If you are a freelancer there are multiple options of pricing strategies that you can pick. But the problem is you do not know which strategy is the best for you.
We have all been in that phase at one point or the other but trust me there is no one size fits all strategies here.
“What you can do instead is experiment with different forms of pricing strategies.” To do that, you need to know which strategy is suitable for which type and how you can benefit the most from it.
So, without wasting any more time, let us talk about the different forms of pricing strategies that are popular in the freelance industry.
How to charge for Freelance Content Writing?
There are four ways to charge for a freelancing work:
- Hourly Rates
- Pricing on a Project basis
- Package based pricing
- Value-based costing
1. Hourly rates
As the name suggests hourly costing describes the cost by an hour of work done by you. This costing or pricing strategy is the most popular costing strategy amongst freelancers and is often used by most freelancers who are beginning their freelancing journey.
But how do you calculate your hourly cost?
A lot of people refer to the costs offered by their peers or other freelancers. That would be incorrect because their expenses or overheads may vary from that of yours. The same is applicable if you are comparing your hourly rate by a person working in an organization.
The best way to calculate your minimum hourly cost is to understand your expenses first.
You can begin by writing all your expenses in an Excel sheet or in a diary whichever is convenient to you. Make sure to incorporate the tiniest of the expenses that you may incur in a month, it could be the price of a takeaway meal or some online shopping that you do or intend to do.
Also note down the number of days that you do not plan to work, or you would like to go on a vacation or some unplanned leave. This will help you in getting an idea of the number of days you are available to work.
Once you have all the expenses noted down and the number of available working days in your hands, now note down the number of hours that you intend to work per day.
Please note that if you intend to work for say 25 hours per week then keep 10-15% of it as a buffer and only consider 22.5 hours (subtracting 10% as buffer time) as your available weekly hours. This buffer time usually goes in other admin or operational activities like calling, emailing, proposal making, messaging, etc. Now let’s calculate your hourly cost as a Freelancer:
Your hourly cost = ((total monthly expenses + margin) * 12 )/52)/ available weekly hours
Minimum hourly rate = ((total monthly expenses * 12 )/52)/ available weekly hours
Here is an example: Say, Arun has a monthly expense of ₹35000. Below mentioned are three different scenarios, of how his hourly rate is affected by a change in one of the variables.
|Monthly Expenses (a) (in ₹)||35000||35000||35000|
|Margin (b) (in ₹)||35000||25000||25000|
|Total (a + b) in ₹||70000||60000||60000|
|Available Weekly Hours||28||28||32|
|Hourly Rate (in ₹)||576.92||494.50||432.69|
|Minimum Hourly Rate (in ₹)||288.46||288.46||252.40|
- Best to use when the scope of work is not clearly defined.
- Clients are familiar with this pricing model, hence are comfortable to use it.
- If the project is complicated and may involve multiple iterations.
- It limits your earning potential.
- You need to track the number of hours you have put-in to charge accordingly.
- An initial ballpark fixed during prior conversation with the client may act as the final cost to the client.
2. Pricing Per Project
Pricing per project works the best when you know the entire scope of work that you have to do. Few clients are not clear of what they want and specially if they themselves are starting off new, then chances are, the scope of work could change on the go.
But if the scope of work is clear and you know exactly what is to be done then pricing per project makes sense. If the project is a month-long project, then you can also break it into weekly or fortnightly milestones and charge accordingly.
This helps your client to understand that you have full control of the work that you are doing, and it gives them the confidence of what you are charging them for.
For example, if you have to write four blogs in a month for your client then, you can break the deliverables either weekly or bi-weekly and share the same with the client.
Do not forget to incorporate the time that you spend while researching, conceptualizing, and framing this strategy of how the work is to be done. Deliverables only form a part of the entire project.
The most common mistake that people make while calculating pricing per project is that they multiply the number of hours that they would spend in finishing the work and they add some buffer time to it. Essentially, if you are doing this then it is as good as an hourly cost model.
