How To Price A Project
Setting your price for your services is always stressful for new freelancers. Getting it right first time puts your new career on good footing – getting it wrong means you’ll be struggling to make ends meet.
Here’s a few tips to help you price your projects right.
Understand your industry
Firstly, identify what kind of work you’ll be doing. Is it web development? Graphic design? Audio engineering? Copywriting? Market research? Something else? A mix of different things? The industry area that the project occupies will directly inform the kind of fees you can expect to charge.
Now, let’s take a look at the three main ways you can price a project. Deciding which one is best is a contentious issue for even seasoned freelancers – you just need to decide which one is best for you.
Pricing by hourly rate
Charging hourly is preferred by many freelancers for a number of reasons:
- It’s good if you’re completing regular projects for a client – you can give them one contract instead of typing up a new one for each project
- It helps clients see their project as a chunk of your time that they’re paying for, so they’ll be more eager to set definite goals, provide the things you need quickly and avoid requesting extra tasks and features during the project
If you’re going to charge an hourly rate, it’s important to carefully estimate how long the project will take. Look back at similar previous projects and how long they took you to complete.
Of course, it’s a juggling act – you need to offer a timeframe that lets you complete the project satisfactorily, but also adds up to a reasonable price.
If you underestimate the time you’ll need, you’ll either be losing money or irritating your clients by asking for more (although generally speaking, clients are more understanding when you’re charging them hourly – don’t expect them to budge if you’ve priced by project). If you’re approaching your allotted project hours and you’re not sure you’ll be finished in time, get in touch with your client as soon as possible.
You may also want to charge separate hourly rates for each client, particularly if the type of work you’re doing for each one is markedly different. This can help you earn more, but keeping track of what each client owes you can be a headache.
Charging an overall project fee
Charging hourly isn’t for everyone. If you take on smaller projects with a more direct focus, charging a single fee for each project may be preferable:
- There’s less admin to deal with – you won’t need to record the time you’re spending for each client
- You’re less likely to be hassled with presumptive ‘Why is this task costing me this much? I could do it in five minutes!’ objections from clients
- You’ll be more inclined to get projects done quickly and move onto the next one, unlike time-based pricing
- Some clients won’t want to pay hourly rates in case the project takes longer than expected – they’re more likely to accept a flat fee for the whole thing
Unfortunately with project-based pricing, you may find your client is happier to bug you with questions and extra requests, and/or dawdling when you need them to provide something for the project (whether it’s advice, project files or even just approval).
Make it clear to the client at the proposal stage that any interference with your work process or changes to the project spec will set back the deadline they can expect you to meet, and any additional work not covered in the original project scope will cost them extra.
Even if they stick wholeheartedly to this agreement, it doesn’t mean the project definitely won’t drag on and on (particularly if they’re not in a hurry to see the project finished).
Pricing by value
This is a tricky strategy, but if you’ve been freelancing a long time and built up a solid reputation, it can be very lucrative. Instead of basing your price on the time and resources you’ll need, you charge your client based on the estimated value that your work will bring to their business.
You’ll need a solid grasp on the value you’ve brought to other clients with your services, and the confidence in yourself to understand your skills and expertise provide huge benefits to those who commission them. Show potential clients that you’ve provided tangible results for other clients in the past, and do not back down on the fee you propose (because it will undermine your value in their eyes).
You’d be surprised at how many clients are willing to pay value-based fees – since they can ‘see’ the extra business and/or efficiency that you’ll provide, they’re more eager to enlist your services and start raking in that moolah.
The risk comes when your work doesn’t bring the value you’ve projected, for whatever reason. It could be that you’ve over-estimated your value, or some outside influence has affected your client’s success – or maybe your work has delivered the value you said it would, but clients simply can’t see it for their own reasons.
Get payment up front
However you choose to charge your work, it’s essential you demand an initial payment for larger projects. Invoice the client for somewhere between 40% and 50% of the total quote before you start any work, and the remainder when the project is complete.
Any serious client will be happy to pay the initial up-front fee – any client who objects may be looking to rip you off, so stand firm and point out that they can look elsewhere if they won’t agree to your terms.
Avoid itemising the project
Let’s say you have a big website project. You’ll be performing graphic design duties, developing all the code, producing copy and arranging the hosting.
It may be tempting to put down individual prices for each area of the project (or even each and every little task) on the proposal you send to the client. A lot of freelancers do this to demonstrate the value of their services (“I’m just one person, but look at all the things I can do for you!”).
What it actually does is a lot less helpful. Your client will see your services like a set of options, and will be scrutinising your prices much more closely. Pretty soon you’ll be getting an email from them… “Could we leave out the copy?”
Where will that copy be coming from? A cheaper competitor, most likely. That’s money you won’t be getting, and the quality of work may well be less than you can offer (or simply doesn’t match with the style of the rest of the project – too many cooks spoil the broth, as they say).
Perhaps the copy will be coming from the client, who likely doesn’t have the expertise and/or the time to produce quality writing. Or perhaps they’ll just leave it out entirely – so the ‘finished’ website looks like a shipwreck, drives visitors away and drags down your reputation with it.
Your client could choose to take out any one of the essential elements of the project (or even multiple elements), leaving the final project full of holes and not up to their standards or yours.
Have Your Say!
How do you like to charge your clients? Drop me a comment below to share your own thoughts.
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