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Sarah Goliger

With all the hard work you put into creating your website, building out your portfolio, promoting your services, finding clients, and agreeing on a project, you’d think you would be good to go after that. But there is one factor that trips up most freelancers: determining your pricing.

 

Introduction

Have you ever been on the phone with a prospective client and they’ve asked how much you charge? Did you completely freeze up, or start mumbling incoherent sentences while you racked your brain for the right number? If so, you already know the thoughts that start running through your mind at a mile a minute:

  • Should I charge hourly, monthly, or by project?
  • Could I negotiate a retainer?
  • Should I negotiate a retainer?
  • What am I going to quote them for, and how the heck am I going to justify it?
  • Is it too much? Or too little?

It may take some time and practice to perfect your approach, but with these five tips, you can make smart decisions about how to structure your pricing.

 

Step 1: See if you can gauge the client’s budget.

First things first: before you quote a client, you should try to get an idea of budget they’re working with.

The most obvious measure will likely be the size of the company. If it’s a small startup, you’re probably looking at fairly low figures.

Nevertheless, ask your client (either via email or phone) what their rough budget is for outsourcing this project. They may avoid giving you an actual number, but you can always follow up with:

“I know it’s tough to name an actual budget, but if you could even give me a sense of the range you’re looking at, that would be really helpful to make sure we’re on the same page.”

This information benefits you in two ways:

  1. First, you ensure you’re not wasting your time on a client that doesn’t have enough budget to hire you.
  2. Second, you get a better sense for how big an issue budget is for your client.

You may find that their answer is, “We’re really just looking to hire the right person; budget isn’t really an issue” - in which case, you’re going to up your quote quite a bit, aren’t you?

Conversely, you may find that they’re very concerned about budget. If that’s the case, you’ll need to decide if it’s going to be worth taking them on with such constraints.

 

Step 2: Avoid offering quotes in real-time.

This is not just a good tip, but a key negotiation tactic. You’ll likely be having conversations with prospective clients on the phone or in person. If this is the case, avoid offering a concrete number verbally. If they ask for your rates, say something like:

“Because I customize each project around my client’s specific needs, my rates tend to vary based on the project. How about I write up a proposal with a detailed description of how I think we should approach this project, and I’ll include a quote for the project as well. I’ll have that over to you within the next couple hours and we can go from there.”

By avoiding giving the client a quote on the phone, you give yourself more time to think through the best way to structure the project and decide what to charge. It also means that you won’t have the pressure of having the client on the other end of the line, tapping their foot and waiting for your response.

 

Step 3: Choose the structure that makes sense for the project scope and makes you the most money.

Usually, when I’m choosing between offering hourly vs. fixed rates, the decision is almost made based on the answer to this question:

Can I structure this project to have a very clear fixed scope of work?

If the project is to, let’s say, create an email nurturing series, that’s an easily-defined deliverable. I can agree with my client on how many emails it will contain, how much setup will be involved, etc. This would be easy to price at a fixed rate.

On the other hand, if the client is bringing me on to offer strategic guidance on their marketing efforts, or to help out across various channels, this type of project is not easy to scope out in fixed deliverables. It’s also, by nature, a longer-term project. I’d likely offer a fixed monthly rate (i.e. “retainer”) for this type of project. If it were similar, but shorter term, you could do hourly.

However, you also want to think about it from the perspective of what will be fair to the client, but still benefit you the most?

With an hourly rate, you are incentivized to make projects take longer than they need to. Even if right now you’re thinking, “I would never do that!” - that’s great! But that’s still the incentive.

It also means that your client has an incentive to actually care about exactly what you’re delivering to them for every hour you bill for. They might ask you if “there’s any way to cut down from 20 hours/month to 10 hours/month” and… you can see where this is going.

With fixed rates, the nitpicky nature of hourly rates vanishes. Your client knows exactly what they’re going to get for their money -- and you shouldn’t hesitate to remind them of this when you pitch them on a fixed rate. Explain to them that it incentivizes you to get the project done as effectively but also as efficiently as possible. Now you get the same amount of money if you can get it done quickly (which means onto the next project / payment!), and your client gets a faster turnaround time.

 

Step 4: Don’t tie the value of your work to your time.

This is by far the biggest mistake I see most freelancers make. An hourly rate says to your client: “an hour of my time is worth $X, regardless of what I spend it on.”

But that’s not true. Your client should not be paying you for your time, because what you’re delivering to the client is not time. What you’re delivering to the client is value.

Here’s a quick illustration of this point from Dan Ariely, behavioral economics professor and author of Predictably Irrational:

Let’s say you get locked out of your house. You call a locksmith.

In Scenario A, a locksmith shows up and it takes him a couple hours to get the door unlocked. He tries all different tools and tricks, and finally - voila! - the door is open. You think, “wow, he really put a lot of time and effort into opening that door - I should tip him well!” So you do.

In Scenario B, a locksmith shows up and, because he is a very experienced locksmith, he is able to open the door for you almost immediately. You think, “wow, guess that wasn’t too hard. I’ll just give him a small tip.”

This is completely irrational, and we’re all guilty of thinking this way. Really, the value that you’re getting from the locksmith doing his job is the speed at which you can get back into your house.

Shouldn't the better tip go to the expert locksmith who got you in right away, instead of the one who made you wait a couple hours? Shouldn't you be getting paid for your expertise, not the amount of time you put into a project?

As a freelancer, you need to adjust your mindset immediately to start framing your projects and pricing in terms of the value you are providing.

If you can do a project in 30 hours that generates $1,000 in revenue for your client, or do a project in 5 hours that generates $10,000 in revenue for your client… do you really think you should be charging hourly?

Start pitching your clients on your proposal quote by illustrating to them the value that your work is going to drive. You’ll start to see your income growing faster than you thought it could.

 

Step 5: Decide what you think you should ask for, then ask for more.

Obviously, if your client has already given you a sense of what their budget is, don’t ask for double that. If you’re not willing to work for what they’ve offered and don’t think they can realistically go any higher, move on. You need to be reasonable (at least, to an extent) in your quotes, and respectful of your clients’ priorities.

Let’s say you don’t have much sense for your client’s budget yet, or perhaps they’ve mentioned that it’s not a concern to them. This is a promising position for you to be in.

Most freelancers start to get nervous once they decide on an amount they’re going to ask for. If you don’t get nervous, you’re either not asking for enough, or you’ve been doing this for long enough that you’re already a pro at this.

Think about it: what are you afraid will happen if you ask for too much?

There are only two possible outcomes:

  1. “Unfortunately that’s more than we have budgeted for this project. I’m not sure we’ll be able to move forward.”

In which case, you respond and find out what is within their budget (they’ll be more comfortable offering a number once you have), and decide if you’re okay to work for that amount. If so, you move forward.

  1. “Great, when can we get started?”

In which case — look at you, making all that money.


In short: you don’t get what you don’t ask for. Give it a shot!

 

Sarah Goliger is a marketing strategy consultant and freelancer based in Cambridge, MA. She previously ran the email marketing and paid marketing channels at HubSpot, and now works with clients of all sizes on a variety of digital marketing projects.