Pricing and calculating rates for freelance projects are without a doubt one of the toughest elements of freelancing. Getting your rates right, so you’re not charging too much or too little, is a vital part of building a freelance business doing work you love, on your terms. Get it wrong, and you can fall into the clutches of a downward spiral where you’re working too many hours, or running out of clients.
Pricing is one of the most challenging elements of freelancing because there aren’t any rules. We’re all just making it up based on countless factors, stories we tell ourselves, and our own experiences. This means it’s hard to feel confident in what you decide.
The temptation is usually downward. It makes sense on the face of it. Drop your prices to win the client. The problem is this rarely works. For starters, if everyone drops their prices, a race to the bottom takes place, and the client goes with the freelancer who is willing to drop the lowest. This quickly becomes unviable and is the reason many of the popular freelance marketplaces are not really sustainable for freelancers.
At a time when freelancing in the UK and around the world is growing, but economic issues are pressing, setting the right freelance rates and pricing is more important than ever.
So let’s dive deep.
Table of contents:
- Why do rates and pricing matter for a freelance business?
- Why do we struggle with freelance pricing and setting our rates?
- The dangers of overpricing
- The dangers of underpricing
- Why you shouldn’t compete on pricing
- Getting your freelancing rates and pricing right – three rules
- How to calculate your freelance rates
- My proven pricing formula
- Dealing with objections
- Freelancing during a recession and economic uncertainty
- Aiming for oversubscribed
- Struggle to earn a comfortable living? Then our Pricing and Negotiation Masterclass is for you!
Why do rates and pricing matter for a freelance business?
Pricing can make or break your business. It’s the difference between landing a life-changing client or letting them slip. Your pricing also communicates more than you realise about how you see yourself and the value you provide for your clients.
Get it right, and you’re in the driving seat. You can choose which clients you want to work with, and put more of your time into dazzling and delighting them.
Get it wrong, and you end up in a position where you just can’t say no to anything, and you’re struggling to make ends meet while working harder than ever.
So pricing really defines freelance success or failure. You can be the most skilled freelancer in the world at what you do, but if you can’t price your services right, you’ll quickly sink.
We know that pricing is so important, so it’s one area where it’s really easy to slip into procrastination and doubt. We can waste hours and hours attempting to create estimates and second-guessing what clients will think of our proposed budgets.
Getting on top of your pricing helps you feel confident and in control when talking about money, and makes it far more likely that you’ll land the clients and jobs that you want to work with.
Why do we struggle with freelance pricing and setting our rates?
One of the key challenges of pricing is the fact there is no reliable feedback loop. Even if a client accepts our pricing, that doesn’t necessarily mean we got it right. Maybe we should have charged more?
If we lost out on a project, we often assume we’ve charged too much. In reality, it could be for any number of reasons – maybe they just wanted to check the marketplace, or got a friend to work on the project instead. Maybe they were unrealistic about how much the project was going to cost.
This lack of reliable feedback, and the high stakes involved with getting it right, make it hard to assess whether or not you’re getting your pricing right.
It’s all tied up in our ego and sense of self-worth too. If a client rejects us because we’re charging too much for them, it can feel personal. Also, it’s really easy to fall into the trap of getting too emotionally involved in projects that we haven’t yet won. If a client approaches you with an exciting project, you naturally want to win it. This weakens your objectivity and rationality, however. It can lead to us dropping our prices dangerously low, just to secure the work.
The dangers of overpricing
Overpricing your freelance services can cause a few issues.
To start with, overpricing can work as a short-term strategy. Sometimes you can land a one-time job because the client is desperate and willing to pay more. But it’s probably not going to leave them feeling very happy with the deal.
Sometimes, it’s better to price more conservatively if this is likely to lead to a longer-term relationship with the client, and more work down the line. Remember, a happy client is likely to tell others about you and generate valuable referrals.
It also makes it much more likely that you’ll lose out on jobs. Price is a major factor that influences client decisions, so if you push it too far, you can rule yourself out of good jobs.
Sometimes, if you price extremely highly, the client may expect more than you can realistically deliver.
If you charge top dollar for your freelance copywriting service but then deliver low-quality work with typos in it, you’re setting yourself up for trouble.
The dangers of underpricing
There are plenty of risks associated with going too low as well, however.
One danger is you start to resent working on projects because you know you’re not getting paid enough for them. This can be toxic and leak into how well you perform and how happy your client is with the work.
It’s also horrible working on projects and sinking your time into them when you know you’ve made an earlier error on the pricing.
Another peril is the fact that whenever you say yes to a project, you are limiting which other projects you can work on. You are unknowingly saying no to other projects that you may never learn about.
