An effective pricing strategy is essential to every business, because one goes into business to make money. Freelancers and business owners deserve to be paid just as every worker expects payment for services or labor performed. Determining how to price products is fairly straightforward (what is the cost of materials? what is the price of labor?), but pricing services, especially intangibles, can be daunting. Many Freelancers operate in the knowledge economy (e.g., providing leadership training) and it’s not always possible to benchmark your prices against that of competitors’.
Add to the mix that clients are well aware that they have the upper hand in nearly all fee negotiations. Exploitation is alive and well and there can be shameless manipulation to obtain your top-drawer services at bargain-basement prices. The smug assumption is that if you refuse to work dirt cheap, then it will be easy enough to find someone else who will.
Then there are the “clients” who request free services in exchange for “opportunities for exposure” or “future paid work” that I strongly suspect never materializes. (Why would it? Once you’ve built their website for free, they no longer need you.) In my experience, nonprofits are the worse offenders and they do it with a clear conscience. They rationalize their disrespectful behavior because their budgets are thinly stretched and their organization is all about doing good. Ha!
Yes, there is risk to raising prices in this climate of hyper cost-consciousness, but every once in a while one must raise prices and there may be compelling reasons to do so now. Your price increase may be in response to any number of factors, not the least of which is to synchronize the value you bring with the fees you charge. Or maybe you just plain old need more money to maintain your preferred standard of living as you hand over more money than you should for groceries and gasoline.
The art of pricing is to charge a fee that simultaneously reflects your perceived value to clients and allows you to achieve your desired bottom line. To that end, you can discover useful competitive intelligence at http://gsa.gov/mobis and learn what others in your specialty charge the US government for consulting services rendered.
To access, see the search box at top right and enter a professional category (e.g. project management). Scroll through the businesses listed until you find one based in your geography. Look to the right, click “terms and conditions” and view the services and prices revealed.
If you learn that your prices are rather low by comparison, then it might be time for a price increase. Additionally, if clients remark that your services are a wonderful bargain, then it’s definitely time to give yourself a raise.
Be aware that billing practices can either help or hinder the introduction and acceptance of a price increase. It’s easier to bill by the hour and for small jobs that may suffice. But hourly billing can expose you to haggling over your hourly rate, making a price increase unpalatable for those who’ve worked with you before.
A flat project fee holds many advantages and typically benefits both Freelancer and client. A project fee also makes it easier to institute your price increase. To make sure that you don’t lose money on a job, obtain written project specifications (to avoid “mission creep”) and calculate the number of hours/week it should take to successfully complete the job.
Be sure to add in at least 2 – 3 hours extra per week to accommodate unexpected delays. You may even choose to discount your (discreetly increased) fee somewhat, in exchange for the stability of working on a long-term project (because those extra hours allotted may not all be used). Furthermore, you should also specify a weekly cap for hours worked and set an hourly rate for time worked in excess of the cap.
Your mission, should you decide to accept, is to get paid what you’re worth. Investigate MOBIS to learn how your prices compare to competitors’. Whatever your pricing, if you feel that an increase is in order, be strategic about your approach.
Billing a flat project fee whenever possible is likely to be helpful to you and your clients (they’ll know the project cost up front). A modest price increase may be best, or perhaps increase only the prices of selected services. Most of all, as discussed in previous posts, you must work with the right clients and sell the value of your services.
Thanks for reading,