Part 1: 11 Freelance Fee Strategies
1. Research the freelance rates in your industry.
2. Let the client know your value
- Know the value of your solution to the client's problem. How will your solution benefit the client? How will it positive affect their bottom line? This will help you write a convincing proposal, telling the client the story of their problem and what it is costing them. Then give your solutions. This is called PAS model - problem, agitation (all the things caused by the problem), and solution. Offer multiple solutions at multiple price points.
Most freelancers fail at this part. They fail to justify their price and are stuck at whatever price the client suggests.
3. Hourly fee
To convert hourly rate to annual salary
Divide your target annual salary by 2080, to get at your hourly rate, where 2080 is the amount of hours total from a 40 hour work week over the course of a year.
Multiply your hourly rate by 2080 to get at your annual salary.
When to charge by the hour
Most experts suggest to charge by the project, because, as Seth Godin puts it, 'it's a project the customer wants, not an hour.'
Exceptions: If the client explicitly wants an hour of your time. Or, if the client is known to change projects specifications often ('I want the tagline in sans serif now'), causing you to revise the work many times, you may set up an hourly rate, but it is often for a particular task, which you know beforehand.
One thing to know about hourly fee is you suffer financially for doing your job fast and well.
4. Know your Minimum Acceptable Rate (MAR)
This is your your bare minimum per hour pricing, which covers all your expenses as well as the tax. Even if you don't work on hour basis (which is a good thing), you have an idea of how much time each project will take, and thus it helps to know the minimum cost of your 1 hour.
MAR = ( (Your total cost of living for you and your dependents + business outgoings) / hours worked ) + tax
5. Unit- or quantity-based fee (per word, per foot, per dozen).
Online writers work on this method. But small jobs, for example 250 word articles take the time but end up paying poorly, when you consider a day's work.
6. Project fee
This is one of better ones for long-run sustainability, but you can't really calculate all the man hours needed to finish a large projects involving mulch-disciplinary tasks. Large consulting companies have experience and ample help to get it right, and they often get the big projects.
7. Pricing package(s)
Search engine use this service: 'Get online marketing package for $1000/month'. It may be useful for the freelancer but clients may be shortchanged as they can't dictate the contents of service. For example, they can't say 'we don't need directory submission, just write a series of blog posts instead.' They get what they paid for.
8. Minimum amount
Freelancers may find it useful for small projects requiring less hours but needing pre-project planning.
9. Day rate
This is similar to 'Minimum amount' (see above) but you have to very sure the job will be done on time. Have a cushion built into the day rate.
10. Percentage of profits/equity
Often startup founders partner with web application developers giving them equity share in lieu of their coding work. In this case, most deals are dicey. Very few startups see success. A successful example is the movie business, where actors and other senior freelancers take a cut of profits - but they get some basic pay upfront.
11. Ad-hoc/On-the-go pricing
This is done for very small projects, redesign/editing jobs, where you just can't decide on a flat fee or a per hour hour fee, so just quote a figure that is okay with the client. This sort of pricing happens often in established client-freelancer relationships.
Remember, rates are not permanent
There is no Amazon for fixed rates for each and every kind of freelance work. Even if you are forced to work for a reduced fee on a project (you need the money), you know that you can ask for better money from clients in future, using low-paying gigs to speak for your expertise.
Part 2: Basics of rate negotiation
1. Don't tell your price first. Get Them to Name a Price
2. If they force you to name your price first, start with a high price and then say it also depends on the nature and scope of the work, among other things.
3. You should ask for a retainer-type arrangement, unless the job is particularly large and will require a lot of upfront investment.
When you ask a prospective client for a retainer, you are also saying, 'I don't trust you'.
4. If you are uncomfortable with the proposed payment terms, suggest a shorter payment period over a probation period, followed by a permanent long term agreement, if the project will go on for some time.
5. Short time frames are dangerous: When the client say they need your answer quickly, tell them the project needs people to give more time on it, and that they should get back in touch when they have more time. Classic tactful negotiation.
6. Use the PAS (Problem - Agitation - Solution) model to put pressure on the client: Reminding them how serious the client's problem is 9with examples and consequences), and suggesting how you can be of help pronto.
7. Use the 'baby steps' commitment formula: Robert Cialdini wrote about the commitment tactic, where you get them to start with a small commitment (e.g. 'simple yes or no?'), and go on getting their agreement to mostly rhetorical questions you know they will respond to in affirmative, and finally they agree on the big thing.
Google 'Cialdini commitment tactic'.
8. If you look all booked up, client sees you more valuable. (the scarcity principle)
9. What is the commitment size? Do you want the client to make an annual contract? That will make the negotiation crawl. Monthly commitments are a better bet, for example.
Pro tips: Pricing based on your value is the best pricing. So, establish your value through examples,. It is a job interview.
People follow experts. If you can position yourself as an authority through your 'Personal Branding' efforts, you are in a better position to convince the client.
Thank you for reading.
If you found this guide useful, please share this with your friends and family.
There are 200+ guides to succeeding in business, career and personal life in The Success Manual. Get the pdf ebook for $12 only.