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Freelance Pricing Models
6:46Figuring out how to price your work is a never ending question for freelancers. However there are two main kinds of methods. We’ll explore the advantages, disadvantages and methodologies of the two main options at our disposal.
[How to Freelance - with Pasan Premaratne]
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[Pasan Premaratne] Once the client has answered all your questions, you have enough information on hand
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to determine whether the project is of interest to you or not.
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But before you can start working on it, you still have to get back to the client with your project proposal and your quote.
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These documents lay the groundwork for the rest of the project.
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We're going to spend some time carefully looking at what these documents are.
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But before we can do that we need an important piece of information—the price that we're going to charge.
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Of the 2 documents the quote will list out the price we charge, broken down by the components of the project.
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So before we put the document together, let's talk about how we can arrive at a price.
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As someone new to the game, pricing can be very frustrating.
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Let's say that in our hypothetical situation, our first client is a friend who wants a website for her mom's business.
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Should we even charge to begin with, given that it's a friend?
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Our client's budget, given that it's not a pressing project, is also quite low.
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Also since this is our first time working on an actual project, we have no guarantee of the quality or timeliness of our work.
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Therefore, we shouldn't charge, right?
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Now those are all legitimate concerns, but you should really consider whether working for free is advantageous or not.
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The fact that you consider yourself inexperienced shouldn't drive you to work for free.
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There may be times when just starting out you might have to work for free, but don't assume that free is your only option.
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If your client is willing to pay you, charge for your work because there are certainly negatives to working for free.
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Now it's true that working for free can help you build up a portfolio.
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But 9 times out of 10 you will supporting the product you just created for them, whether it's a website, web app, or mobile app.
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Because you did the work for free the first time, a client might expect that any work you do for them in the future will be free as well.
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You will be expected to update the website or add new functionality whenever the client wants and at no cost to them.
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If and when they spread the word of your services, they might let other potential clients know that the work was done for free.
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Now you have more clients who either expect free work or at least a great product for dirt cheap.
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Working for free can also damage your relationship with a client.
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There might be a chance that you want to stop working on this project after the initial job,
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but the client wants as much work out of you as possible since they're not paying for it.
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If you decide to stop working on it, there goes the relationship.
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This can be quite detrimental if the client was a friend or family.
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Free projects are also usually lower in priority than anything else that has the potential of bringing in money
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and so aren't worked on as much.
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The inability to deliver something on time, simply because free work isn't as high a priority,
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is another way you can get on bad terms with a client.
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In short free work might seem like a great short-term answer to get that first client on board,
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but it can lead to long-term headaches.
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Since the cons definitely outweigh the pros, if you can afford to, look for a client that can pay.
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Or at least reconsider doing free work for your existing clients.
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If you're convinced that you should charge for your work, that brings up a second, more complicated question—
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how and what should you charge?
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The answer, as you will find everywhere on the web, is it depends.
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There are different methods to establishing a price, certainly. But it also depends on your location, situation, experience, and goals.
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The 2 most prominent methods you hear about is to either charge on an hourly basis or to charge a flat fee on a per project basis.
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Different people in the industry have different opinions on the matter, and there isn't 1 right way.
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It's up to you to figure out what you're most comfortable with.
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But let's start by going over some of the distinctions between the 2.
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If you want to charge by the hour, you take an hourly rate and multiply that by the amount of time
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you think it will take to complete the project.
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This has its benefits, of course. If a project isn't completed in the time frame originally established,
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it's easier for you to revise an estimate of the final cost.
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You can also do this if the client suddenly changes the project or requests an extra round of revisions or features.
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But hourly pricing isn't for everyone.
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You have to know 2 important pieces of information—the hourly rate you're going to charge
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and the amount of time it will take to finish a project.
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Coming up with an hourly rate as a new freelancer can be a little tricky and given that it's your first time working on a project,
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your time estimations could be off.
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Even if you have the information ready, you could scare clients off with hourly pricing.
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Having a rate of $50 per hour is not uncommon as a web freelancer, but it might seem excessive to clients
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who think of work in terms of 40 hour work weeks.
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If you tell a client you charge $50 per hour and that it will take 2 weeks to complete a project,
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they're going to assume that you will charge them for9-5 work days for 2 weeks for a total of $4,000.
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In reality you won't be billing them for every single working hour of the 2-week span, but they might not get that.
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Another disadvantage is that when you price hourly, you have to run everything by the client
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to make sure that they're okay with paying for that.
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This can get complicated.
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On the other hand you have pricing per project.
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Per project prices are easier for the client to understand.
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You just give them a set rate for the whole project that eliminates any sort of confusion.
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Like hourly rates pricing effectively on a per project basis requires a bit of experience on your part.
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You should have an idea of how long it takes you to complete a type of project and what that should translate to in terms of costs.
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It's easy to underestimate time on a project.
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When this happens with hourly pricing, you can revise your final price.
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But with a per project basis it's harder to determine what that extra time spent means in terms of costs
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and how you can best relay that to the client.
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Now there are situations where certain pricing models may be better suited over the other.
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It makes sense to charge per hour if you don't know how long it will take to complete a certain project,
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if it seems like the project may change once you start working on it or that there may be lots of additions along the way,
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and if the project isn't something you've done before.
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On the other hand go with per project pricing if you've done a project like this often enough to know how long it takes,
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the project is relatively short and specific, and finally your client's budget isn't very flexible—
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meaning you can't revise hours or charge for extra work.
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