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Freelance Pricing Models6:46 with Pasan Premaratne
Figuring 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] 0:00 [Pasan Premaratne] Once the client has answered all your questions, you have enough information on hand 0:04 to determine whether the project is of interest to you or not. 0:09 But before you can start working on it, you still have to get back to the client with your project proposal and your quote. 0:12 These documents lay the groundwork for the rest of the project. 0:19 We're going to spend some time carefully looking at what these documents are. 0:22 But before we can do that we need an important piece of information—the price that we're going to charge. 0:26 Of the 2 documents the quote will list out the price we charge, broken down by the components of the project. 0:32 So before we put the document together, let's talk about how we can arrive at a price. 0:39 As someone new to the game, pricing can be very frustrating. 0:44 Let's say that in our hypothetical situation, our first client is a friend who wants a website for her mom's business. 0:48 Should we even charge to begin with, given that it's a friend? 0:55 Our client's budget, given that it's not a pressing project, is also quite low. 0:59 Also since this is our first time working on an actual project, we have no guarantee of the quality or timeliness of our work. 1:03 Therefore, we shouldn't charge, right? 1:10 Now those are all legitimate concerns, but you should really consider whether working for free is advantageous or not. 1:13 The fact that you consider yourself inexperienced shouldn't drive you to work for free. 1:20 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. 1:25 If your client is willing to pay you, charge for your work because there are certainly negatives to working for free. 1:32 Now it's true that working for free can help you build up a portfolio. 1:39 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. 1:43 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. 1:50 You will be expected to update the website or add new functionality whenever the client wants and at no cost to them. 1:57 If and when they spread the word of your services, they might let other potential clients know that the work was done for free. 2:05 Now you have more clients who either expect free work or at least a great product for dirt cheap. 2:12 Working for free can also damage your relationship with a client. 2:18 There might be a chance that you want to stop working on this project after the initial job, 2:22 but the client wants as much work out of you as possible since they're not paying for it. 2:26 If you decide to stop working on it, there goes the relationship. 2:31 This can be quite detrimental if the client was a friend or family. 2:34 Free projects are also usually lower in priority than anything else that has the potential of bringing in money 2:38 and so aren't worked on as much. 2:44 The inability to deliver something on time, simply because free work isn't as high a priority, 2:46 is another way you can get on bad terms with a client. 2:52 In short free work might seem like a great short-term answer to get that first client on board, 2:55 but it can lead to long-term headaches. 3:00 Since the cons definitely outweigh the pros, if you can afford to, look for a client that can pay. 3:03 Or at least reconsider doing free work for your existing clients. 3:09 If you're convinced that you should charge for your work, that brings up a second, more complicated question— 3:14 how and what should you charge? 3:20 The answer, as you will find everywhere on the web, is it depends. 3:23 There are different methods to establishing a price, certainly. But it also depends on your location, situation, experience, and goals. 3:26 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. 3:34 Different people in the industry have different opinions on the matter, and there isn't 1 right way. 3:43 It's up to you to figure out what you're most comfortable with. 3:48 But let's start by going over some of the distinctions between the 2. 3:52 If you want to charge by the hour, you take an hourly rate and multiply that by the amount of time 3:57 you think it will take to complete the project. 4:02 This has its benefits, of course. If a project isn't completed in the time frame originally established, 4:05 it's easier for you to revise an estimate of the final cost. 4:11 You can also do this if the client suddenly changes the project or requests an extra round of revisions or features. 4:15 But hourly pricing isn't for everyone. 4:22 You have to know 2 important pieces of information—the hourly rate you're going to charge 4:24 and the amount of time it will take to finish a project. 4:29 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, 4:33 your time estimations could be off. 4:39 Even if you have the information ready, you could scare clients off with hourly pricing. 4:42 Having a rate of $50 per hour is not uncommon as a web freelancer, but it might seem excessive to clients 4:47 who think of work in terms of 40 hour work weeks. 4:53 If you tell a client you charge $50 per hour and that it will take 2 weeks to complete a project, 4:56 they're going to assume that you will charge them for9-5 work days for 2 weeks for a total of $4,000. 5:02 In reality you won't be billing them for every single working hour of the 2-week span, but they might not get that. 5:08 Another disadvantage is that when you price hourly, you have to run everything by the client 5:15 to make sure that they're okay with paying for that. 5:20 This can get complicated. 5:23 On the other hand you have pricing per project. 5:25 Per project prices are easier for the client to understand. 5:28 You just give them a set rate for the whole project that eliminates any sort of confusion. 5:31 Like hourly rates pricing effectively on a per project basis requires a bit of experience on your part. 5:36 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. 5:43 It's easy to underestimate time on a project. 5:51 When this happens with hourly pricing, you can revise your final price. 5:54 But with a per project basis it's harder to determine what that extra time spent means in terms of costs 5:58 and how you can best relay that to the client. 6:04 Now there are situations where certain pricing models may be better suited over the other. 6:07 It makes sense to charge per hour if you don't know how long it will take to complete a certain project, 6:12 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, 6:19 and if the project isn't something you've done before. 6:25 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, 6:29 the project is relatively short and specific, and finally your client's budget isn't very flexible— 6:37 meaning you can't revise hours or charge for extra work. 6:43
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