When it comes to figuring out pricing as a freelancer, it’s often best to turn to the experts.
Which is why we thought we would ask seasoned freelancer and expert Rachel Smith, founder and director of Rachel’s List.
As a freelancer, she writes for editors, content managers, corporate clients and small businesses. At Rachel’s List, she’s leading a team that helps freelancers find clients, and businesses find freelancers.
Her website includes a jobs board for businesses and freelancers, an in-depth report on how much to pay freelancers, as well as a comprehensive toolkit with templates and tools to help freelancers start on the right foot.
There really couldn’t be someone more qualified to talk about pricing as a freelancer!
We asked Rachel a series of questions on freelance rates and pricing, and here’s what she told us:
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Depending on what you do, you can charge by the word (popular for journalists / writers), by the post, the project, by the hour or you can do value-based pricing.
Word rates are how journalists are used to being paid; it’s how most print publications still work, too. It’s important to set a word rate you don’t go below – such as 50c (I don’t go below that; mostly I would be up around the 80c/word for journalism).
Writing for online publications, you’re usually offered a flat fee for a post – like $200 or whatever the budget is – and you may or may not get a word count. My advice would be to divide these flat fees by an internal hourly rate (for me that would be about $100, even though I charge more, $100 is a decent rate and easy to divide).
So if the post is simple, only involves desk research and no interviews are required, I may be able to write it in two hours. That’s not a bad rate. If, however, they’re paying $200 and they require interviews, lots of research etc, I’d turn it down. At $200 it’s not a viable use of my time. Dividing it by an hourly rate is a great way to figure out if something’s worth it to me or not.
By the hour is basically when you take your hourly rate and tell a client their job will take five billable hours multiplied by your hourly rate. You do need to factor in super and tax as well, or you’ll lose out.
It’s common to give agencies your hourly rate, and it can work for small jobs. The downsides are, it can be time-consuming and involve time tracking / time sheets. It can also be difficult to raise your freelance rates with clients once they’re used to paying a certain rate.
Pricing by the project is something I do the most often, because I do a lot of project work. I have an internal hourly rate and I’ll talk to the client at length and may get them to fill out a document like our client briefing template to help me get an idea of their budget and the project scope.
Then I will work out an estimate for the whole job by figuring out how long the project will take me and multiplying the time by my hourly rate. I add in a buffer for revisions and any other contingencies such as regular WIP meetings, additional research that may be required, assets you have to buy to complete the job for the potential client, or project management if you’re collaborating with another freelancer (such as a designer).
The benefits are, you can take the time to work out a price that’s fair and provided the scope doesn’t change, you and the client know where you stand with a fixed price. The downsides are (not surprisingly) scope creep: a client trying to add bits onto the project AFTER you’ve quoted.
Value-based pricing involves figuring out what the value of your work might be to the client, and charging a percentage as your fee. If you wrote a white paper that converted hundreds or thousands of new subscribers to their database or designed a company logo that created a powerful brand for a business, those would arguably carry far more value than the amount of time it took to create those assets.
It’s a more complex way of pricing your services and it’s something you might consider if you’re working on projects with high profit margins, but it can come with risks if it involves working on a campaign that doesn’t do well. I wouldn’t recommend it unless the job is your area of specialty and you know the market back to front.
There are lots of ways to do this but I prefer using a rate calculator to help me crunch the numbers. For a really simple process, try the Your Rate calculator, where you plug in your ideal annual salary, billable number of hours you can work per week and how many weeks off per year you want to take. The RKM hourly rate calendar is a bit more complex (and isn’t that pretty to look at) but it does the job.
Tiered pricing is when you provide options or packages for clients with different values / prices. You might label them things like ‘budget’, ‘deluxe’ or ‘most popular’ and ‘premium’, and research shows this can ease the anxiety of decision making and provide a quick, handy way for clients to work out what might suit their budget.
