Tuesday, September 13, 2011

Freelance Series: Setting Your Price

After mulling over my last post you may have indentified several areas of freelancing you are interested in. You are ready to start marketing your goods and services. However, you have no clue what to charge. Don't worry. This post is here to help!

Calculate Cost: What is the cost of the supplies you are using? Include cost of shipping and packing materials. Also include cost of depreciation on equipment like computers, glue guns or baking pans. If you buy an item in bulk and use only a portion in this project, do not forget to count that fraction of the price as part of your supply cost. Also consider your expenses for other needs like advertising, space/rent, health care, education, legal advice and office equipment.

How Long Will This Take: Your rate will be determined by how much effort and time you spend on a job. A quick, five minute job usually costs less than a 3 hour job. How valuable do you think your time is? How much do you want to make per hour? Multiple that by the amount of hours the job will take.

For a base price add your supply cost to to your time cost.

Scope Out the Competition: How much do competitors charge? Is their product quality as good as yours? You do not want to price yourself out of the market. If your competition has a price much lower than your base price, then you are either way overpaying for your supplies or they are delivering work of lower quality. If your work is better quality, you might still stand a chance. If your work is of similar quality but due to supply prices your work will cost much more there is no reason for someone to choose you over a competitor. If you have to lower your price to meet your competitors prices this activity may no longer be worth time.

If all your competitors are charging a lot more than you are, you are likely undervaluing your time.

A simple web search will usually bring you to competitor's websites. You can also check out freelance websites and income surveys from groups like the freelancers union.

Fixed vs. Per Hour Pricing: For many projects you will want to charge a fixed rate upfront. This is especially true for items like baked goods, essays (price per word) and jewelry. Clients love fixed rate projects because they know exactly what they will be paying. On the other hand, if you go over time you won't get any more compensation. Other projects are charged per word or per hour. You need to agree on the per word/hour price beforehand and come up with a scheme for billing. Make sure you have  a good relationship with the client otherwise you may find yourself haggling over the bill later. How will you prove you worked that many hours? Is there a max number of hours they will pay for?

The right model will depend on your relationship with the client and your needs. It is very common to get paid for magazine articles per word. Many magazines have a set per word rate.  On the other hand it is very uncommon to get paid for making a hair accessory by the hour. You need to set the price for that accessory that people will pay at the time of purchase.

Don't be afraid to say no or negotiate. If a client is looking to pay you less than you want, it may not be worth it. Clients rarely let you ramp up the rates later. Therefore, selling low at the outset will just lead to expectations of future low rates. Never, ever sell at a loss. If your price is not going to cover your supply costs you are pricing yourself too low.


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