Entrepreneur
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How to Charge for Design Work

By Richa Jain

“There is just no simple generic answer. In my own case, even after over 25 years of experience in the profession, pricing is still a constantly evolving process. “ — Jeff Fisher

“So how much do you charge?”

Most freelancers experience a mild panic attack when clients ask them for a quote.

It’s a mixed emotion – one part elation that the client likes their work enough to ask for a quote mixed with one part desperation about what should be the right price.

So how much should you quote? Before we get into the pricing strategies, lets take a little detour to understand why it causes so much heartache.

Why Are You Afraid of Pricing?

Much of the pain surrounding pricing can be done away with, if you understand the why’s and the how’s of pricing your services. I asked a few freelancers why they struggled so much about deciding what to charge for their services.  Here’s a summary of their responses.

I don’t want to (or can’t afford to) lose this client.

They are afraid of quoting too high (it may be out of their budget) or too low (they’ll think you’re cheap and not good enough).

I don’t want to come across as a snob.

They want the client to like them. They are afraid that if they quote higher, the client will think they’re pompous.

There’s no way I can charge that much, even if XYZ does.

They are not confident about their skills. They’re afraid they’re not good enough to ask for a better rate.

It’s sleazy.

They think it is sleazy to quote higher. They don’t want anyone to think they’re out to fleece the client!

But, at the same time, I don’t want to starve.

Right?! Who doesn’t want to have more money in the bank?

Notice the common thread in all of these? It’s fear.

They were afraid. They were afraid they’re not good enough. They were afraid to ask for more. They wanted the client to automatically know the value of their work, but they were not willing to put in the effort to ask for what they’re worth.

Before going ahead, it may be good to reflect on why you are uncertain about charging for your services.

Is fear holding you back? Or is it merely that you’re still searching for the elusive sweet spot?

Well, it’s time to take the leap and begin charging what you’re worth.

How to Determine The Best Price Points For Your Services

1. Discover The Client’s Budget and Returns.

Step one is finding out the client’s budget upfront, at least a ballpark figure, so you can take a quick call whether the project is worth your time. If the client has a clear budget, that’s great. You know straight away whether to make the effort to pitch to them because preparing an estimate and quote can chew up a few hours.

If the client is unwilling to quote a specific budget or even a range, instead of badgering them for a number, you can request them to fill out a discovery worksheet and include queries pertaining to their goals.

Try to get specific numbers that you can convert to a tangible dollar value.

Ryan Castillo gives an interesting example of how companies pay for solutions, not hours and how pricing is never black and white.

It’s really about value – the value the customer attaches to your work.

For example, if you create websites or write web copy for clients, goals could be to increase leads by X%, revenue growth by Y% or subscribers by Z%.

Things become much easier for you once you have an idea of how much you can add to a client’s revenue. You can either ask for a fraction of the increased revenues, or use it as leverage to quote a higher rate.

2. Figure Out Your Minimum.

Spend some time to chalk out what the client really needs, how demanding the client is and how well your skill set matches the requirements.

Then make a rough map of the features required, and estimate the effort it would take you.

You could simply multiply this by your hourly rate (here’s a good calculator to work out your minimum hourly rate) and present a quote, but that would be a big mistake.

Consider this as a baseline minimum. You will always have additional costs – any extra software, products or services you may need to purchase, any extra hours you need to put in due to scope creep or spill over work.

Typically add in an extra 10 percent to your baseline minimum to factor for the unforeseen circumstances that always come up.

3. Freeze on The Billing Method And TimeFrame.

There are various ways to bill clients – a flat project fee, an hourly rate or incrementally.

Many freelancers default to an hourly rate and get stuck at that level for years.

Other times, they find that fixed priced projects result in many unbilled hours of work. It’s important to recognize that not all projects or clients should be billed in the same manner. Here’s a short rundown of which type of pricing is best suited to each type of project.

Hourly Rates

This works well for projects that are not well defined or where it is difficult to determine discrete tasks that should be billed.

Pros:

  • Works well for clients since they don’t have to pay large amount upfront. They pay only for deliverables.
  • Works well for freelancers since they get paid for only the work delivered.

Cons:

  • Clients may balk because it’s difficult for them to know the total, upfront cost.
  • Has limited earning potential since you can only work so many hours in a day.

Fixed Price Project

A fixed price contract works well for projects that are small and each deliverable can be easily defined. This does not adapt well to larger, more fluid projects.

Pros:

  • Features and deliverables are clearly defined up front. No last minute extensions.
  • Client knows from the start what the project will cost. No nasty surprises.
  • No scope creep and last minute additions for the freelancer to implement.

Cons:

  • Falls apart if you didn’t estimate the effort and schedule in enough detail, or the client decides they want new features.
  • Requires significant initial effort to map out the details of the tasks and deliverables, that is usually not billable.

Fixed Cycles

This is a good alternative for large projects that may not have full details available up front, but rather evolve over time. Here, along with the big picture of the project, you work out small delivery milestones and bill each delivery milestone, much like an Agile project.

Pros:

  • Less risky. Since delivery is in small manageable chunks, clients can monitor progress and validate the deliverables after each cycle, while freelancers can get early, regular feedback rather than at the end of the project.
  • Payments are distributed over time, at the start of each cycle. Client can discontinue at any cycle if they do not like the work, the quality or even the attitude of the freelancer. Freelancer still gets paid for the work already done.

Cons:

  • As of now, few clients, or freelancers, are comfortable working in such agile cycles.

4. Write Up a Proposal

Only now that you have the three basic elements in place, should you get to work on your pricing.

Take into account not just your minimum rates and hours, but also the value that you bring the client in terms of revenue, leads or whatever their goal is.

There’s no direct formula to this. You are going to have to make a decision based on the parameters you mapped out earlier.

If you’re still having trouble deciding, read this debate on hourly versus fixed project pricing, and an interesting way of responding to general requests for quotes.

The biggest mistake many freelancers do at this stage is to shoot off their cost estimates in an email (like you see in this link).

Instead, learning to frame your proposal right (note I said proposal, not rates), can make all the difference.

Write out a proposal that highlights the client’s problem (and if possible, highlight what it’s costing them) and how you propose to solve those problems. Then, and only then, write out how much you’d charge for fixing those problems.

Writing a winning proposal is an art in itself.

You can learn more about it in this Bidsketch post.

The key is to highlight the problem that you are solving and the value proposition you bring to the table. This helps frame your value proposition in a positive light to the client.

Conclusion

No matter what you read anywhere else on the web, it’s not actually about coming up with the best rates.

One size does not fit all.

Do not rely on one single method or formula to price your projects.

Instead, use the guidelines above to work out the value you can create for your client and showcase how you can fix their problems. That will make it easier for you to charge what you’re worth and yet have clients who are happy to pull out their wallets for you.

PS: Here are a few other great resources on pricing:

More:

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