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If you never get turned down, you’re underpricing.

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I was just reading a recent article over at AllFreelance and was astonished by how complicated they had made hourly pricing for freelancers. They advise on budgeting out the entire year; including things like retirement savings, office supplies, postage fees, etc. Then, after coming up with your yearly expenses you add a bit of profit margin room and then convert that into your hourly rate. It’s very thorough, and perhaps the most professional method I’ve seen for creating an hourly rate for a freelancer. Yet… I’ve got some problems with it.

There’s got to be a better way than “Survival Based” Pricing

The issue I see with this kind of pricing system is that it is based around your living arrangement and your needs – as opposed to being based on the value you are contributing and it’s worth to your client. It really made me think about what all goes into that price tag and here I’ve gathered some of those observations.

Factors to Consider

  • Type of work
  • Qualitative factors like: how enjoyable is this work going to be? will this experience be useful for future work? will it provide future work opportunities?

  • Expertise in the field
  • It goes without saying that you must be realistic about your abilities, but at the same time – be confident.

  • Value your finished project gives the client
  • Price to value! Price to value! Price to value!
    Example: If your re-designed landing page takes you 2 hours, yet increases their sales by 10% – perhaps it’s worth more than just your hourly rate*2.

Be Wary of Underpricing

Personally, I’ve had the chronic problem of seriously underpricing my services. Admittedly, my expertise in website design and graphic design is by no means of expert quality, but still my time was worth more and most importantly, the end product (the website) I was making for my client was worth a ton more then what I was charging. Embarrassingly enough I was charging $10 an hour for static HTML pages back then, thinking that being super cheap would bring me more clients. In retrospect it only made me look unskilled and like it was risky to use me. Won’t make that mistake again.

Pricing Connotations

Whatever hourly rate or price you decide you need to make sure you realize the outside factors like price connotations. Charging excessively low rates probably won’t help you get more clients, but it will definitely make you look unqualified to potential clients. Who are you going to pick for a website – the guy charging $10/hr, $25/hr, or $50/hr? The last choice is probably the $10/hr.

One thing to keep in mind:

If you don’t get turned down on occasion, you’re probably underpricing.

For more Freelancer pricing strategies you might want to check out these articles:
Freelance Switch = 25% Challenge – Becoming a Negotiation Ninja
AllFreelance = Setting Your Rates and How Much for Freelancers to Charge – The Ultimate Guide

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Written by Joe

May 23, 2008 at 1:36 pm

Posted in Pricing

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