Freelancers often struggle with setting rates and communicating pricing with clients, especially when they are just starting out. It doesn't have to be such a struggle. Here are some tips for setting your rates.
How to Determine What Your Labor Is Worth
The most basic way to determine what you should charge clients is to add your monthly expenses to what you'd like as an ideal monthly salary. An ideal salary allows you to cover living expenses, and gives you a bit of fun money and enough to save too. Cogni makes that last bit easy by allowing you to create "savings buckets." Set up the app to automatically funnel a specific percentage of your income into savings, and you'll be set.
Next, divide your expenses and ideal salary by the number of hours you're available to work in a month. If you work 40 hours per week, that's typically 160 hours. The result is your ideal hourly rate. If you choose to offer fixed-rate projects, it's important to know how long each task will take you so you can still make your desired hourly wage overall.
What Are Customers Willing to Pay?
This question is harder to answer than your ideal salary and rate. It may require some trial and error on your part. Gain insight by researching similar freelancers in your area and finding out what they charge. Think about the type of client you'd like to attract, and what you think they'd be willing to pay. Some freelancers offer different pricing tiers with varying levels of service in order to attract multiple types of clients.
Many freelancers find flat-rate projects are more psychologically appealing to clients than projects priced hourly. Instead of offering an open-ended deal at $75 per hour for graphic design, you could offer your services for a total price of $225, knowing it would take you three hours to complete the job. This may make potential clients feel more secure in the long run.
Know When to Change Your Rates
Knowing when to adjust your rates is a big part of pricing yourself as a freelancer. You may start out at one rate and discover that by adjusting it higher or lower you can increase business and make more money overall.
First, analyze your monthly income. Cogni helps by providing smart categorization of both income and expenses that lets you view the numbers at a glance. The app also provides predictions for the coming months, which can help with rate change decisions.
If you find your monthly goals are lacking and you suspect it's due to your rates, ask past clients what they think about your rates and overall work, do a bit of market research through online surveys, and analyze your local market.
You may worry that a rate increase will hurt your business, but keep in mind high-end clients expect to pay big bucks for top-notch services. Many freelancers up their price when clients start accepting proposals right away without any negotiation. Getting resistance on pricing is never bad, it just means clients want to find a way to work with you that fits their budget!
Lowering rates can hurt the ego, but it's important to remember the goal is to make more money overall. Even though it seems contradictory, lowering rates can help.
There will always be clients who try to negotiate. Some freelancers believe you should never waver on your rate, while others believe discounts are acceptable in certain situations. The truth is, any negotiation of your rate is completely up to you. If you choose to negotiate, make sure to highlight the value of your services and how the service will benefit the client in addition to talking about pricing.
Now you know how to get paid what you're worth, with a little help from Cogni.
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