Pricing Negotiation For Freelancers

Setting up a pricing structure as a freelancer is one of the hardest things you’ll ever do. It will sometimes feel like you’re playing the most surreal game in the world. But it matters.

As a freelancer, you’re not just a graphic designer or an architect or a writer or an interior designer or a mechanic. You’re the CEO of your own personal corporation–and your goal is to make sure your company makes as much money as possible.

You need to make sure you’re being paid fairly–and you need to maximize your profits. That means setting up a fee structure.

Here’s a quick overview of your options, with pros and cons for all of them:

Hourly fees

Pro: Billing is easy. Using a tool like OfficeTime or another invoicing software, you can easily let clients know how long you’ve worked and how much they pay you for.

Pro: You’re on the clock. You’re motivated to work on projects for your clients.

Con: By charging hourly fees, you’re almost always getting underpaid. If you’re working long hours on a project, you’re better off establishing a project-based fee.

Con: Clients are often uncomfortable with hourly fees for anything more than a short project. They’re worried about being overcharged, which makes it difficult to establish relations.

Con: The parameters of projects sometimes change due to reasons beyond your control. You don’t have to redo work and deal with an angry client because their superior requested changes to deliverables.

Con: Working on an hourly basis gives you less autonomy on future projects with repeat clients. They’ll expect you to finish projects in the same amount of time as you did for prior projects… which almost always isn’t the case.

Project-based fees

Pro: You can charge whatever the project is worth, without having to worry about charging for every single hour or hammering out the amount of time a project takes with your clients.

Pro: Project-based fees give more transparent pricing for both you and your clients.

Pro: By accepting a set fee (with exceptions for revises, add-ons, and similar products) you’re establishing a healthier relationship with your client for both parties. By letting your client pay for a product instead of your hourly labor, you both benefit.

Con: Clients often assume you’ll be working on a project 24/7 if you’re receiving a fee. Of course you’ll likely have multiple clients as a freelancer; this means managing expectations.

Con: Sometimes clients may extend a project extra weeks or months because a flat fee’s been agreed on. Alternately, they might not make it their top priority because it’s already been budgeted for and accounted for.

Retainers

Pro: Retainers guarantee income over a period of time–anything from three months to a year or longer.

Pro: Retainers make it much easier to plan financially. You don’t have to worry about slow months, and you’re paid no matter what.

 

Pros: Using a retainer price structure, it is easier to figure out long term strategy with your clients: You aren’t necessarily hostage to the strategy of a single short term initiative.

 

Cons: It’s typically harder to sell clients on retainers than per-project work. As a freelancer, it’s your job to convince a client that having you on retainer benefits them by having on-call help.

 

Cons: Because clients are entering into long-term agreements with you, you need to make sure you can commit to the agreement. If you take a retainer without being able to give your client 110%, you’re letting them down… and letting yourself down.
What has your experience been like setting up pricing structures with your clients? Let us know in the comments below.