Pricing is one of those dirty little secrets of freelancing that no one talks about but everyone wants to know, and it can be difficult to find straightforward advice from thought leaders in your industry. The fact is, there isn’t a one-size-fits-all approach to setting your rate, but there are four main strategies you can choose from to fit just about any project or client.
Time-Based Rates
Hourly, daily, or weekly, you set a fixed price for your time labor. This strategy is typically used for contracting with an agency on a temporary project (like copywriting on a holiday advertising campaign), or for smaller ongoing tasks (like website maintenance and updates). A great strategy for when you’re just starting out, because it ensures you’ll get paid on projects that go out of scope. The flip side is that there’s no reward for working efficiently and finishing a project quickly.
You can calculate your hourly rate by adding up your desired annual salary and expenses and dividing it by your estimated billable hours. Openly discuss pricing with friends to make sure your rates aren’t too far off from the market average for your industry, area, and level of expertise (another good reason to have a tight knit network). Usually there’s a percentage discount for larger blocks of time, e.g. $60 per hour or $420 per day (8 hour workday with one hour free).
Retainers
This is a variation of the time-based rate where the client commits to buying a certain amount of your hours on a regular basis, usually with a small discount (e.g. 10 hours per month for $600). Works best with clients who need ongoing work, e.g. a food company that needs ongoing product photography. Generally includes a “use-it-or-lose-it” clause encouraging the client to use the hours or lose them. Having a few retainers with clients you like is a great way to bring some cash flow stability to your practice, sort of like having a part-time job.
Fixed-Fee Projects
Fixed-fee pricing is more of an art than time-based pricing, which can make it really challenging to perfect. This strategy is at its best when the client has a fixed budget, set scope, clear deadline, and you’re sufficiently experienced to know how to price the project. This is where accurate time tracking, broken down by task, will help prevent you from under-or-overbidding. Calculate prices based on average time spent on similar projects in the past, adjusted up or down depending on the client, which means it might be best for only the most experienced freelancers. For example, you might cut a break to your local barbershop or charge a premium to a large corporation, because the value provided to each is different. Within this strategy are two variations:
- A menu of fixed prices for simple tasks, e.g. 10 social media posts for $100. This can be a fun way to create a small business around a specific task, like custom wedding hashtags.
- Custom bids for large projects that vary depending on scope and client, e.g. $2,000 for a one-page restaurant website or $20,000 for a complex corporate website.
Value-Based Projects
This is the cryptocurrency of freelance pricing—a high risk, high reward investment in your client. Value-based projects tie your compensation directly to results (e.g. $1 per new Instagram follower, or 1% equity after delivering a brand identity package). Ad agencies like Red Antler and Gin Lane have staked their personal success to that of their clients by requesting a mix of cash and equity as compensation. It’s not the kind of risk you want to take all the time, but definitely worth thinking about. Just be sure to spell out the goals and payment terms clearly from the outset!
One More Tip
You can mix-and-match certain strategies, like making a fixed-fee bid for a website with an hourly rate listed for changes out of scope. Different-sized organizations will likely require different strategies and having a variety of options can make you more palatable for each clients’ distinct needs. But while mixing, don’t include hourly estimates in your fixed-fee bids, e.g. $500 for a set of icons that will take 4 hours to design. Instead, include estimated delivery times, e.g. $500 for a set of icons that will be delivered within two weeks. Otherwise you’ll get your client thinking more about how much money they’re spending and less about the value they’re getting from your accumulated experience.
If your brain hurts from reading about pricing strategies, ask your talent rep at Artisan! Our recruiters have years of insight into the pricing within your market and your specialty, so they can give you real feedback on the right rate and pricing strategy for your experience. With our simple and transparent project pricing, we make it easy for freelancers to skip the compensation games and focus on doing what they do best.
Building your freelance business and looking for more tips?We've compiled some of our favorites here.