Pricing per project encompasses a wider spectrum and there is some value attached to the work that you are doing, that value could be your expertise in that work or the worth of your work that would benefit the client. I will discuss more on the latter part, in the value-based costing.
- Best to use when the scope of work is clearly defined.
- You can charge high for the overall scope of work.
- Even if the project takes more time, the client does not mind because the prices are fixed in advance.
- Number of revisions need to be fixed beforehand with the client, else there are chances that client may ask for unlimited revisions.
- If the project takes longer than expected, then it affects the other projects in the pipeline.
3. Package-based Costing
Package-based costing is often used by people who have certain value additions to offer in their service portfolio. The best example of it would be to understand it from the point of view of a freelance social media marketer.
Such a freelancer could build different packages based on the number of social media platforms that they have to operate or the number of posts that they would do per social media platform or the services in the form of engagement, posting or analytics that they may offer.
Again, for a package-based costing, it really helps to have a clear scope of work defined beforehand.
You could also offer packages based on the time that you would devote for a particular project. it entirely depends on your comfort level.
Such a strategy is useful when you want to increase rates with a particular client and extend a new set of related services that may benefit the client.
- Best to use when you have a bundle of related services to offer to the client.
- Clients seek value for money in your work and hence package-based costing can help it justify.
- It offers you an option to upsell to your existing customers.
- Offering too many services in packages may confuse the client.
- Additional features or differentiators in packages should be attractive enough for clients to select a win-win option for both.
4. Value-based costing
Value-based costing is the most attractive costing when it comes to the payout from the clients. The reason here is simple, you are not trading for your time or the number of hours that you are putting in for a project but the value or the revenue that you expect to bring to your client via your work.
For example, your client asks you to change the landing page of the website. The existing website has a poorly designed landing page that has high bounce rates. This landing page is important for the client because it is from here that they are driving their conversions via monthly subscriptions to their newsletters.
If you charge by value-based costing, then the questions that you discuss with your client or your prospect becomes very important. You have to ask them, the conversions that they’re looking at and what value does it have on their business.
Like in the above example, you can ask, how many visitors come on your landing page, what is the existing conversion rate for newsletter subscription and what is their expected conversion rate for the same.
Based on the thorough research of the industry that they are into and the answers that they give you, you can then estimate the value of the work for their business.
Let me explain it with another example of a salesperson’s job. Salespeople are often given a percentage of commission of the revenue that they have generated for the business.
Now taking the same landing page example, if your client is expecting a business of $20,000 then he won’t mind giving you 10% of it if you can help him achieve that revenue via increasing that conversion rate of newsletters. This is just a rough percentage; you may select a percentage that you feel is worth the work that you put in.
Often, experienced freelancers or independent consultants use this pricing strategy after working on multiple projects that helped them to get an idea of how their work is benefiting their clients.
For beginners, I won’t suggest you to go in for value-based pricing unless you have prior work experience in a job or so and you are Freelancing confident that you can pull it off and justify the value of your work done.
- Best to use when the client discloses what impact is s/he trying to achieve from this work.
- It offers you to earn significantly more than other pricing options.
- There is no time-tracking involved because focus is on the solution being provided. These are high-risk projects.
- If you can’t deliver the value, then it spoils the client relationship.
- Clients could be reluctant to share financial information if they don’t get the confidence that you can pull it off.
- If the number of changes and revisions in the project are not discussed in advance, then you may end up doing multiple iterations.
Whether you are an experienced or a newbie freelancer, you should use a mix of pricing strategies for all your projects.
Now that you know the pros and cons of the four different pricing strategies discussed above, you can even create any other pricing strategy that is weekly or on retainer basis or something else, depending on the project specifications.
“Each client has a different paying capacity and comes with different objectives. You must use your judgment to strike the right balance and pick the best strategy that is a win-win for both parties.”
There is nothing sacrosanct. Please remember to be interactive with your client or prospect. Roll up your sleeves and play your ace game of relationship management skills because at the end of the day, it is your interactions and how you present yourself to the client, helps you to bag a project.
I hope this helps. Till then happy freelancing!