How To Price Freelance Work (7 Strategies To Try)
When you have the right pricing model, things start to click. And I don’t just mean you sell more (though that’s a lovely outcome). I mean you start getting clients you actually like working with, doing work you enjoy doing. Getting to this nirvana requires knowing how to price yourself – then being willing to stand by that pricing even if someone else doesn’t get it. This doesn’t mean charging the most you possibly can, but instead pricing in a way that is profitable and sustainable for the type of business you want to run. With that in mind, here’s how to price freelance work (with 7 strategies to try).
What freelance pricing signals to customers
When you share your prices with a prospective client, you’re saying three things implicitly:
- What value you believe you can create.
- How you view yourself and value your labor.
- What kind of work you offer (budget, premium, etc.).
The ideal, of course, is that you can deliver what your prices say about you. For example, charging premium prices is fine if you can deliver a premium experience and outcome. Charging lower prices is fine if everyone’s clear on the value delivered and it requires minimal effort on your part. That kind of thing.
Elements of freelance pricing
On top of what your price says about you, you have to think about what your price does for you. In particular, think about both personal and work-related elements of pricing.
Personal elements of pricing: The following list should be considered when pricing your work:
- Your experience.
- Processing and admin fees to run your business.
- Estimated admin time with the client (both required for the project and projected overtime).
- Tax withholding while still earning enough to survive (and thrive).
Work related elements of pricing: In a product company, this might be called the “costs of goods sold,” and includes:
- Outcome: What you’re delivering.
- Scope: What you’re doing around and outside of the deliverable.
- Quantity: How many outcomes are you delivering?
- Speed: How fast someone wants the outcome vis a vis how much labor is required.
- Quality: Do they want it done or do they want it done well?
- Industry standard: How (and how much) does everyone else charge?
- Project complexity: Is it easy peasy lemon squeezy or difficult difficult lemon difficult?
A quick note on complexity: if the project is easy for you but not others, that means it’s a difficult project and you have experience. If it’s easy for everyone, then it’s an easy project. Don’t mistake your experience for generic labor.
The good (and annoying) part about these elements is that they are always in flux. You gain a bit more experience every time you learn something new to keep a skill sharp. You can tinker with admin and labor costs to a certain degree. Or you can set strict expectations to keep a cap on admin time.
How to price freelance work: 7 pricing strategies to consider
Wondering how to price freelance work? Here are a few strategies you can try (as a note, all numbers and percentages are for illustration purposes, not direct advice).
1 – Mirror the market
As the name sounds, this strategy is just about matching what you see in the market for your kind work.
How to: Research on common websites (like Payscale or Glassdoor), plus your network if you can, to get a sense of rates (both type and amount) for your level of experience. Make that your price.
Pros: It’s fairly simple and straightforward. Further, it’s easy to justify in sales calls. You know that you’re charging the average of the market, so you don’t have to give into demands for discounts – you know they won’t find much better prices than yours.
Cons: It makes you an undifferentiated freelancer. If you’re charging average, on some level you’re implying that you deliver average results. You can avoid this with a good personal brand, but this pricing model adds an additional hurdle to overcome.
2 – Hourly
This model is common with freelancers, particularly for simple tasks that require time but aren’t all that difficult. The more experienced you are, the more you can charge per hour.
How to: If you don’t want to mirror the market, then take your desired hourly rate and add 25% (a baseline that accounts for things like taxes and admin). That becomes your hourly rate. This has to be within reason, so it’s best to choose your desired rate then research average rates to make sure you’re not wildly out of range (unless you provide a specific, high-value version of that service).
Pros: Simple to calculate and track.
Cons: Not scalable – you can’t make more hours in a day and you can only increase hourly rates by so much. Further, an hourly rate both punishes you for being efficient and incentivizes your client to push you for speed, not quality.
3 – Deliverable-based
For services, this is commonly referred to as “productizing” your service. Instead of charging for an input such as your time, you charge for the outcome such as a completed blog post or filing a certain amount of receipts as a bookkeeper.
