3 Tips for Creative Freelancers on Pricing and Quoting Clients
“Many of my millennial peers have this romanticized dream of becoming their own boss, making millions, and having absolute freedom. However, when it comes time to price their services, they start to flake.
I work with a lot of contractors in my digital marketing agency. I also spend a substantial amount of time interviewing prospective writers, designers, and web developers for a variety of projects.
I’ve noticed a trend in these interviews. When I get to the end of the conversation, I ask: “What are your rates?”
As a prospective client, I expect a direct answer. However, I often hear:
“Well, you know…it depends..”
“That’s a good question..”
“I’m still trying to figure that out..”
“What do you usually pay?”
Many of my millennial peers have this romanticized dream of becoming their own boss, making millions, and having absolute freedom. However, when it comes time to price their services, they start to flake. This often yields one of two outcomes:
- You won’t get hired because you don’t look professional.
- You’ll get a lower rate than you deserve, because the client knows you’ll let them get away with it.
If you cannot be firm on your pricing, you will have clients who will take advantage of you. Over the long term, you’ll wind up working longer hours to cover your basic income needs. So much for that dream of freedom!
Pricing can be one of the more challenging aspects of being your own boss. Here are a few tips to build a pricing plan that gives you the confidence to create that entrepreneurial lifestyle.
1. Start with a Business Plan
Even if you are just starting out part-time, do not underestimate the importance of a business plan. Your plan doesn’t have to be 20 to 30 pages of in-depth projections, investor pitches, and all of that.
It just needs to give you a clear view of your services, your competition, your market, and your budget. What you’ll gain is a comprehensive look at what it actually costs you to run the business – which in turn gives you a baseline for fair pricing.
“How much do I need to make to sustain my lifestyle?”
When you’re starting out on a new venture, you aren’t doing yourself any favors by shortchanging the income that you need to pay the basics like your mortgage, grocery bill, or utilities. Give yourself a salary, and count it as part of your cost of doing business. If you’re part-time, set a goal for a salary that you need to earn before you can go full-time.
For example, if you need to take home $50,000 a year to cover your expenses, you need to make $4166 per month, or $148 per day. Build your pricing so that this is possible in a 40-hour workweek.
“What are my competitors charging?”
This can give you a range to price your own services. Just remember: The fastest way to put yourself out of business is to be the cheapest in town.
“How much do I need to run the day-to-day operations of my business?”
Include any equipment, software, office space, printer paper, and so on. The sooner you set yourself a budget, the easier it will be to stick to a pricing structure.
Once you know the true cost to run your operation, you will have an idea of how you need to set your prices to make a profit and scale your business. This is your first and most important step to financial freedom and business stability.
2. Build Your Expertise and Build Your Price
If you are just starting out, you may not be able to price yourself at the rate as some of your more experienced competitors. Know your limitations, and price yourself accordingly.
There is a huge difference between knowing your worth, and inflating your experience. Remember, if you are in the service-based industry, your main commodity is your time and experience. Therefore, if you want to make more, you have to invest in your training and education.
If you’ve recently earned your Master’s degree in your field, it’s time to re-evaluate that pricing structure. Have you earned a new certification? Update your service offerings and your pricing. Your pricing structure is a living concept, and it will change as the business changes.
3. Come to the Table Ready to Walk Away
This is one of the hardest “life lessons” associated with running a business. When I first started out as a freelancer years ago, I was so desperate to get money on the books that I would cut corners on my prices. I even let some of my clients set their own prices (cringe).
As a result, I was working an obscene number of hours for an extremely limited income. To make matters worse, these budget customers took up so much of my time that I wasn’t able to build relationships with the kind of clientele that would pay me what I deserved.
When I did update my pricing structure, I had to “fire” several of those clients when they would not pay what I was asking. While I was relieved that I now had the time to build a quality client list, I will never get back that time I wasted with people who didn’t appreciate the value I brought to the projects.
Today, I have a different mindset when I enter a pricing negotiation. While I may want that client’s business, I don’t need it. I need a client who is going to value my work and my services enough to pay a fair price for them.
Remind yourself: If the prospect isn’t able to see your value within a reasonable margin, then they are not the right client for you. Be respectful and understanding that the prospect is being mindful of their own budget as well, but be prepared to walk away if you are not comfortable with an offer.
You know what you need to make this work, so ask for it! The right clients will respect you for standing your ground.
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Image Credit: Inc.com
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