When it comes to freelancing, how you approach your pricing will usually define whether you struggle or succeed.
Most freelancers feel at least a little uncomfortable when it comes to pricing their services – it’s natural to have doubts about whether you are quoting too high or too low.
But getting your pricing right is critical. If you’re competing on price instead of the value you offer then you’re going to underprice yourself and struggle to make it in the long term as a successful freelancer.
So that’s why are sharing today three fundamental, hard-learned lessons on pricing and negotiating. These are the first three lessons taken out from our brand new eBook: 8 Lessons on Pricing & Negotiations for Freelancers, which you can download below:
Now let’s dive in!
Lesson 1: Define your Minimum Acceptable Rate (MAR)
In the world of negotiations, the first offer is important for both parties – because it anchors all further discussion around it. For example, think of buying the car – the salesperson will make an initial offer by putting a price on the car, and then it’s up to the potential buyers to lower that price through the negotiation – but all discussions revolves around that original anchor.
In freelancing, your potential client might set up an anchor by telling you their available budget for the project. Or, in most cases, they will let you set up the anchor by asking you for a quote. In both cases, you need to have what’s known as your Minimum Acceptable Rate ready – this is, simply, the lowest rate it makes financial sense for you to work on the project.
Minimum Acceptable Rate (def.) – The lowest rate you will be happy to work on the project
So to set up your anchor, you can use your Minimum Acceptable Rate as a base, add then add some leeway on top of it – and start the negotiation from there. Make sure you leave enough space so you can lower your price enough so that the client accepts your offer, but you can stay above your Minimum Acceptable Rate.
How do you calculate your MAR?
There are different formulas online, but this is the one that I’ve created and use all of the time to quickly set my pricing:
- Work out how much you want to get paid each hour,
- Estimate how long the job will take you,
- Double it.
I have explained the formula more in detail in this video as well:
This formula works well because we ALWAYS underestimate how long jobs will take, and it will push you to quote more than you might feel comfortable with. It automatically builds in a bit of leeway to protect you from underestimations and overruns. Remember, you are not freelancing to struggle to make ends meet, but rather to make a comfortable living, and there’s no shame in that.
Lesson 2: Add a non-monetary value
In some cases, you will reach your Minimum Acceptable Rate but the client is still saying it’s out of their budget.
What do you do then?
While you should say no to clients who want to take advantage of you, don’t rush into leaving the negotiation if there’s still a chance you can make it work. One way to do this can be by adding non-monetary value to the table.
Non-monetary value is something extra, that isn’t financial. Doing this indicates to the client that you’re at your limit and doing everything you can to make the deal work.
It could be an hour’s consulting work, a helpful PDF document that you have created previously, or a discount code for future work. It doesn’t overly matter what it is – the point is we are sending a signal that the price cannot go any lower.
Lesson 3: Create three pricing options
Omne trium perfectum – Everything that comes in three is perfect.Latin phrase
We all know that three is a magic number, but it can really work miracles when used in your pricing.
Depending on what you do, we recommend trying to turn your services into products, or packages with fixed prices. List in bullet points what each package includes, so your clients can understand the price and value difference between the packages.
So if you are a copywriter, you might create a website package, a sales campaign package, or a social media package. This will give your clients a good idea of what you can do for them, and how much it will cost them – so they have their expectations set right from the start.
This can also help to weed out time-wasters, and will often remove the need for negotiations altogether.
Of course, you can always offer to customise packages (and therefore decrease or increase the price), but you have the anchor – and if they are interested to work with you, it means they have the budget to afford your services. If you don’t want to create packages, you can try using magic number three when sending proposals to potential clients.
Include three different options at three different price points.
Often you can create that price difference by adding some extras to each option, like a 1-hour strategy call, or a non-monetary items like we covered above.
Want to learn more lessons on pricing and negotiatins?
→ Download our free PDF 8 Lessons on Pricing and Negotiation and start setting and negotiating the prices you deserve!
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