Five Mistakes to Avoid When Pricing Your Freelance Services
By Jena Kroeker
After clearing the first hurdle of finding your niche, another hurdle looms ahead. It’s one that’s not always easy to clear, and it’s very easy to trip over — pricing your services.
Many factors come into play when deciding what to charge clients. You need to consider your level of experience, cost of living, office expenses, and the current industry standard. But when you’re just starting out, it’s easy to make mistakes. Maybe you began doing pro bono projects for your local network to gain experience. Maybe friends and family paid you by treating you to lunch. You may feel awkward asking for “real money” from them. And at the same time, you may feel bashful asking for competitive rates when you compare yourself to other freelancers. A bout of Imposter Syndrome may cloud your judgment.
In FreeU training sessions and articles, however, co-founder and instructor Craig Cannings often says, “You are better than you think!” Remember that you are a skilled freelancer or virtual assistant who deserves fair compensation for your services.
Gregory Ciotti echoes this sentiment in an article titled “Freelancers: Are You Making These 5 Common Pricing Mistakes?” He explains,
“As a freelancer, what you charge for your time is of paramount importance.
“You’re trading away valuable hours and letting people access your talents in exchange for pay… and that sounds fair enough, but you need to pay close attention to what you are charging if you want to maximize your returns.
“It’s not about being selfish, it’s about charging what you’re worth; it’s up to clients to decide if you’re ‘too pricey,’ your job is to do great work and get paid appropriately.”
Indeed, setting rates can be difficult for all of us, no matter what stage we’re at in our businesses. But it becomes easier when you avoid certain mistakes that get in the way of pricing and packaging your services appropriately. Let’s take a closer look at these issues.
Five Mistakes to Avoid When Pricing Your Services
1. Party like it’s 1999… but don’t price that way.
Some of us have been freelancers for a long time… for decades even. You may have a well-established business and a niche you enjoy. But over time, business stops feeling profitable. You work hard, but have trouble making ends meet.
And then one day it’s like finding out the big ‘80s glasses you’ve been wearing are no longer in style. You discover that the prices you’ve been quoting, the ones you worked so hard to decide on years ago, are no longer in fashion. It’s time to raise them. Although it may feel awkward, it’s a necessary part of running your business so you don’t devalue your work. To avoid pricing too low, decide on regular intervals to review and revise your rates.
Each time you review your rates, consider what additional training you’ve done. In addition, think about any extra experience you’ve gained. Your pricing should reflect the increased value you’re offering as time goes by. And consult resources like the Freelance Pricing Guide in FreeU’s “Pricing Your Freelance Services” course. Guides like this outline a range of average rates across various niches so you can adapt them to your particular services and clients.
2. Freelancing doesn’t mean “free.”
Our local network is a great place to find prospective clients. But we need to avoid certain traps that are easy to fall into. Sometimes when asked to do work for friends, family, or acquaintances, we may feel an outpouring of generosity that makes us say, “Don’t worry about it,” when they offer to pay. We feel like we shouldn’t ask for money from them.
And some prospective clients, whether in our local network or not, don’t have our best interests at heart. They’re more concerned with saving a few bucks and therefore ask us to do some “test projects” before signing a contract. In those cases, be careful about offering introductory pro bono work, assuming it will lead to paid work. If you do offer free work, put a clear limit on it.
As we discuss in a previous blog post, “How to Gain Experience (and Credibility) When You Have None,” free or discounted services can reduce your credibility. So, it’s important to decide how many free projects you’ll provide, and ask for a testimonial in return. Similarly, if you offer a discount, figure out how much you can afford without enduring financial hardship or undervaluing your skills.
In an article titled “How to Start a Freelance Business in 2021 – Complete Guide,” Brad Hussey shares these insights to think about when pricing your services:
“Remember that you are solving somebody’s problem and making their lives better in some way. The product or service you provide is valuable, and people expect to pay for it. You wouldn’t expect a dentist, lawyer or your local farmer at a market to give you their goods & services for free, simply because they’re self-conscious about asking for money – would you?”