How to: Start by taking your desired hourly rate and multiplying it by the number of hours (on average) it takes you to complete a specific task. That becomes the deliverable-based pricing for that task.
Pros: You can create multiple “products” using this model. Further, selling an outcome is attractive to a lot of buyers who just want to know what they will pay and what they will get.
Cons: This model is hard to apply to every single kind of freelance work, since not all work is neatly packaged (like finishing a blog post).
4 – Value-based
Instead of productizing the inputs of a project, charge based on how much value you create for your clients. For example, if you create a sales ebook that you know will be used to sell $10,000 contracts, then even if you charged $5,000 the client would make double what they paid you with only one successful sale.
How to: Start with your deliverable-based price. That’s your floor. Then think about the value – either time savings or direct revenue – that your work does for a client. A good rule of thumb to start is to price your rates at 10% of projected value or your deliverable-based price floor, whichever is higher.
Pros: Far higher earning potential since your work is tied to value creation.
Cons: It can be very hard to project how much value you create, making this model difficult and volatile to use.
5 – Daily retainer
If the client needs something done quickly and you figure it will take about a day of solid effort (a “day” is ~6 hours), then you may consider a day rate that is a flat fee for your inputs and projected outputs in one day.
How to: Take what an employee would earn in the position annually (for example, $50,000). Then calculate day rate ($50,000 / 200 working days per year = $250 per day). Then double it (so $500 in this example). That’s your day rate.
Pros: You get a fixed fee for your work.
Cons: It can open disputes about if you didn’t use your time efficiently or if the client isn’t satisfied with the work you did. It can even turn badly on you if you’re too efficient and get the work done too quickly, making the client feel like your “day rate” isn’t justified.
6 – Weekly retainer
Similar to a daily retainer, a weekly retainer is for short term projects that need a lot of intensity.
How to: Same formula as a day rate, except calculated weekly (and make sure you take into account any time differences. For example, if they want you for a week but only half-time. Then calculate what a half-time employee would earn and double it to get your rate).
Pros: You get a fixed fee and can accurately budget your time for a week each.
Cons: Depending on the retainer structure, it might stop you from taking on other client work.
7 – Monthly retainer
A retainer strategy that makes you a part- or full-time employee for a month or more. Great for ongoing projects with clients (especially if you like working with them).
How to: Same formula as a weekly rate, except calculated monthly (20 working days per month on average).
Pros: Gives you significant fixed revenue for the year, meaning you can more accurately project earnings and budgets.
Cons: Depending on the retainer structure, it might stop you from taking on other client work. Further, you’re getting perilously close to being considered an employee, which might include additional expectations like sitting in more meetings or taking on work outside of your scope.
Choosing your pricing strategy
In most freelance work, I recommend a deliverable- or value-based pricing strategy, at least to start. In my experience, these pricing strategies best align your incentives (making money, doing good work) with client incentives (not overpaying, getting a desired outcome). It also puts you in a position to think of your work as a product, which means you keep the upside. When you charge rates revolving around time (hourly or retainers), you inherently give up any efficiency gains to your client. When you do that, you can’t sustain a long-term business with growth potential.
That said, hourly and retainer rates are more predictable, which can be appealing to many people. You know how much you’re going to get for an hour (or day, week, or month) of your honest work. That works very well for many freelancers and clients. But what you gain in predictability you lose in growth potential.
Some other things to consider when choosing your pricing strategy:
- Best Alternative To Negotiated Agreement (BATNA): In other words, if they say no, can you walk away and be ok?
- Minimum Acceptable Rate (MAR): The lowest amount that you will accept, either because it’s unprofitable to earn lower than that or you would devalue your experience if you took the gig.
- Pricing when the outcome itself is time: Sometimes a client just wants you to sit in a meeting. That’s technically an hourly rate scope, but you can package it as an ‘outcome’ of you sitting in the meeting for an hour so you can continue your deliverable- and value-based pricing.
