One of the most common questions for eager freelancers is pricing. “How much do I charge?” It’s a good question, but there aren’t any easy answers. The best we can do is give you a lot of advice as you try to figure it out for yourself. So we’ve got loads of freelance pricing tips to help you out.
Project vs. Hourly
A recurring debate in this arena is whether to charge hourly or by the project. We go into more detail in this in our new book, The Ultimate Guide to Starting a Freelance Web Design Business.
The short version is that you can often make a lot more money by charging per project and focusing on selling value as opposed to time.
Charging hourly can give you more control and keep projects from spiraling away from you, but you’re likely leaving money on the table.
Check out the book for more details on the pros and cons of charging by the project vs. hourly rates. The Freelancers Union also has a helpful guide.
More Freelance Pricing Tips
But aside from the basic project vs. hourly debate, a ton of thought needs to go into figuring out how much you charge. Here are some freelance pricing tips to help you approach this difficult subject.
1. Don’t Go Cheap
First things first: If you try to win the lowest price competition, you’re going to lose no matter what. Lowering your prices is just bad news. More often than not, freelancers severely undervalue their services.
“Cheaper is the last refuge of the marketer unable to invent a better product and tell a better story.” –Seth Godin
If anything, you need to raise your prices.
2. When Do You Get Paid?
When you get paid should determine how much you charge. Let’s face it:
“Getting a dollar today is not the same as getting a dollar next month.” –Walt Kania
You should always be getting paid something up front, but if that has to be negotiated or for a remainder payment, make sure it’s coming quickly and not in 90 days.
And if it’s going to take that long? Just charge more. Tack on a little ‘pain in the butt’ fee. You could also go the other direction and give a discount to clients who pay early. However you spin it: The longer it takes to get paid, the more you should get.
3. Focus on Fast Payers
In fact, you might even want to focus on those customers who pay promptly. Quick payments can be a better, more reliable source of income than your biggest clients.
4. Be Confident
How you talk about your pricing matters. Be confident. Emphasize what you’re delivering and its value, not the price. Don’t apologize or tiptoe around the price like it’s a bomb. Say it and move on.
“If you are trying to convince somebody to give you their money and you’re the right person to give it to and they ask you how much something costs and the first thing out of your mouth is, ‘umm…’—you just lost $10,000.” –Mike Monteiro
Be confident when you talk about money. Say up front what it costs. If you don’t know, tell them you’ll find out.
5. What Will Clients Pay?
We often look to costs to help figure out pricing, but that’s not as helpful when we’re talking about services. This is when it helps to look at what clients are willing to pay. This is hard to figure out, but it comes down to the value you’re offering and has very little to do with your costs.
“Too many freelancers work from the perspective of what they think their services are worth, when in reality they should be doing the exact opposite. Your opinion isn’t particularly important when it comes to negotiating rates—it is what the client thinks that makes all the difference.” –Tom Ewer
Don’t base your rates on your costs, time, expenses or even what you think you’re worth. Base it on what your client gets out of it.
If you build a website for a client and base it on your costs, time and expenses, maybe you charge $3,000. You feel like you’re making decent money. Not bad.
But the client is using that site to sell more widgets or bring in more donations or ink more deals. At the end of the day, the redesigned site you delivered for only $3,000 is making them $3,000 a month.
So one year after you built the site for them, you’ve earned $36,000 for them. Isn’t that site worth a lot more than $3,000? Suddenly doubling your price doesn’t sound exorbitant at all. It’s a steal. Even tripling your price would be completely reasonable.
“Your experience is saving clients money. Your pricing should reflect that reality.” –Chris Lema
Of course that’s a nice shiny example where the client’s value is clearly defined. It rarely happens that way. But a better way to price is to shift away from what this is costing you and toward what it’s delivering for the client.
(Let’s be clear: Your costs, time, expenses and even what you think you’re worth do matter. If you don’t factor those things in you’re liable to go broke. But focusing on those things alone and ignoring what the client values is a good way to undervalue yourself and leave lots of money on the table.)
6. Give Exact Numbers
When you give a price, don’t give a round even number. Give an exact figure: $734 not $750.
Why? Science. Round numbers seem arbitrary and shoppers are more likely to want to haggle. But an exact number communicates certainty. We assume a lot must have gone into coming up with that number, so we’re less likely to question it or try to haggle.
So drop those zeros from your quotes. Haggle less, make more.
7. Pricing is Subjective
In addition to the exact price example above, stores like to price a product at $19.99 instead of $20 because we subconsciously think it’s cheaper. And it totally works.
Wal-Mart goes a step further and ends their prices in a lower number. It’s $19.98 or $19.94. Just a little bit cheaper to give the impression that Wal-Mart is shaving their prices that much closer.
As you struggle to come up with a price, remember that pricing is subjective. There often is no single “right” price. It’s more about how it feels, what it communicates, how it works for you as a business.
