Pricing Strategies: A Guide for Freelancers

pricing strategies for freelancers
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As a freelancer, the way you price your services has an impact on everything — from marketability to sustenance. The right pricing will largely determine whether your freelance business sinks or swims. 

Set the price too low, survival will be hard. Set it too high, getting clients will be tough. So, the million dollar question is how do you get your pricing right?

We’ve listed down and explained effective pricing strategies that freelancers can use. These strategies will save you from hard bargains, being jobless, or feeling overworked or underpaid.

Table of Contents

Common pricing strategies for your freelance business

If you are looking for an easy way out, you can research what your fellow freelancers are charging and adopt something similar.

The downside of this approach is that your needs, demands, style of working, and quality of work, may not be the same as your competitors. So, charging the same blindly doesn’t make sense.

The better way of doing it is to adopt a pricing strategy that matches your demands and requirements. Here are the different strategies that you can select:



1. Hourly pricing

As the name suggests, clients will be charged on projects based on the number of hours you spent working on it.

A survey by Payoneer found that Indian freelancers on an average charge ₹1350 per hour and works for 7.5 hours per day.

For starters, don’t compute your hourly rate based your last drawn salary. Freelancers are not employees of the client, so your overheads won’t be covered by the client.

Calculating your hourly rate

Instead, start by calculating your monthly living expenses. This includes everything from EMIs, tax, insurance, to the amount you spend on food. Also, add a margin that’s appropriate to your skill and expertise level.

Source

After that, estimate your total freelance working hours. If the plan is to work 40 hours a week, that doesn’t mean you can bill clients for 40 hours. The billable hours would be around 30-35 hours, the rest of it will be spent on non-project related tasks.

There you have it, your hourly rate = [{(monthly living expenses + margin)* 12} / 52] / billable weekly hours

Also calculate your Minimum Acceptable Rate (MAR) = {(monthly living expenses*12)/52}/ billable weekly hours.

MAR is the minimum rate that you should charge to sustain yourself. You can never afford to go below that.

hourly rate computationSource

When to use hourly pricing

  • If you are in highly subjective fields such as web design, content writing, and so on.
  • When the outcome expected is not defined clearly.
  • When you are new to freelancing.
  • If you want to guarantee that you will get paid.
  • If the project is relatively complicated and will require a lot of trial and error.

Tips to keep in mind while using hourly pricing

  • Use an expense tracker tool such as Mint Bills or Expensify to help you compute your monthly expenses.
  • Use a project management tool to maintain transparency as well as monitor and manage how much you are spending your time.
  • Always give them an estimate of the time required to complete the project. For example, if a client wants you to write two blog posts, tell them it will take 10-12 hours.
  • Communicate with your client regularly and keep them up-to-date about your progress.
  • If you plan to take sick leaves or vacations, do reduce the number of weeks accordingly while computing your hourly rate.


2. Project-based pricing

Unlike hourly pricing, here you get paid to complete a project, and not based on the hours worked. You charge a flat rate for a project. The key is to go about it systematically, rather than quoting some random figure.

Here’s an example of project-based pricing:

Task-by-task-How-to-write-a-project-proposal-that-wins-clients-over.png
Calculating a project’s price

To start with, compute your hourly rate using the same method explained above. Then, estimate the time required to complete the task. Multiply your hourly rate with the time required, and that’s what you should charge for the project.

For instance, the client wants you to create ten posters, and you know it will take you a maximum for five hours to finish it. So, if your hourly rate is ₹30, then quote ₹150 for the project.

Simply put, the faster you complete a project, the quicker you can move on to the next one. This way you earn more compared to hourly pricing, and clients will be happy too as your turnaround time will be lower.

When to use project-based pricing

  • When you are an expert in your focus area.
  • When the deliverables are clearly defined.
  • If you want to make money fast.
  • If you are sure about how much time you’d take to complete various tasks.
  • If the projects are of a repetitive nature.