Although freelancers differ on whether they want to offer a pricing page on their website (because it can be limiting for projects that might not fit into your pricing tiers), I think offering packages can work well if you’re often asked for specific things and you’re always bundling those things for clients. It can just save time doing quotes and estimates.
Psychological pricing is using psychology to entice customers or clients to buy. There are various strategies you can try, including ‘charm pricing’ – where you end a price in a 9 or a 5 (so $99 or $95 instead of $100). It can make customers think they’re getting a better deal.
Same goes for tactics such as ‘buy two get one free’, or creating a sense of urgency ('This deal ends at 5pm and then the price is going up!’). You often see freelancers running online courses or workshops using psychological pricing tactics, and these can be effective.
Charging by the hour is probably the simplest to work out, and as you get more experienced you can look at better ways of pricing your services.
Mistake 1: Staying with the same pricing model because it’s easy. A common thing here is continuing to charge by the hour even though you’re more experienced / skilled and projects take you less time. You might end up charging the client less because you’re faster, but why should you be penalised because you’re getting more skilled? This brings to mind that famous meme, ‘If I do a job in 30 mins it’s because I spent 10 years learning how to do it in 30 minutes. You owe me for the years, not the minutes’.
Mistake 2: Misquoting a job. If you’re inexperienced, it’s easy to stuff up an estimate on a project and essentially leave money on the table. It’s near impossible to go back to a client and say you’ve misquoted so you can end up working partly for free, which is super frustrating. If you do this once though, you won’t make the same mistake again.
Mistake 3: Letting scope creep slide. It’s SO common for a client to add bits and pieces onto a job after you’ve quoted on a specific scope, and as a freelancer, if you’re new at negotiating with clients you might find it easier just to do those tasks under the initial quote. What you should do whenever scope creep occurs is resubmit the quote for sign off, or put those new deliverables on a new quote so you’re not out of pocket.
You can learn so much from other freelancers and how they do things, and by asking questions. The best way to do this is to build your freelance networks so you have a posse to bounce questions off. I’m a huge fan of Facebook groups for this purpose – Rachel’s List has one called the Gold Community, which is a private group just for our annual Gold members.
Other open ones I love include The Freelance Jungle and The Freelance Content Marketing Writer. You’ll find freelancers of all experience levels in these groups and often people are very generous with their advice.
For small jobs (under $500), some freelancers have a policy that clients pay the entire job up front. For jobs $1000 and over, charging 50 percent of the job upfront is perfectly acceptable. (If a client bawks at this, that’s a red flag!) This works for copywriting jobs but journalism commissions are often paid on the publisher’s terms or on publication, which can mess with your cash flow. So it’s a good idea to create a mix of clients for this reason.
When invoicing I’d make sure the invoice is in order– with a PO number if that’s required, and stating your terms clearly (like ‘due in 7 days’). If the client is late paying, send reminders and pick up the phone and call the accounts department every day until the money hits your account.
Offering discounts for fast payment or penalty rates for late payments might work for some freelancers, too, but I’d seek advice from your accountant first and make these really clear in your terms and conditions.
For more advice on this topic, check out our article: How To Create an Invoice in Australia (And Get Paid Faster!)
Download our pay rates report This free pdf download is one of our most popular freebies. It offers suggested freelance rates in a range of creative fields and can give you confidence on how to price your services.
Watch masterclasses We have several fantastic masterclasses related to pricing, including Lynne Testoni’s Essential Guide to Quoting Freelance Projects and Brook McCarthy’s Turbo-Charge Your Money-Making Skills As A Freelancer.
Listen to key podcasts. Ours discusses pricing and other freelance issues a lot – it’s The Content Byte. I also recommend listening to Ed Gandia’s High Income Business Writing podcast, Melanie Padgett Powers’ Deliberate Freelancer podcast and The Get Paid Podcast with Claire Pelletreau.
A huge thank you to Rachel for going into so much detail about pricing. We hope it was useful and make sure to check out her website for more information about pricing and working as a freelancer!