8. Ask What the Budget Is
One of the first questions you need to ask a client is, “What’s your budget?” This is how you save time and get in the right ballpark. You could waste lots of time talking about grand solutions only to realize they can’t afford it.
Some clients may balk, claiming you’ll charge them whatever their budget is. But it comes down to trust. You can’t give a fair price and offer a service they actually need without knowing what they’re willing to spend.
9. You Have to Negotiate
Talking about money can be awkward and negotiating for more money can just be stressful. Too often freelancers take what they can get just to avoid these difficult conversations.
That’s too bad.
“You don’t get what you deserve, you get what you negotiate.” –Freelancers Union
No one is going to hand you anything for doing a good job. You have to negotiate fair terms and a fair rate. Don’t just sit back and take what a client offers. Both parties should be willing to compromise to come to a fair agreement.
Learn more about what kind of things you should stipulate in a contract. Spoiler alert: It’s more than just how much you get paid.
10. Charge More for Extras
“When a customer wants something faster, different, or extra, it’s a chance to hike the price.” –Jerry Bernstein, president of the Price Improvement Team
Don’t be afraid to charge more for rush work. Or extra services. Airlines do this all the time—last minute flights cost more. Want first class service? You’ll pay for it.
Granted the airline industry probably isn’t the best model for freelance pricing tips, but don’t feel like your price is set in concrete. Be willing to adjust your price and charge more when it’s warranted.
11. Don’t Give Discounts
When faced with a choice between “33% off” or “50% more free”—which amount to the same thing, by the way—getting more resulted in a 71% increase in sales.
Instead of offering discounts or sales, give clients more.
Discounts can eat into your profits, devalue your product and train people to expect discounts. But giving clients more or throwing in a freebie is like a bonus. Sometimes it’s just a matter of reframing what you’re offering.
12. Offer Three Prices
But giving them more than one choice increases the likelihood that you’ll hit closer to what they want. That range of prices might better fit in their budget. Or the extra premium options might be what they really want.
“When you give people options, you’re making it a lot easier for them to say yes to something.” –Chris Lema
13. Highlight the Best
While giving customers three choices is often the best approach, it helps to make that choice for them. Highlight the best deal for your customers. Show them why it’s better than the others.
14. Pricing is About Comparison
When it comes down to it, people decide value based on comparison. What are the other houses in the neighborhood selling for? A $35 book might sound expensive, but it’s pretty cheap compared to a $195 book.
The best example of this is a study by Dan Ariely about a subscription offer for The Economist. They had three options: Web, Print, and Web & Print together.
Here’s the prices and breakdown of subscriptions in Ariely’s study:
- Web Subscription – $59 – 16%
- Print Subscription – $125 – 0%
- Web & Print Subscription $125 – 84%
Since the Print-only and Web & Print together are the same price, it’s not surprising that nobody bought the Print-only subscription. So why offer it?
Here’s what happened when Ariely removed the Print-only option:
- Web Subscription – $59 – 68%
- Web & Print Subscription $125 – 32%
Without the Print subscription as a comparison, the sales shifted to the cheaper Web-only subscription. Even though no one bought the Print-only subscription, it served to highlight the value of the Web & Print option and drive up sales.
By setting up the right comparisons you can make your prices seem better or emphasize the value you offer. This is one way you can work the three-price model to your benefit.
15. Avoid Annual Plans
If you’re selling a service you might want to avoid annual plans.
First, annual plans can create too many choices. Monthly vs. annual plans can double the number of choices. Suddenly your simple three-tiered menu is way more complicated.
Secondly, that large lump payment can be a bitter pill to swallow. You’re more likely to lose customers over an annual renewal than a monthly one.
To really maximize income, consider weekly plans instead of monthly plans. A $4,000 monthly plan will make you $48,000 in a year. But a $1,000 weekly plan will make you $52,000 in a year.
16. Premium Plan
Whatever you’re selling, you should always offer a premium version. Load it up with bells and whistles and boost the price.
Basecamp rolled out a premium version of one of their offerings—more features at five times the price—and income went up 30% in two weeks. Soon the premium version was generating most of their revenue.
Never forget that some people are willing to pay for quality. If you deliver a high-end service, someone will be willing to pay for it.
17. Creative Penalty
You should absolutely be charging penalties for late payments. You need to get paid on time and having to chase down invoices is a waste of your time. Make your clients pay for it.
But sometimes those late fees can be a nuisance and do more harm than good. Rather than a late fee that caused ill-will with customers, one doctor’s office got creative. They charged a late fee, but they donated the late fee to a local children’s hospital. It’s hard to argue with a donation, even if it is forced.
18. Be Out of the Box
Sometimes it helps to take pricing and turn it on its head. Shift it around so people look at it differently.
That’s what made Saturn’s no-haggle approach to selling cars so successful. A lot of people hate the haggling part of buying a car, so Saturn found a lot of success by simply skipping it.
Basecamp took this approach in their early years and created an express service. They eliminated all the debate at the beginning of a project and offered to redesign one page in one week for $2,500.
