for too little, we can invoice the hours spent and thus make sure our time is paid for. However that should remain the exception rather than the rule.
On the other hand I strongly recommend to keep an eye on how much your income for each customer represents once you divide it by the time spent generating it. Indeed, time is the one resource that you can’t get more of, so although you shouldn’t link your rates to time units, you should definitely know which customers give you the most money for your time.

It’s not because a whole industry invoices in a certain way that it’s forbidden to try something else. Again about Alan Weiss; he was one of the first to invoice his consulting services based on the value provided rather than the hours spent (as 90% of his competitors did – and still do).
Trying something unusual is never easy of course, and it should be based on the deep-seated belief that the new system offered is fairer for everyone involved (trying to change the rules to our benefit at the expense of our customers’ will never work long-term and will end up destroying our reputation, along with being against basic rules of honesty and respect). But even then, it’ll probably only work with customers who trust us and/or for major projects where the client is ready to discuss and experiment (instead of simply looking for the cheapest freelancer). If it works however, the payout is big: better income for ourselves, better pricing system for the whole industry (to try to avoid the continuous erosion of rates), excellent reputation (quality services, easy to work with…), etc.

Important

I noticed – and a quick discussion with other business owners proved that I’m not the only one – an interesting and rather counterintuitive phenomenon related to freelancers’ rates and their impact on their customers: clients attracted to low fees also tend to cause the most troubles.

My only explanation so far is that by trying to pay as little as possible, they attract unskilled people and try to compensate by adding rules, controls, penalties, etc.

On the other hand, customers that pay well also tend to be the most enjoyable to work with. In my case, customers ordering projects of several thousand euros usually simply tell me the expected result and then let me do my job. Needless to say, I don’t cause troubles when they request adjustments and such, and I willingly contribute with ideas or take initiatives. The result is that I’m well-paid and they’re extremely happy of what they get.

On the other hand, customers who enter into endless negotiations for a couple of dozen euros also tend to constantly want to check my work, impose super short deadlines, try to automatize their processes to the point that it becomes impossible to make any suggestion or do anything a bit outside the box (even if it would provide added value), etc.

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4.And How Much Should I Charge?

Important

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4.
And How Much Should I Charge?