Let’s talk about m-m-m-money! Venturing out on your own as a freelancer means you have to figure out how to price yourself. This alone can cause so much stress in the beginning stages of your business — and even in later ones! How much should you charge? What is your worth? Is that being too greedy? Will it put people off? The list of concerns and questions is endless! So let’s break it down shall we?
Pricing Yourself 101
I have to start this post with a little disclaimer. Not everyone is the same or has the same circumstances and you should be taking every piece of advice on the Internet with a grain of salt. Meaning, take what fits with you and leave the rest. I would love to tell you that there’s an exact formula for these kinds of things but there isn’t. Pricing yourself is complicated but I promise that it’s less painful than you think. In fact, I’m going to give you a set of guidelines so that you can choose what fits right for yourself. Sit back and relax, this post is a long one!
Ways to Calculate Your Pricing
In my 6 years of being a freelancer I have dabbled with many different ways to price myself. I honestly didn’t know what I was doing and mainly was client hungry so I didn’t give it much thought at the beginning. I was so young and inexperienced that my first client actually dictated my pricing for me. They found me on Behance and needed a designer to do production work at $20 an hour. So while I wasn’t being hired to brand or design, I was excited that it was my first real freelance job since quitting my 9-5. All I did was prep web files, re-size images and do minor Photoshop edits for a handbag brand in Venice, CA. I got to work from home, start my freelance career and get paid!
After that experience I got smarter and started valuing my talents. I priced myself in many different ways until I found the one that felt right for me. I’m going to walk you through how you can do this, but you have to feel out which one is right for whatever stage you are at in your freelance career. I’ve done all of them in my time. Whichever one you go with, make sure you are pricing yourself, not your clients 🙂
01. HOURLY RATE
This first approach involves setting a rate and tracking your hours. This means that you have to be on top of how much time you are spending during the project and then charging your client a total for your time invested at the end of it. This method can be tricky mainly because it isn’t always fair to freelance designers. Let’s say that like me, you started off with $20 an hour (please don’t), that means that if you work for a whole day (8 hours) you’re only getting $160. If you keep doing the math and say you have a steady stream of clients every week all paying you that amount… is that really going to pay for your livelihood? Probably not.
When using the “hourly rate” method, you have to be careful. Sure there are loads of tools nowadays to track your time and make it known to your client (Bonsai has that feature now!). But at the end of the day you have to make sure that you’re being paid fairly. Really think about what your hourly rate should be and make sure it fits with your business and life. There’s this great quote by Paula Scher — “It took me a few seconds to draw it, but it took me 34 years to learn how to draw it in a few seconds.” So know your worth! If you’re still scratching your head and have no idea how to come up with your hourly rate, this graphic may help!
02. COMPETITIVE RATES
After working for $20-$30 an hour I decided I wanted to start pricing myself like other freelancers. Competitive rates just means that you are pricing yourself based on what your competition is doing and then go cheaper. The thought behind this is that if your rates are cheaper, then you’ll attract more clients. While I totally understand doing your research to see where your competition is at, I do not recommend going cheaper. This will just devalue your work and attract unwanted cheap clients. In the end you’ll just be frustrated.
If you’re starting out and want to price yourself around your fellow freelancers, that’s ok! As a community we need to value our talents and skills. Having one freelancer price themselves dirt cheap just devalues the work freelancers do in general — so don’t be afraid to start pricing yourself with a reasonable competitive rate. Do your research and price yourself alongside other creatives that are along your level of experience. Then you can and should grow from there until you find what works for you.
03. FLAT RATE
A flat rate is just giving a client a single rate for a project. These rates are pre-made “packages” that are calculated based on how many hours you are going to spend on a certain type of project. Let’s say that for a full branding suite it takes you about one full week. Based on your hourly rate you calculate how much time it will take and you add 30% tax. This one is very important… always always always… add in the tax on top of what your rate is. You just lump it in with the total flat rate you present the client.