Tips to keep in mind while using project-based rate

  • Make sure your estimated time of completion matches or is less than the client’s estimation.
  • Ensure you have automation and templates set up to deal with repetitive tasks.
  • Always add on some buffer time when you make estimates.
  • Ensure that you and the client are on the same page — define project goals clearly, set a revision policy, and share the blueprint with them.


3. Value-based pricing

Simply put, value-based pricing is based on the impact you generate rather than the time spent or the work done. The project price will be a certain percentage of what the client earned as an outcome of your work.

You may have seen this system used by sales teams, where salaries and bonuses are decided by how many deals each salesperson closed. For this to work, your contribution has to be quite significant and can be tracked.

Here’s a simple example: your copies helped the client get 100 sign-ups in a month. On each sign-up, the client makes a net of ₹2000. So, your fee could be a percentage of what the client makes, say 10% on 2,00,000. People won’t mind investing 20,000 if they can earn 1,80,000.

If done well, it can create a win-win situation for both parties. You can earn a lot more, while the clients won’t have to worry about your commitment.

When to use value based pricing

  • If the client is capable of considering you as a partner.
  • If the client is ready to share their KPIs and monetary goals for the project.
  • The project goals must have quantifiable outcomes.
  • Time is not a barrier for you, as you will have to spend a lot of time on research and discussion.
  • You prefer to work with a few high-value clients rather than a lot of small clients.

Tips to keep in mind while using value based

  • Each project proposal you sent must be well-researched and unique.
  • This system requires a lot of discussion and research before you even sign a contract, so be prepared.
  • Don’t expect any consistency in your earnings, it will differ from client to client.
  • Do set up project milestones, so that you don’t have to wait till they achieve the goal to get paid.


4. Retainer pricing

When you sign a retainer agreement with a client, it means that you agree to work for them a client for a preset period for a certain fee. The volume of work will be defined during the agreement.

For example, if the client is ready to pay you ₹30000 for 100 hours, that means they are buying your service for that period. 

You can also sign project-based retainer agreements, where you will be contractually obliged to complete a particular project.

Typically, there are two types of retainer agreements, rolling retainers and limited retainers. With rolling retainers, if the client doesn’t use your service, it will be carried forward to the next month, and limited retainers work on a use it or lose it basis.

Here’s an example of a retainer agreement:retainer agreement
When to use retainer based pricing

  • If you want to build a long-term relationship with the client
  • If you are offering a service rather than a product.
  • If you want to ensure regular cash flow.
  • If you expect consistency in time commitments or deliverables for each month.
  • If you don’t want to spend time attracting new clients.

Tips to keep in mind while using retainer pricing

  • Rolling retainers might not be ideal if the client is not clear about the deliverables.
  • Ensure you define the scope of work accurately.
  • Before signing the deal, communicate what they can expect from you.


5. Package pricing

To implement package pricing, you need to create 2-3 different pricing tiers. The core offering will remain the same all the tiers; it’s the additional services that’ll make each tier different.

Source

Typically, the 1st tier will be made up of the primary offering, and the last tier would be the premium one with all the bells and whistles.

This way you can cater to different types of clients, from people with limited budgets to people with custom requirements.

When to use package pricing

  • When you have the bandwidth to offer additional services.
  • When you want to upsell to your existing customers.
  • When you want to raise the price of your services.
  • When there are simple additional services that you can provide which will help you stand out.

Tips to keep in mind while using package pricing

  • If you can’t provide any value-added services, you can opt for usage-based tiers or turnaround time-based tiers.
  • Keep the tiers simple and easily discernible.
  • Don’t offer way too many things. You will end up attracting the wrong crowd.


How to price your freelance service in different situations

Knowing the strategies is one thing, but you need to make sure you apply it in the right circumstances.

1. When you are starting as a freelancer as a fresher

If you are a fresher with zero experience, clients may find it hard to trust you with hourly rates. So, project-based pricing with milestone payments may be the right way to go.