Using multiple billing strategies
To say it plainly: you can absolutely use multiple billing strategies in your freelance business, whether that’s between different clients or using multiple strategies with one client.
The best time to use multiple billing strategies is to be flexible for closing more business. For example, let’s say you are a freelance writer and you sell a certain number of blog posts using a deliverable-based pricing model. For each blog post, you’re willing to conduct one 25-minute interview. If the client asks for additional ad-hoc interviews, it might make sense to work on an hourly rate for a lot of conversations or sell an a la carte offering of an “additional interview.” You could also sell a day rate, for example, and have all additional interviews booked for the same day.
When using multiple billing strategies, use price as an opportunity to make your value clear to the client. As long as you focus on outcomes for the client, the inputs (hours, deliverables, etc.) are easier to talk about.
Create multiple offerings to enable different price levels
Sometimes clients don’t want to pay your full rate. Or maybe they don’t need everything that’s included in your standard rate. That’s fine – when you focus on deliverable- and outcome-based pricing, you can easily create multiple offerings to accommodate different needs.
Let’s look at a freelance blogger for example. That person could take a single outcome – a blog – and create multiple offerings each with different prices:
- A “standard” blog offering where the freelancer does the outline and writes the blog.
- Writing a blog where the client provides the outline first.
- Completing a blog where the freelancer adds on a thought leadership interview with the client.
- Writing a blog where the freelance attends the marketing team’s weekly meeting to take part in content brainstorming.
These kinds of add-ons and offerings give your clients more choice to select the outcome they want. Further, if a client asks for a discount on price, you can easily default to a lower-tier offering as a way for them to fit in their budget while still working with you.
A note about discounting
Because freelance work is fundamentally limited by your time, I don’t recommend discounting. However, discounting can be a wonderful tool to help you increase your overall rates.
I love the example from Duane in his tweet. If everyone is saying yes to your proposals, increase your prices by 20% for the next potential client. If that person says your prices are too high, offer a 10% discount as a courtesy. That client gets a 10% discount so they are feeling good, but you’ve still raised your rates by 10% so you’re earning more. Everyone walks away feeling good.
A note about selling too easily
Similar to the discounting note above, think about how easily you can sell your services. If everyone is saying yes without skipping a beat, you are not charging enough. I used to be ecstatic when someone accepted my rates without thinking, but I later learned it just meant I wasn’t capturing enough of the value I created for clients.
A rule of thumb I learned from a mentor is every time you get an easy yes, increase your prices by 10%. An “easy yes” is defined as one sales call and a “yes” once you send your price proposal – no questions asked and no grumbles.
You don’t have to raise your rates every single time, but this rule of thumb is good to keep in mind. You also don’t have to raise your rates at all if you like selling super easily and that matters more to you than the extra dollar. If that’s the case, power to you. This strategy may limit your income growth potential, but income growth is not everyone’s ultimate goal. If you have another reason for freelancing, then deliberately pricing under market for an easy sale could be your unique value proposition.
And if you’re worried that raising rates means you won’t close any clients, try the discount strategy I mentioned above. It’s a good way to test the waters without putting yourself at risk. Also only use the strategy for new clients. Don’t raise rates on existing clients until you’ve filled your roster with higher-paying clients and would be prepared to lose existing clients if they don’t pay more. You might lose a couple, but you’ll probably more than make up the revenue with new clients at your higher rates.
Pricing is an experiment
As you think about how to price freelance work, remember it’s not set in stone. Setting prices as a freelancer is a delicate balance of your experience and the client’s needs. Don’t be afraid to experiment. Even though freelance rates are your livelihood, try to work through any fear you have about not closing clients. There are multiple different strategies to try and tactics to implement that help you change (raise) your prices. In the end, the goal is to make you more money and capture some of the value you create. Once you get really good at the pricing game and build up enough experience, then you can even start implementing project minimums – that’s when things get really interesting.