Freelance Pricing Tips for Beginners
First of all, I would like to give you a brutally honest fact about pricing which every single freelance learns in practice. You will undercharge yourself. Every single person does. A guy who charges $25 per hour for web designing in his first year of practice is not modest. He is just not experienced enough in handling the business. And if you are here because you want to do some freelance part-time or even go full-time, then pricing skills are the most important for you to learn. More important than the knowledge of any particular skill itself.
Hourly pricing is a killer of your financial well-being.
Let us talk about the problem with hourly pricing. Hourly pricing punishes you for being efficient. Just think about it for a minute. You spent three years mastering your Figma, JavaScript or copywriting skills and becoming more efficient. What do you get? Right, you are paid less for every project since you do everything in two hours instead of six. Hourly pricing creates a pricing structure that actually punishes you for improving your efficiency and increasing the level of your skill. Madness, isn’t it?
Solution to this problem is pretty simple and theoretical, but very hard to implement in practice. You have to stop thinking about your time and start thinking about the value that your work generates. Logo for a five people startup in Austin is totally different from the logo for a series B SaaS company that raises $30 million of investment. One hour of your work can generate $200K profit in the first case and literally millions of closing enterprise deals in the second one. Your rate has to be adjusted to that difference, not to the time passed.
So, where do we begin?
The biggest mistake that most of the beginners commit is the attempt to copy some rate or choose any decent-looking rate for themselves. Such approach is a shortcut that goes nowhere. Instead of it, do your math. Calculate your monthly expenses – rent, food, insurance, subscription services, gym membership that you probably don’t use anymore. Add your savings and tax amount which is 25-30% in case of the United States. Estimate how many billable hours you have in a month. Not forty. Not even thirty. Most of the freelancers have between fifteen and twenty hours after accounting for administrative tasks and sales.
That gives you the rate baseline – the minimal amount you need to get paid per hour of your work to cover your expenses. Don’t work on an hourly basis though. Use that number to calculate project rates. If your rate baseline is $75 per hour and the project requires around eight hours of work – you start charging $600 per that project.
Your rate has nothing to do with you.
One of the most important mindshifts that you have to make at the early stages of freelance career is the detachment of your value from your price tag. Price of $500 per project doesn’t mean that you are worth that much. Rate of $5,000 per project doesn’t mean that you are five times more valuable than the other freelancer. It means that you know your market, positioned yourself correctly and communicate the value of your work effectively.
Graphic designer from New York City charging $150 per hour is not necessarily more talented than a graphic designer in Detroit charging $50. Maybe the New Yorker just knows how to position himself or ask for the price he deserves. Confidence and competence are two different things, but in case of freelancing, confidence is usually the factor that affects your earnings more than competence.
Increase your prices regularly.
Every three to six months you have to evaluate your prices. Not next year. Not when you are ready. Put it in your calendar. Why? Because your skills improve, demand grows and inflation doesn’t care about your imposter syndrome. Freelancer who charges the same price in the third year of his practice as he did in the first year of his practice, loses thousands of dollars.
The best time to increase your rates is when you are busy. Not when you need new clients. Not when you need money. When your calendar is packed and people are waiting to work with you. That is the leverage. Use it. Rate increase of ten to twenty percent every six months is quite aggressive, but completely sustainable, especially during the first two years of your skills’ fast learning period.
Never ever compete on prices.
There will always be clients who will want you to charge the lowest possible price. Let them have it. Client who is negotiating you down from $3,000 per project to $1,500 tells you everything about your future working relationship. Revisions, scope creep and midnight emails with the request to change the font by two pixels. Cheap clients are not cheap at all. They are taking your time, energy and creativity away from you.
Clients who are worth having are the ones who see your price, understand what they are paying for and don’t negotiate it at all. Such clients exist. They are out there right now and looking for someone who charges premium prices because they think that price equals quality. Your job is not to find the most clients. Your job is to find the right clients.
Portfolio dilemma that nobody talks about.
You need projects to get clients, but you need clients to get projects. That is the bootstrap dilemma and there is no clean solution to it. What you can do is to create some spec projects, volunteer in nonprofit organizations that you care about or offer some discounts to one or two strategic clients in exchange for testimonials and portfolio samples. Do it one or two times and never again. The moment you get three to five good case studies, you stop offering discounts forever.
Freelancing in your twenties and thirties is a great opportunity to build something independent of any employer’s decisions. But only if you are running your business seriously from the very beginning. Which means that you have to start pricing your work and communicating its value. Age, level of experience or any other irrelevant factor doesn’t matter for the market. Market cares only about results. Create them and get paid for them. 💼