The dreaded question of how much to charge clients can be a source of worry and a barrier to business growth for many freelancers.
When you start earning you might, like many freelancers, feel grateful to be making over your hourly rate from your previous or day job. Or worse, you might be happy with that rate, quoting it as your hourly fee and hoping people aren’t put off by it.
If you’ve been doing this for a while, it’s probably no news to you that this isn’t working out. You shouldn’t assume that because your day job pays £8 an hour that that’s good enough. Being self-employed is completely different.
You have costs
Unlike your previous or current day job your freelancing venture is a business with business expenses. While you might have only paid for transport and lunch at your job, now you have a whole load of other things to worry about.
Here are some of the basic things you might end up paying for, there could be more depending on your line of work:
- Income tax on profit
- Class 2 or 4 National Insurance
- Website hosting, email hosting, domains, themes, logos
- Office supplies, paper, ink, computer, software
- Insurance, pension contributions, office rent, phone line
You need to think of how much of your time is billable. Count how many hours in the day you have free to work and how much of that is doing client work that you’re actually getting paid for. It’s probably less than you think and so you’re charging for only a small percentage of the time you’re working.
Say you’re doing two hours client work a day and another two hours administration, bookkeeping or marketing. You are only getting paid for 50% of the work you do, less than that once you cover expenses. If this was a typical job, that would be unacceptable.
The good thing about most jobs is that you get paid for a set amount of hours, no matter how much work you do. This is simply not the case for a freelancer, AND you have costs to cover.
You could try explaining to your clients that you need to spend this hour doing admin essential to keeping the business afloat and are going to charge THEM for it but you’re unlikely to be met with enthusiasm. This is one of the unfortunate prices you have to pay as a freelancer, but there is a way to make it work.
Charge clients a higher rate so you can cover expenses and losses from time you are not actively doing work that earns you money. This is how all businesses operate.
You only have so many hours in the day, particularly if you have a day job. In order to cover your costs and make something close to an income worth your time, you need to raise your prices. This is the problem with charging an hourly rate.
Changing your pricing model
Alternatively you could change your pricing model. Charge for a project instead of hours. Clients like to know exactly how much you will cost them. On the other hand, if you need to change the price a week down the line, they won’t be happy.
A well thought out, planned project fee is better than naming a random figure. In order to do that, you’ll have to work out how long it takes you to do certain projects so that you can work out how much to charge. This might take some experimenting before you can settle on a figure.
When coming up with a project fee consider:
- Time taken to complete work
- Expenses of completing – stock photos, graphics, materials, publishing
- Consultation time, alterations and new requests
- Expenses of running your business & profit
Go out and see what more experienced freelancers are saying. They all recommend that you increase your rates. Most of them were in the same position before so they know how it is.
How to charge more
Now for the awkward part, telling your clients. You don’t want to annoy them but you’ll only annoy yourself if you don’t take this step. It’s understandable that clients might be unhappy. Think how you feel when your gas bill goes up with seemingly no added benefit to justify it.
Some different approaches:
- You could just come clean and tell them they have to pay more. Some might understand, others probably won’t be happy.
- You could add extras to justify the fee increase but this will likely cost you more time which is beside the point.
- Or you could find new clients and tell them your new rate. Eventually, you can drop your low paying clients when you have enough high paying ones.
But you don’t want to lose potential clients? It’s a common fear that you will be asking for too much and clients will find someone cheaper. They might do. They could go to a content mill but they will be getting what they pay for. Any client who prioritises low cost to quality work is someone you might want to avoid anyway.
Try it on one potential client. Tell them your new fee, see what they say. They might reject it or try to talk you down. Whether you let them is up to you but bear in mind that once you’ve done it once, you’ll probably do it again. Be firm! They might just accept it. If not, that doesn’t necessarily mean that the fee is wrong but that the client is not a good fit for you.
You might even find that you’re still undercharging and are still considered cheap in comparison to others. This could be a good or bad thing. You might think that being the cheap option will be a great way to win clients but most freelancers advise against promoting yourself on price alone.
You want to be affordable and reasonable, but not cheap. You don’t want people scratching their heads, thinking the fee is too good to be true and that there must be some dodgy reason why you’re so cheap. Just think about someone selling a brand new TV for half the average price, you’d be wary wouldn’t you? The same applies here.
Charge what you are worth to the client. Value is not in your work but in the benefit your work will bring the client.
Are you having trouble making enough money or raising your rates? What advice would you give other freelancers? Drop a comment below to let us what you think.