Pricing your services as an independent creative can be a much more complex issue than assessing a rate based on what your competition charges and offers, the current state of the economy, or by determining a rate from a salary you once commanded as a full-time employee.
Though “It’s not personal, it’s business,” is a relevant mantra in many facets of the business world, determining the value of your professional skills and the time you invest to produce and deliver them is personal: Your financial present and future are impacted by how your price your services.
Here’s a look at how being honest with yourself when pricing your services can help you to structure the most optimal business model for your needs, at any given time.
What’s in it for you?
One of the greatest benefits of being an independent creative is the freedom to choose the clients and projects whose work you find fulfilling, interesting, and advantageous to your longer-term career goals. Though a well-honed marketing strategy can help you target the types of clients you want, your prices have significant bearing on which projects you secure. Though fee calculation formula sand resources (see the links at the end of this post) can guide you in calculating an appropriate price range based on overhead, estimated billable hours, desired salary and profit (typically 10 to 20 percent, according to the Freelancers Union), consider the “fringe benefits” any client relationship can offer to your future value when you determine rates.
For example, if adding the client’s name to a customer list will enhance the perceived value of services in other industries, winning the business is likely more valuable than being “married” to a certain rate. On the contrary, if a client is leaning on your background or industry expertise to build their own credibility, your price should include the value you offer them. Consider the same factors in how you quote prices, whether as an hourly rate or a flat fee. If you work quickly, price conservatively, and the client demands time sheet documentation, for example, you could undercut your own earning potential. If the client communicates with you multiple times a day, on the other hand, billing hourly (and expressing every conversation as an incremental charge rounded to the nearest 15 minutes) can help you and the client manage a project (and time) more efficiently.
Are you approaching pricing contextually?
What you charge clients is relative to them, and to you, based on the context of each unique situation. When you’re asked to bid on a project, ask specific questions to determine the type of work a project entails, and how those details will impact fees. For example, a client who needs a resource with industry expertise will likely be more willing to pay for the required talent than fora Web designer whose background isn’t relevant to the project. Similarly, a client who lacks the staff or resources to complete a high profile project will typically be less price-sensitive than one who is adding to their arsenal of talent in preparation for a busy season. Consider these questions to determine the context of a client’s work:
- Who is currently doing the work?
- What created the need? (And is the work to support a new business pitch, or new initiative?)
- What is the typical process for “kicking off” a project, and receiving edits and approvals?(And what is the estimated timeline and final deadline for this project?)
- Is there additional research required to produce the work?
- Who are the decision-makers?
- What special software, equipment and images (and possibly, copyright licenses for them) will be part of the work?
Use these contextual facts to arrive at appropriate pricing in a way that meets your business needs.If the client works with a variety of freelancers, do a Google search (“freelance designer at [company name]”). Peruse the freelancer’s website and portfolio to gain a sense of how their services compare to your skills, talents and industry expertise. (If there’s significant crossover between their talent and yours, your pricing may need to a bit more competitive). Consider how long other freelancers have worked with the client to gain a sense for how pleasant they are to work with.The amount of frustration you’re willing to bear from a difficult client should be part of your pricing models, too.
Have you set clear parameters around rates?
When you develop a scope of work estimate for the client, outline the services your rate includes, whether you charge a flat project fee, or hourly rate. For example, your ability to hop on a client call with short notice has value, as does client interaction and presentation skills. The amount of edits a client’s projects tend to involve, and how they communicate and expect delivery on those edits should impact your price, too. (The more “hand-holding” the project requires, the higher your rates.)
How much work do you want?
There is plenty of competition in the design and development world, but you’re not a commodity. Be confident in your rates, based on your market knowledge, ability and talents, and the lifestyle you want to maintain. The less you charge, the harder you’ll have to work. But with that in mind, recognize that your market “value” will ebb and flow with both the demands of the broader employment market, and based on how much or little work you need at any given time. Freelancing doesn’t involve static pricing;never put yourself in a position where you don’t have the flexibility to course-correct your business model immediately to satisfy the amount of work, or financial return, you need.
How quickly are you paid?
A business model that works to build and sustain the financial health of your operation is just as critical to a small shop as it is to a large company. Regardless of how high a rate you can command, the work is only as valuable as the extent to which you are compensated quickly, relative to your financial needs. Consider the average “lag time” in your current business model, from the time you start a project to the time you are approved to bill and, finally, receive payment. If you’re overly reliant on a few slow paying clients, for example, optimizing your pricing strategy could improve your cash flow—even if it means pitching to smaller clients who may not be equipped to pay your highest rate, but have flexibility in their invoicing processes. By using an electronic invoicing system, for example, you can ease the administrative burdens that deplete your billable hours; if you use a payment processing service (many are cost-efficient for small businesses), you can even accept credit cards payments through your website. If slow-to-pay clients aren’t willing to work with you to adapt processes in a way that expedites payment, assess how much that costs you in the sense of tangible financial burden (like high interest balances you may carry on a credit card because you lack cash flow). Based on your assessment, you may find the need to raise their prices to reflect such barriers to payment.
Though part of being an informed creative is pricing your services appropriately based on trends and market demands, what you charge clients (and whether you’re worth it) isn’t an exact science; perception of your value is indeed the reality—and it can change to your benefit, or detriment, at any given time. By weighing the “all in” opportunity each unique project stands to offer, you can ensure that you win the work you want to maintain an upward career trajectory, while commanding a fair fee both for the client and your own time and efforts.
With that said, check out the pricing tools below to get a sense of what others your market charge, and how to use your other costs and skills value to determine appropriate value to your bottom line.
- Trinity P3 Resource Rate calculator app: Standard agency pricing model.
- MyPrice: Takes location, experience and similar factors into account to help determine hourly rates.
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