7 Ways to Define How Much You Should Charge Clients
After I had been freelance writing for a bit I started acquiring more clients. At first when they asked, “What’s your rate,” I stuck with the price that I was initially charging. The problem? I was definitely worth more than that.
That’s not trying to be too egotistical. It’s just that the quality of my work was worth more than I was charging. Besides. I was barely making ends meet. If I only I knew then what I know now.
Determining the price that that you’re charging your clients is not only one of the most important tasks for a freelancer, it’s also one of the most stressful. After all, if you charge too little, you can’t pay your bills. If you charge too much, clients may look for a cheaper alternative.
To prevent that from happening, here are 7 ways to define how much you should charge a client.
1. Know the market.
The amount that you’re going to charge your client can be determined by a number of factors, such as your geographic location, your experience, and the demand for your services. For example, a web developer based out of San Francisco is definitely going to want to charge more than a developer living in Topeka, Kansas because the cost-of-living is so much more expensive in San Fran.
Take a little time to do some market research and see what the going market rates for are for someone in your industry. Look for surveys, industry publications, or simply Google “How much should I charge to ______ ?”
PayScale is another resource worth reviewing since it provide the average salary for thousands of different jobs.
2. Keep tabs on the competition.
More specifically, you can do a little snooping and see what your competitors are charging. Thanks to freelance marketplaces you can search and see what people in your industry are charging their clients.
If you know of any competitors in your neck of the woods, visit their website. Most freelancers are transparent and provide a list of their charges or a menu of commonly-requested packages. For example, a fellow photographer have different prices for a half-day shoot, a wedding, or a full-day of capturing product images.
Seeing how much your competitors are charging can give you a ballpark estimate on where to set your prices. However, don’t charge too far below your competitors. Clients may not see you as reputable.
3. Hourly or Per-Project?
This is arguably one of the greatest dilemmas that freelancers face. And the best way to get out of this predicament is to understand the type of work that you’re in. That’s because some industries are better-suited for hourly rates, while per-project is optimal in others.
Our own Miranda Marquit explains that when “you charge $50 per hour, you can only ever make $50 for each hour that you work (until you raise your hourly rate).” You can’t fudge those numbers and it’s not as flexible as charging per-project. For example, “If you charge $200 to write an article and you can finish in four hours, you’ve made $50 an hour.” But, if you become more efficient and cut that time down in half, then you’re making $100 an hour.
That’s not saying the charging by per-project is a better option.“You need to be able to accurately estimate how long it will take you to complete a work order if you want to avoid undercharging,” says Marquit. “This can be a problem if you are a freelance web developer or graphic designer.”
For example, if you “estimate that a project will cost $500 to complete, thinking you can finish in 8 hours, making your hourly rate $62.50. But what happens if it takes 25 hours instead? Now you’re making $20 an hour.”
Ultimately, you have to figure out “what you want to be paid, and what will allow you to make a living.”
4. Determine how much money you need to earn.
This leads perfectly into my next point. Determining how much money you need, or want, to earn.
This easiest way to do this is by creating a budget that lists all of your essential monthly expenses, such as housing, utilities, food, and transportation. If your monthly expenses come out to $1,000 per month, then you know that that’s the minimum amount of money you have to earn.
You also want to create a desired budget that not includes your essential expenses, but earning enough so that you can set money aside and place it into an emergency savings account.
You then want to compare those budgets to what you’re charging your clients. Laura Shin states in Forbes, “If your expenses are more than the amount you can fetch in a month given your experience, then you may want to get more experience, take some classes or otherwise improve your skills so you can charge more.”
5. Consider your client.
It’s perfectly acceptable to determine how much you’re going to charge a client after meeting with them. For example, if a client from a nonprofit that you support approaches you, you’ll probably be willing to take a significant pay cut to work with them. You may also consider decreasing your rates if the client is someone that you actually enjoy working with. You could also think about offering lowering rates to friends, family, or clients that have an awesome product or service that you’re a fan of.
If the client is picky and seems overbearing, I have no problem requesting a down payment and charging them more money. It’s these types of clients that are headaches since they’re constantly adding on to project or requesting multiple revisions. For example, I recently worked with a client that not only demanded so many changes that I essentially had to rewrite the article, the comments were passive aggressive. In short, they really got on my nerves and I raised my rates the next time they wanted me to write an article for them.
6. The “Mattress Method.”
This is a method developed by Marie Forleo after she visited Sleepy’s to purchase a mattress. Marie wanted the Temperpedic, but didn’t want to spend the $3,000 on the mattress. However, the salesman reminded Maries that she spend over a third of her life bed and the quality of her sleep would affect her productivity, health, and good lucks. Suddenly, investing in a mattress with those benefit, along with lasting for a decade, seemed like a great investment.
So, the “Mattress Method” is when you “deliberately translate the value of your product or service into real life currencies like time, money, love, or health.” You can figure that out by asking yourself “what result are your helping people achieve and how can you translate that value into even more time, money, love, or health?”
If you can determine that, then your client’s won’t have a problem paying your rates, because your services are providing them with something more valuable than just a written article, logo design, or photograph.
7. Track everything.
Hopefully you’re tracking your time to see how long it takes you to complete a project. When you know which parts of a project are eating-up most of your time, you have a better understanding of what to charge. Not to bias here, but we happen to have an innovative and powerful time tracking tool that deserves your attention.
Besides tracking the time it takes you to work on a project, Annie Pilon suggests on Small Business Trends that you also need to track;
- Things like admin work, brainstorming and communicating with clients.
- The amount of revisions you’ve had to make.
- Other tasks like marketing.