Suddenly a complicated project that would require the back and forth of quotes and proposals is reduced to a simple price.
19. Pay What You Want
One way to get creative with your pricing is to let clients pay what they want.
Now before you scoff, consider how it works. A lot of musicians and artists have experimented with this approach in the last decade as the music industry struggled to find a new model. Some artists found that it worked—yes, some people took the music and ran, but a lot of people paid the standard rate and some people paid even more.
The most famous example is perhaps Radiohead’s 2007 release of In Rainbows. They let fans pay what they want (including nothing) and they did just fine, selling three million copies while previous albums sold hundreds of thousands.
That might be fine for a beloved rock band or even a product, but what about freelance services? Yes, pay what you want can work for freelance too.
“The ‘pay what you want’ idea can be surprisingly and dumbfoundingly profitable.” -Walt Kania
The key is to use this approach is special circumstances:
- Long-term clients. Only do it with clients you trust who understand the value you can deliver. Otherwise you’ll get shortchanged.
- Big win projects. The best time to do it is when a client really needs a big win. They’re desperate for it to go well, and when you solve their problem their gratefulness is reflected in how much they pay.
- Hard to price projects. It can also work well when you’re not sure how to come up with a price. Rather than waste time trying to figure it out, just do the work and trust the client to pay you well.
In most cases this works because there’s so much value to the work you do. Good clients understand that and will pay well for it. And often that’s a lot more than you think you’re worth. Find out how much by setting yourself up to be the hero.
Is it risky? Yes. Is it crazy? Kind of, yeah. It could go really wrong (which is why you should only use it in the right circumstances). But it could also go really, really right.
20. Performance Pay
If you want to get bold with your pricing strategy, try tying your payment to performance. Get paid what you need to do the work, but then put a bonus payment in the contract based on how well what you do delivers.
So if you’re redesigning an ecommerce site, set a target number for sales to increase. Say they want to see a 10% increase in sales. If you hit that number, you get a 1% cut of the increase. You’d need to figure out what kind of math works, but you get the idea. If it’s not a project directly tied to income, make the target some other indicator of success—maybe it’s a traffic increase or number of donors. Tie it to a monetary bonus that make sense.
Not only is this a way to potentially make more money, but the client can’t lose. If they get what they want, it should more than pay for your bonus. You’re taking on some of the risk and standing behind your work.
21. The Upsell
Let’s not forget the classic upsell:
- At the post office they always ask if you need any stamps before they finish your transaction. It sounds like convenience, but it’s an upsell.
- Goodwill asks if you want to round your purchase up to the nearest dollar and donate the change. Even though it’s a donation, that’s an upsell.
- A good bike shop will make sure you have a helmet for your new bike. Yes, they’re looking after your safety, but it’s also an upsell.
- Fast food franchises have been doing this for a while: Do you want fries with that? Do you want to biggie size it?
- And of course there’s the age-old example of car dealers selling rust-proofing and floor mats.
What kind of extras could you offer as an upsell?
For ecommerce sites or products it can work to do related products or impulse buys. If you’re selling services, you might try to upsell with a maintenance plan or backup services.
Another take on the upsell is what Chris Lema covered in his recent value-based pricing webinar:
“Never put only a single option/price in front of your prospect.”
Always give your clients a few extra options. One approach is to propose a stripped down, barebones solution as the main option and then add on extras from there. You give clients the “less for less” option that covers their basic needs and keeps the price reasonable, then you add on some additional options that cost more and might better deliver what they want.
You have the power of comparison and multiple options working in your favor. The dream solution might be out of a client’s reach, but they might go for a few upgrades you would have missed out on if you didn’t offer options.
22. Just Pick Something
If you’re still not sure what to charge, just pick something. Remember that pricing is subjective. There’s no perfect answer.
So pick something and see if it works.
“The good news about pricing is that you can guess, be wrong, but still be right enough to build a great sustainable business.” -Jason Fried
The best thing you can do for your freelance pricing is be willing to experiment. What you’re doing now might work, and that’s safe, but another approach might double your income. You don’t have to jeopardize your entire business model to find out either. Just try a few different approaches with a project here or there and see what happens.
Video game company Valve experimented with prices and stumbled upon 40 times greater revenue (that’s a factor of 40, not 40%):
“We don’t understand what’s going on. … All we know is we’re going to keep running these experiments to try and understand better what it is that our customers are telling us.” -Valve co-founder Gabe Newell
Get to Work
At the end of the day, you need to make a decision on pricing and get to work. Sure, test, tinker, experiment—find out what works and what doesn’t. But if you spend all day doing calculations and not actually charging anyone, you won’t make any money.
“The goal, no matter what you sell, is to be seen as irreplaceable, essential and priceless.” –Seth Godin
Whether you build websites as a hobby or already have a few clients, this book is the ultimate resource for starting a freelance web design business. We’ve combined the wisdom of successful freelance web designers into one go-to reference book.