Deciding what your freelancing rates should be can cause enough stress before you even begin to think how you should be charging your clients.
Project fees, hourly rates, retainers or charging per word: you should think carefully about which model you use. It will all depend on your services, clients and the industry you work in. Read on for some pros and cons of the most popular pricing models.
Pros for charging hourly rates:
Clients will see your rate up front, and won’t be hit by a big lump sum surprise
If you charge a project fee and the project overruns your estimated time frame, then you will have to ask for more money and that won’t go down well with your clients. When charging per hour you can give them an estimate but you are still left with the flexibility to charge more in the long run.
It might seem more affordable
It will largely depend on your clients but an hourly fee might look better than a lump sum. While some clients might prefer the upfront project fee, others might consider you more affordable and are less likely to be put off by your fees if you charge an hourly rate.
Better for some services
A project fee might be ideal for a one-off piece of work. However, if you’re providing an ongoing service such as consultancy, then you might find it easier to charge hourly rates.
Cons for charging hourly rates:
You only have so many billable hours in the day. A lot of the work you do will be the marketing and admin required to maintain your business and win new clients. You’ll only be charging for a small portion of your working time.
You lose out the better you get at freelancing
The more experienced you become with freelancing, the chances are you will work quicker. As you become more experienced in your niche, it will take less time for you to complete projects, particularly the research side of it because you will already know a great deal about your specialist subject. This is a good thing. You should be striving to do your work in the most time efficient way.
However, this doesn’t help if you’re charging by the hour. You get penalised for working quickly and more efficiently because you can’t charge for as many hours.
Your clients will be happy, they get work done quickly and have to pay less but how does that help you grow your business?
Why you should know your hourly rate – but keep it to yourself
If you choose not to charge by hour for the reasons above, that doesn’t mean you shouldn’t bother to work out your hourly rate. In fact it can be useful to work out the minimum you need to live on and then base your fees on that. You can always keep this rate to yourself.
Pros for charging project fees
Upfront fee, clear pricing
Working out a lump sum fee might be easier for you. Many clients will also prefer to know exactly how much they have to pay so that they can work it into their budget without any nasty surprises.
This can be particularly useful for clients who have never worked with a freelancer before and are worried that a freelancer will exaggerate the amount of hours they’re working. An upfront price with no hidden fees may help alleviate some worries.
When quoting a project fee, this is a great opportunity to list all of the things you will include as part of the service. It’s a good idea to do this no matter what your pricing model, but particularly when there’s a lump sum project fee. It will seem like better value to your clients because you can list all of the things they will be getting for their money. The price will seem small in comparison and they’ll be less like to challenge it.
Other pricing models
While hourly rates might be a good idea for ongoing services, you might also want to consider using a retainer pricing model. This is where a client will pay a lump sum each month for a set amount of work. This can be a general retainer or it can include a certain number of hours you’re expected to work each month. Any hours not used by the client could then overrun into the next month.
If you’re a freelance writer you could charge per word. This gives flexibility to the client depending on how long they want the work to be. More work, more money for you.
However, you’re still faced with the same problem as with the hourly rate model. You only get paid for the client work and not all the time you spend on growing and maintaining your business.
Even worse still, the per-word rate does not include all the hours of research and communication with clients. The only way to balance the scales on the per-word and hourly rate is to charge high fees to cover your time spent elsewhere.
Any other pricing models we’ve missed out? Which one do you use and would you recommend it to others? Let us know in the comments below.