Steer clear of offering your services for cheap or free — as an alternative, you might want to consider a side hustle until business picks up. ~ Makeda Waterman

Pro-tip: Lack of experience doesn’t mean you should work on the cheap or for free. Ensure that you make enough money to cover your living expenses.

2. When you are freelancing while on a full-time job

The project-based system is perfect if you are freelancing part-time. It allows you to earn more without spending a lot of hours on the project.

Smart work

Pro-tip: Be sure to find out the expected period within which the clients want you to complete the project.

3. When the project requires a lot of trial and error

For a bigger project, you should be very careful setting your rate if your potential client wants to use a fixed-rate payment schedule. In essence, you need to be sure you fully understand the scope of the project, otherwise you risk being massively underpaid should the project run long or requirements change. ~ Justina H

In this sort of a situation, it is always better to go for an hourly or retainer system. This way you won’t have to worry about the cash flow.

Pro-tip: Evaluate your client thoroughly before you sign up for a retainer agreement. Do a few minor or test projects to help understand their style of work and if you like working with them.

4. When the deliverables of the project are defined clearly

When the deliverables are clear, you can choose to go with either value based pricing or project-based pricing. As the path is pretty straightforward, you don’t have to worry too much about delays.

Project-based pricing can be ideal for a project with finite deliverables and a clear scope you can predict in advance. ~ Megan Parry

Pro tip: Set up automation and templates for repetitive tasks, they make life a lot easier.

5. When the competition is high

The most common way to overcome competition is to reduce your price. But, quality clients don’t necessarily go for low priced freelancers. For them, it is the service that matters. So, don’t try to compete on price.

Instead, try package pricing. Create a base tier, and then another two tiers plans that offer various add-on services customised to the client’s requirements. This way you will be able to stand out among competitors.

6. When the client is a scope creep

Scope creep is someone who keeps changing the project as you go along. For freelancers, such people are a nightmare.

If you already know the client is scope creep, then ensure that you go with an hourly rate. Otherwise, you will end up being overworked.

7. When you are dealing with a repeat client

Always remember, clients come back because they were happy with your service the first time around. So, rather than raising the price for new clients, do it for existing clients. But, do it in a planned and systematic manner.

The increased rate will most likely better reflect the value of the service you have delivered, and will continue to deliver in the future. ~ John C

Inform them about the price increase beforehand, why you are changing it, and be sure to promise an even better quality of service.

Pro-tip: A more subtle way would be to create exclusive packages for repeat clients. Packages which includes special add-ons at a slightly higher price.

8. How to offer discounts

Typically, freelancers offer promotional pricing when: (a) they are looking to attract clients as a newbie (b) there is a dry spell, (c) when the client is a friend, relative, colleague, or acquaintance, (d) special pricing for special occasions.

You need to be careful while offering discounts. It can set a dangerous precedent and even damage your reputation.

Few tips to keep in mind while offering discounts:

  • It should not be less than your minimum acceptable rate.
  • Make sure to let them know it is a limited time offer.
  • Ask for referrals or testimonials in exchange.
  • Offer discount only if they become a repeat client.
  • Ask them if they would like to sign a retainer agreement with you.

Final thoughts

Pricing can be a tough task solely because of how critical it is. The key is to stay emotionally detached and look at it from an objective point of view. Also, keep experimenting with your strategies, that will help you understand your target audience and their behaviour in more clearly.

Sucheth

Sucheth is a Content Marketer at TapChief. He is a marketer by day and an avid reader by night.

4 thoughts on “Pricing Strategies: A Guide for Freelancers”

  1. Good one. Very clear and precise. My only suggestion is you consider INR and not USD or GBP. Most companies in India are working at 40 paisa and some even lower than that. Anyone offering even a little more expects the writers to agree to multiple changes or rewrites.

    So, not just pricing plz mention the number of rewrites or changes you offer along with writing the content. It helps to stop the endless changes required.

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