If you take five low-paying projects, then you are limiting how much time you have available to work on landing better-paid jobs or to work on growing or improving your business.
We often undercharge because we forget about the hidden costs of freelancing.
These are elements like tax, rent, equipment, subscriptions, freelance pensions, and energy bills – the list can be huge.
It’s important to consider these factors when pricing up projects, otherwise, you’ll short-change yourself, and find you’re not earning as much as you expected to.
Lowering your rates is not the answer
Too many freelancers make the mistake of dropping prices because they think that’s what the client wants. They don’t consider the message this is sending, however.
If you’re charging a low rate, your clients, will start looking for the catch, and also automatically associate you with inferior quality.
We expect to pay higher for higher quality and are suspicious of lower prices. As you work with larger clients, this becomes even more true and necessary to consider.
They are used to paying more, so if an offer comes in that seems suspiciously low, they will assume you are not experienced or competent. You’ll be making them think it would be a risk to work with you.
Clients can sniff out uncertainty and a lack of confidence around money. So make sure you have a pricing plan, and stick to it.
Why you shouldn’t compete on pricing
As I’ve mentioned, competing on price is a losing game.
It causes a rush to the bottom and suggests that you don’t really know what you are doing and are probably not going to do a good job.
It’s much better to remove yourself from that competition and play your own game. Offer a unique and impressive service, guiding your clients to great outcomes, and you can charge however much you decide.
Getting your freelancing rates and pricing right – three rules
When it comes to pricing and getting it right, I have three simple rules that I like to stick with.
1. It always takes longer than you expect
The simple truth is that every freelance project takes longer than you expect it to. Even when you’re sure it won’t, it will.
The client will always decide they want to try something different, or they’ll get called into meetings. Or the magic idea will just take a little longer than you expect to form.
For this reason, you need to charge for more time than you expect the project to take. Otherwise, you will lose money and not earn as much as you should. On the extremely rare occasion that you finish on time or even in less time, well done. You’ve just made some profit.
2. Be the least risky option
It’s tempting to assume clients want the lowest prices. But this generally isn’t the case. What clients really want is the least amount of risk.
They want to know that you are the freelancer who will do a good job for them and not let them down. That they won’t be wasting any of their money if they work with you.
If you can communicate this to your prospective clients clearly, then you are giving yourself the foundations to charge much more than the competition.
Clients who prioritise low cost above everything else are always a nightmare to work with. They are more demanding and less respectful of you or your time, so it’s best to avoid them.
3. Make your client the hero
The way to reach higher freelance fees is to become a trusted partner to your clients, rather than just a service provider.
Realise that your client is the hero of their own story, and your role is to help and support them on their mission to success. You are the Gandalf to their Frodo.
If you create websites, for example, don’t just offer to build a site. Help your client understand how the website can play a role in an SEO strategy to attract more leads and help them grow their business. Position yourself as a trusted guide, rather than giving a one-time service offer.
How to calculate your freelance rates
You have several options when setting your prices for projects.
The most common methods are by the hour, by day, by project or based on overall value delivered.
There are pros and cons to all of these methods, which we look at in more detail.
Learn about the pros and cons of these methods for setting your freelance rates.
My proven pricing formula
As a freelancer, you often need to respond to client enquiries quickly. This is where my pricing formula comes in handy. This is a quick and simple way to price up projects without wasting too long thinking about it.
It also takes into account the 3 pricing rules and makes sure that your calculated rates won’t be underpricing or overpricing your freelance services.
It’s very simple and it goes like this:
1. Work out how much you want to get paid each hour
Decide on your hourly rate for the work, which you would normally charge. What rate would you be happy earning, and do you think is fair for the work?
2. Estimate how long the job will take you
Now it’s time to make a rough estimate of how long the job is going to take you.
Try not to under or overestimate here, think about what is required and decide on an expected figure.
3. Double it
Here’s where the magic happens – simply double the number of hours you expect it to take. This simple step considers the incredibly likely fact that the project will take longer than you expect. It also gives a bit of leeway to cover the costs you’ve probably not been accounting for, like your business expenses and pension contributions mentioned earlier.
You then simply multiply your desired hourly rate by the doubled expected length of time to get your starting point for a project fee.
Even if everything runs like clockwork, remember that you are running a business and it’s ok to make a profit.
This simple formula works for me 90% of the time. You don’t need to explain any of this to the client or show your workings.
This is a quick and dirty way to reach a project fee that will leave you feeling motivated to work on the project. It is fair to both parties and it takes the guesswork out of the entire process of pricing.
