One of the biggest struggles of being a freelancer is figuring out how to price your work. You don’t want to undervalue yourself and end up working for peanuts, but you also don’t want to price yourself out of the market. As a freelancer with years of experience, I understand this struggle well.
That’s why I’ve broken down the most common pricing models for freelancers, as well as best practices to ensure you’re getting what you deserve. Understanding the pros and cons of each model type, as well as how to deal with sticky situations, will help your freelancing business thrive.
Why Is It Important to Set Your Own Prices as a Freelancer?
As a freelancer, you are your business. While you might have gotten into freelancing because you love the work or the flexibility, you still have to handle the administrative side of running a business. Your pricing should reflect that.
When setting your prices, you should consider both the client work and the administrative side of the business like pitching to new clients, updating your website, and tracking finances. These all add up and the less you earn, the more unpaid time you’re putting into your business.
While it may be good to understand what others are charging, they shouldn’t determine how much you should charge. Only you understand your specific set of circumstances and how much you need to earn. Determine your personal value and price from there.
Common Pricing Models for Freelancers
One of the most common ways for freelancers to charge is by the hour. You simply determine your hourly rate and then track your time to bill at the end of a project or assignment. This is great if you’re a newer freelancer still figuring out how long assignments take you or if you have a lot of ongoing work.
- It’s easy for clients to understand
- You don’t have to worry about scope creep since it’s all time-based
- The more time you work, the more money you make
- It can be tempting to take your time with projects just to earn more
- Tracking your hours precisely can be tedious
- It can be harder to raise your rates down the line
2. Project-Based/Fixed Fee
With a project-based pricing model, also called a fixed-fee model, you set an overall price for a project – regardless of the time it takes you. This is great for more experienced freelancers that have a grasp on the length of time projects take them.
- There’s potential to earn higher per-hour rates if you’re an efficient worker
- You have better income certainty
- There is no need to meticulously track your time
- You may risk pricing yourself too low and working for less
- There is a risk of scope creep if the client changes or adds requirements as you go
- More pricing negotiation is often involved
3. Day Rates
Day rates are a common payment model for contractors that may need to devote more set time to a specific client or project. Most of the time this would include 6-8 hours of work on a project, but this might vary depending on the client and the specific project.
- It’s predictable and simple for you and the client
- Great for focusing on tasks accomplished, rather than time spent
- Clients have ready access to you for a day
- It limits your earning potential with other clients for that day
- The definition of a “day” might differ between you and your client
- Client may try to fit a lot into your work day to get the best deal
4. Value-Based Pricing
An uncommon but potentially very profitable pricing model is result-driven pricing. In this approach, you agree to a certain percentage of the profits for sales that your work generates – like a commission. It’s most common in freelance marketing or sales that can directly correlate work to profit.
- Clients view it as a win-win as they only pay for direct results
- Can result in a huge payout for very little work
- Helps clients view your business as professional and incentivized to do great work
- Requires a lot of trust in the client to pay the agreed commission
- Clients must be willing to share monetary goals of the project to fully understand the value given
- Could take a lot of time, with no guaranteed payout
Freelance Pricing Best Practices
To ensure you’re getting the most value from your work, there are a few pricing best practices for you to employ:
- Work backwards: Figure out your desired salary and how much you want to work (including non-billable hours) in order to determine how much you should charge.
- Don’t work for free, ever: Make sure you have a clear understanding of the scope and never do extra work without being paid, even as a gesture of goodwill.
- Have a contract: A contract is there to protect you and the client. It should lay out the scope of work, the length of time (even if this is “ongoing”), and the payment details and schedule, so there is no confusion from either party.
- Don’t be afraid to increase your prices: As you grow in your skills and develop your business, raising your pricing to match that is crucial.
How Do You Negotiate a Better Price?
Whether you’ve just begun conversations with a new potential client or you’re looking to re-evaluate your existing contracts, you may want to try to negotiate a better price for yourself. This can seem intimidating if you’ve never done it, but negotiating is all a part of business and isn’t something you should take personally.
Here are some tips to negotiate a better price:
- Show your value: Demonstrating your worth to a client is the best way to warrant a higher price tag. This can be done through testimonials, data analysis, and more.
- Do your research: Negotiating a higher price means understanding not only your own value, but the going market rate in your niche to properly price yourself.
- Know your minimum price: Before you go to the negotiating table, it’s important to ask yourself what the minimum you’ll accept is, as clients may try to counter-negotiate.
- Be prepared to walk away: To go along with the above, if you’ve determined your minimum and the client won’t accept that, you might need to walk away from the deal. While it’s never great to leave a client, it’s important to maintain your worth to grow in your freelancing business.
Should You Ever Offer a Discount?
There is a lot of mixed messaging out there on whether you should or should not ever offer a discount on your pricing as a freelancer. While some say that it can be beneficial if you see the relationship leading to long term work or just getting started, others believe it will devalue your work and hurt your business.
Offering small discounts very sparingly, especially as you build your business, can work in your favor if it leads to ongoing work and positive reviews. However, as you grow in your business, be willing to stand firm if you increase your prices and drop clients that won’t pay you your worth.
What Can You Do If A Client Isn’t Paying You?
One of the biggest downsides of running your own freelance business is sometimes dealing with the unpleasantness that comes from clients not paying your invoices on time. While hopefully it’s an infrequent occurrence, it’s important to understand how to handle it and take certain steps to resolve it at the lowest level.
- Stop any ongoing work until they’ve paid up. There is no point continuing to do work for a client if they have shown they aren’t going to pay.
- Reach out to the client and resend the invoice. Sometimes, these things fall through the cracks and it might just be an honest mistake. Give them a chance to rectify the error before taking more extreme measures.
- Write up a letter of demand, if you’ve followed up and still haven’t heard back. The letter should be signed and dated, with notice that they have not paid and you may pursue further legal action if they continue to not pay.
- Finally, consider hiring a lawyer to deal with the client on your behalf. Depending on your location, you may be able to take them to small claims court or hire a collection agency to put pressure on the company to pay up.
The Best Way to Accept Payments as a Freelancer
While understanding how you bill for your services is important, getting the actual money from your client is essential. As a freelancer with enough things to worry about, you want to make the payment process as easy as possible. The best way to accept payments as a freelancer is with Pay.com.
As a full payment service provider, Pay.com makes it incredibly simple to accept payments in a multitude of ways. To bill your clients after a project, you can use Pay Links to send direct payment requests.
You can choose from a wide variety of payment methods, making it easier than ever for your clients to pay. This includes credit cards, PayPal, ACH transfers, and digital wallets like Goole Pay and Apple Pay.
However you choose to price and sell your services, Pay.com has the options you need to get paid easily. You don’t need any technical knowledge to get started.
The Bottom Line
Getting paid as a freelancer shouldn’t be a struggle. By taking the time to understand how much your work is worth and sticking with that, you’ll be better prepared to negotiate with clients in a professional way.
You don’t have to stick with one pricing model across your business. While hourly may work for one client, a daily rate may make more sense for another. Don’t be afraid to try different pricing models and change them if something isn’t working.
As long as you have a clear contract with clients in place and a process for payments, you’ll be good to go. Pay.com makes it easy to send payment requests, no matter how you choose to bill. Click here to create your account now!