While this is by far one of my favorite approaches to pricing yourself, I do think that solely using your time invested as a marker for your rate is not enough. Your value is worth more than the time spent. I always make sure that I am adding in my business expenses and my living expenses with my rates and overall yearly income. Just something to think about.
So here’s the thing about this one. It’s the scariest and most complicated if I’m being honest, but by far the most rewarding. Instead of basing your prices and rates on the hours you spend, you base it on the value that you’re creating for your client’s business. You have to ask yourself a couple of questions and position yourself as a true expert at your job. Considering this, you can create custom quotes your services.
To come up with value based prices you need to consider your clients. Are they big businesses that are bringing in $100k+ in revenue? How much are they willing to invest in high-quality branding? How much are your services going to impact their goals? I know these questions may seem intimidating but let’s break it down… If your client is hoping to launch a new company of natural beauty products and is estimating a 150K in sales the first year, then branding and packaging is very important to meet that goal. They need high quality design that attracts their customers and converts them into loyal ones. This raises the value of you and your services because the design and work you do plays a major role in their success.
With this type of pricing, you need to be honest with yourself. You need to constantly be showing your level of skills and expertise to cater to a higher-paying client. You also need to have a refined creative process and establish a different kind of experience for your client. This is where you level-up! If you feel like you are at this stage then by all means, try it out!
Communicating Pricing to Clients
Ok, now that you are figuring out your pricing… what’s the best way to approach it with your clients? There’s an ongoing debate on whether you should list out your prices on your website or not. Some designers are all for it because of the transparency, and others like to keep it under wraps and send over a media kit when contacted. Here’s my two cents… I know that sometimes client’s get the dreaded sticker shock if you list out your prices online. On the other hand you may get clients with a $300 budget contacting you because you don’t have your rates on your site.
I do a mix of both… I have a required budget field drop down on my contact form. It states the min amount to work with me is $3000. This filters out low-budget clients and gives a peek at my value and pricing. Once I get that email I send over a media kit with more info + starting packages. Boom. Best of both worlds.
When to Raise Your Prices
Since starting my freelance biz 6 years ago, I’ve raised my prices at least 8-9 times. It’s only natural as your skills and expertise grow, it should reflect on your rates. Here are the major signs you should raise your pricing:
You’re booked! When you start getting a bunch of new clients and feel booked out it means you’re in high demand. It is time to raise your prices! This may mean booking less clients but still getting paid the same or even more. Plus you’re likely going to start attracting higher paying clients.
It’s been a full year. Even time makes you update your prices. Do not go a full year without raising them even a tiny bit. You can’t stay at one rate forever. If you hit the one year mark, it’s time to re-think your rates.
Your overall client experience has leveled-up! When you find your flow with the creative process and the on-boarding is smoother, you are creating a more valuable experience for your clients. Client experience is very important, so when working with you is a dream… raise your prices because your value just went up!
Your business seems to be growing, and not just on the client side! Let’s say you’ve been freelancing for a while and you start venturing out into online course creation or mentorships. This just adds to your value and positions yourself as an expert. As your business grows, so should your pricing.
How I Approach Pricing
As I mentioned, I have changed my pricing structure many times but I always like going for a flat rate. I create these flat rates based on my value and my overall yearly income. I have done this for two years now and I’m pretty happy. There are some exceptions of course. For example, I sometimes use the hourly rate method with my long standing client Anthropologie. I only do so when they need some extra revisions or ask me to jump in and help out with a project I wasn’t involved with since the beginning (for reference, the rate is $175). I do this because they are a loyal client and I like helping out now and then. But I mainly create custom quotes on a per client basis with my value as the foundation of it.
Pricing is a tricky subject when you’re just starting out and even as a growing business. My advice is to just go with your gut. There’s no right answer, it’s all about finding what feels good to you and using a strategy that fits your business and lifestyle the best. Oh and don’t forget about adding that 30% of taxes on top of it 😉
Got any q’s on pricing yourself? I’m all eyes! Let me know in the comments…