Again, it can be helpful to give a range, to not scare clients off, and to give yourself a bit of room to manoeuvre. Here, you could multiply the number you came up with by 0.5 and 1.5, to then give yourself two figures for the upper and lower bounds of your range.
Play around with the formula and see what works for you
Using this system can help you save time and energy. We often deal with time wasters who don’t necessarily plan on actually working with us. So it can be a real waste of time to put a massive amount of energy into accurately pricing up every estimate.
It’s nothing personal. For example, for some work, clients are required to get three quotes from suppliers. In these cases, they’ve often already given the gig to their preferred option – they are just getting quotes to tick the boxes.
Using this formula will help you avoid wasting too much time in cases like this.
You can always get more granular later on once you’ve qualified the client a bit more.
Dealing with objections
So let’s say you’ve proposed your rate, but you’re getting pushback. That’s usually a good sign because if they are still engaging, they are probably interested in working with you.
Unfortunately, it’s very easy for clients to just ghost you these days if they don’t like your quote, so this will happen often.
If a client wants you to lower your price, you have a few options.
Enter negotiations
It’s perfectly reasonable to negotiate over money as a freelancer. Most freelancers hate negotiating, but if you have a strategy, you’ll find it can be quite interesting and enjoyable.
Related: Brush up on your freelance negotiation skills
Lower the scope
Rather than compromise on your pricing, it can make sense to reduce the scope of your project. This way will need to invest less time.
You might decide to split the project into sections, to simply reduce the workload required.
If you’re a freelance web designer, for example, you might offer to customise a template, rather than creating a custom project from scratch.
Have multiple options
You can also preempt some of these concerns by offering multiple options to the client in advance.
Having a basic option, a standard option and a premium option means there is something on the menu to suit every budget, whether it’s higher or lower than you expected.
Freelancing during a recession and economic uncertainty
All around the world, things are feeling more precarious and more challenging than ever.
Global events are causing food, fuel and the cost of living to skyrocket. Many experts expect a sustained period of recession and inflation.
This means your money – and your fees are losing value.
This makes getting on top of your pricing and considering all this now absolutely critical.
The price of everything is going up, so your clients won’t be too surprised that your prices are rising too.
Don’t be afraid to raise your freelance rates and pricing of your services – even if you do lose a couple of clients, this opens up time and space to try to land new clients who sufficiently value what you do.
Of course, look at your situation and how exposed you are, but if you have some financial stability, taking this step can help you to insure yourself against the dangers of the coming period.
Aiming for oversubscribed
This ties in with what we’ve just been discussing and I think it’s a really valuable idea to consider. We all know that in business, supply and demand dictate the price of a service or product.
In the book Oversubscribed, Daniel Priestley explains how we should aim to become oversubscribed – to have more people wanting to work with us than we will work with.
As freelancers, we tend to be elastic and do all the work we can fit in. We don’t have a limit on the number of clients we are happy to work with. Even if that means an impact on our private lives.
Make yourself scarce
Priestley recommends creating a limit. Working with a smaller number of clients so you can do a better job, and create scarcity. There is a real benefit here in limiting the number of hours you make available, and the number of clients you work with.
This way you can limit your supply. If clients want to work with you they can pay more.
If you can fill up your books with a few happy clients you can drive up your freelance rates and pricing naturally, simply because you are putting a limit on how much of you there is to go around.
It’s really simple, if more people want to work with you than you can work with, you are Oversubscribed and your prices rise naturally as a result. People are willing to pay more because they see you are in demand, and it can become something like a bidding war to get to work with you. People hate to miss out or be told no.
Pricing is tough, but the more experience you gain, the more you’ll see that you can play your own game rather than going with the crowd and competing in a race to the bottom.
By erring on the side of raising your rates, and aiming to be oversubscribed, you can create a freelance business where your rates are high, without your workload also swelling proportionally.
This strategy will give you freedom and flexibility in your work and life, and help you grow your business sustainably, even during the challenging economic times ahead.
The Freelance Roadmap book has hit the digital shelves!
The Freelance Roadmap is a complete guide to building your freelance business and living life on your own terms.
This book will teach you how to develop a clear vision for your business, use storytelling that makes others want to work with you, develop a rock-solid freelance mindset, build the confidence to bring your ambitions to life and more!
Related articles:
Three lessons on pricing and negotiations (free eBook included!)
How to price your freelance services right
The Fall Of The British Pound: What It Means For UK Freelancers?
Don’t Compete On Pricing!
The Hidden Costs of Freelancing You Need to Cover With Your Pricing
FAQ: Freelance rates for UK-based freelancers
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