The Ultimate Guide to Pricing Your Freelancing Projects
By: Sadia M.
Tags: Careers, Entrepreneurship, Freelancing, Business, Marketing

Hourly Pricing

With hourly pricing, you charge the client for every hour you work. While this is the most common pricing strategy used by freelancers, it’s not the best. Here’s why.

Cons

You’ll need to track your working hours.

As you become faster at completing a task, you’ll need fewer hours to complete a project. Which means the faster you do it, the less you get paid.

For hourly projects, clients can start micromanaging you. They may start telling you that you’re taking longer for a project, which another freelancer could have completed faster.

A lot of estimation is involved.

Pros

Hourly pricing is great for projects where the scope of the project is not clearly defined. You don’t know how many more tasks the client will give you.

You can take longer to finish a project and get paid more.

Example

A client asks you to design their website. Your hourly rate is $80 per hour, and you estimate it’s going to take you two weeks to complete the project with 20 hours of work per week. So you bill the client 40x80 = $3200 in total. Now, if it turns out to be more than two weeks of work, you’ll charge the client for that — but they won’t be happy with that, as it’s more than the agreed price. No one likes to be stung with extra charges.

Many chose hourly pricing when starting in their career because it’s easier to work with than other pricing strategies. I’d recommended you don’t work with hourly rates because they involve a lot of estimation.

Daily Rates

Daily rates usually work best when you’re working for clients on an ongoing basis. You’re still billing for time worked, but instead of hours, you’re charging for a full day of work. You get to decide how many hours one workday comprises of for you. Usually, it’s 6–8 hours of work per day.

Think of your day job where your working hours consist of eight hours. Now think of freelancing as your day job where your working hours can be any number; you get to choose. Your daily rate can, for instance, be $500, and you bill the client weekly or biweekly.

Cons

Like hourly pricing, you earn the most when you take more time to complete a project.

Clients will again micromanage and be upset if you take too long.

Earning potential is limited.

Your weekly schedule will mostly be packed with client work.

Pros

You can charge higher rates because the client doesn’t know the exact number of hours you’re working.

Easier to track time than hourly pricing.

Example

You might want to consider daily pricing when working for large companies that don’t have a clearly defined scope of projects but provide ongoing work.

You’re working for a company that provides ongoing copywriting work. You charge them $500 per day, which consists of six working hours. You work five days a week, so you bill them 500x5=$2500 at the end of the week. This pricing structure helps to prevent you working more hours than you are getting paid for.

Retainers

This is when a client pays you a fixed amount (usually monthly) and retains your availability. The client may or may not avail of your services for a month, but you get paid nevertheless. Retainers work best for long-term clients that provide consistent work.

However, they can reduce flexibility in your schedule because you have to make yourself available to the client, whether for tasks or Skype calls, and accommodate other clients accordingly.

Cons

Most clients prefer hourly pricing over retainers so they can get a clear idea of how many hours you’re working.

Pros

You get consistent work, so you don’t have to worry about hunting for new clients every few weeks.

You build a predictable income stream because you know you’ll earn $X a month.

Clients can extend contracts if they like your work, so you get a chance to build long-term relationships with clients.

Clients don’t get room to micromanage you.

However, keep in mind, clients don’t get to decide how many hours per day they retain you. You decide the number of hours you’ll be working.

Example

A client I worked with was launching a startup. He required consistent copywriting (landing pages, page copy, ad copy, video sales letters, email copy, social media copy, etc.), but his project’s scope was undefined. I wasn’t sure what was coming next, but I was sure the projects would span several months. So I decided to work with him on a retainer basis and charge him $4000 per month for a three-month contract.

Fixed Pricing

In fixed-price projects, the scope of the project is fixed, and so is the price. For example, a client wants you to write 7 emails for their drip campaign. You charge a fixed price of, let’s say, $1500 for this whole project.

You don’t tell the client how many days or hours you’ll work. And if they ask you how long you would take, give them a vague answer such as, “a couple of weeks.”

For fixed-priced projects, always charge a 20% profit to your baseline price. So if your baseline price is $1400 for seven emails, charge $1680.

Cons

The client may ask for unlimited revisions if you don’t clearly define the number of revisions you’ll do.

If you underestimate the value of the project, you can end up undercharging.

You can’t go back to square one and ask for more money.

Pros

You don’t charge based on the number of hours you’ve worked.

Since you’re not disclosing the number of hours/days you’re working on the project, you can charge higher rates.

Fixed pricing minimizes the chances of the client micromanaging you.

Example

I’ve mostly done fixed-priced projects. Clients would give me X number of blog posts to write, and I would multiply my rate for one blog post with the number of blogs. Let’s say I charge $100 per blog post. For 3 blog posts, I charge 100x3= $300.

Value-based Pricing

Think of it as a fixed-price project, only now you’re charging based on the value you’re bringing to the client. You do your research on the client first and estimate the value they’ll receive from the project in terms of money. Then you charge a percentage of that money.

Let’s say a client is expected to make $200,000 after the project is complete. You charge 15–25% of this money. Keep in mind; this strategy applies mostly to projects where high rewards are involved.

Cons

The value is based on estimated revenue, not guaranteed revenue.

You’ll need to employ persuasive techniques to explain the financial incentives of the project to the client.

Pros

High earning potential. The higher the perceived value of the project, the higher you can charge.

You can complete the project in as little time as you want.

The scope of work is clearly defined.

Removes the inconvenience of tracking hours.

Example

You’re writing an email campaign that is expected to bring the client $10,000 in sales. You charge $1000, which is 20% of this revenue.

How you price your projects largely depends on the scope and nature of the project. That said, you can use a mix of these strategies in your freelancing business.

Before you leave, I want you to take home some advice that I wish someone had given me earlier in my freelancing career…

Important Points to Remember

If a client asks you to bring down your price, reduce the services you provide. For example, you can say, “If this doesn’t suit your budget, I can write three blog posts for you instead of five.” But DON’T bring down your price.

Whenever you can, avoid hourly pricing. You end up selling yourself short when you charge by the hour.

Before you quote a rate, get the full context of the project. Do your research. Then create a proposal instead of giving vague estimates to clients.

Before you state your price, ask, “So what’s the budget for this project?” The client may have a higher budget than you expected, but you can end up charging less if you don’t get an estimate from them.

When clients ask you how much you charge, start by saying, “For projects like this one, I have charged anywhere from $X to $Y…”

Once you’ve stated your rate, shut up. And let them speak. Don’t fill the silence with “umms,” “buts,” and all that nonsense.

As you gain more experience, raise your rates.

Final Thoughts

With all that said, a huge part of the freelancing game is confidence. If you’re not confident, you end up selling yourself short. Secondly, you must also be smart enough to know which pricing strategy would work best for which project. And third, know how to deal with each client tactfully.