3. Don’t agree to a retainer or flat rate without knowing how long the work will actually take.
Retainers, packages, and flat rates can be mutually beneficial to you and the client. But if you say yes to a flat rate without knowing how long it will take you to complete a project, you run the risk of cheating yourself.
I will freely admit that I’ve made pricing mistakes. Years ago, I agreed to a certain rate per word for an editing project without knowing the full scope of the work. After completing the project, I suddenly realized that the rate I had accepted worked out to $2.50 per hour. Not my finest moment! To avoid situations like this, investigate the project enough to gain perspective on how much time it will take. If needed, start out charging hourly, and once you have an idea of how long you’re spending on the tasks, transition to a retainer or package rate.
The VA Handbook shares some good advice in their article, “How to set your Virtual Assistant rates.” If you don’t know how long a task will take, they recommend timing yourself doing a mock version of it, or use a sample from the client. Then, add 33% extra time to your estimate to include any components that take longer than anticipated. In essence, “the most important thing is to make sure you have a full understanding of the scope of the project.”
This understanding will prevent you from making the same mistake I did years ago. No one wants to make $2.50 per hour!
4. Don’t charge the same rate to all clients.
This mistake is easy to make. You may not realize that it’s okay to charge a different rate to different clients. For-profit businesses and nonprofit organizations often have different budgets and different cash flow. The nonprofit client who worries about whether your rate is too high is not the same as the for-profit business experiencing steady sales.
If a potential client’s eyes light up when you quote your rates, and they accept them right away, you might be undercharging. So, when pricing your services, consider whether you need to figure out a reasonable rate for clients with thriving businesses versus clients with nonprofit organizations. It’ll help you be fair to yourself and make your services accessible to a wider range of clients. For-profit businesses are often willing to pay more for greater value.
As an example, in a FreeU Virtual Office Hours session, Craig Cannings advised against volunteering for businesses that do have money to pay. Unfortunately, some businesses could start taking advantage of low-cost or free work.
On the other hand, volunteering for nonprofits can build credibility and lead to paid opportunities, as we mentioned in a previous blog post. Specifically, the nonprofit might create room in their budget if they deem your services indispensable. Or other potential clients could hear about your volunteer work and be impressed with your commitment to the welfare of others. If volunteer work does lead to a paid position with a nonprofit, be sure to have a formal contract. Also, define your niche so that you don’t take on too many miscellaneous tasks.
5. Remember to charge a rush fee.
“I need it done yesterday” is a common saying we use to mean we need something done as soon as possible. For many reasons, clients can place this pressure on us. Once in a while, it seems like a harmless request, and if it makes us more valuable and trustworthy to our clients, we’re eager to oblige. But if rush jobs become habitual, they can cause stress and interfere with other clients’ work. We may face the nightmare of multiple clients all wanting things done immediately at the same time.
That’s why it’s wise to include terms in our contract relating to rush fees. Here’s an example of how you can word it:
“I understand that you may sometimes need help immediately. For rush jobs, you will be charged a __% surcharge for less than 24 hours’ notice and a __% surcharge for evenings, weekends or [country name]’s holidays. Depending on my workload at the time of your request, I will advise you in advance if these charges apply.”
A podcast episode titled “Avoid These 12 Mistakes When Pricing Your Design Work” states a simple reason for charging a rush fee: “After all, you’re making yourself available at their beck and call and possibly turning away other work to do so.”
These are just a few ways you can successfully clear the hurdle of pricing your services. And if you’re ever tempted to undercharge for your services, consider this story from the podcast episode above. It highlights the importance of recognizing your previous knowledge and experience:
“A woman wanted [Picasso] to draw her portrait. He agreed. After he studied her for a bit, he drew a single pencil stroke and then handed her the sketch. She said it was perfect and he had captured her essence with that one stroke. Then she asked how much she owed him, to which he replied, ‘Five thousand dollars.’ The woman is in awe and asks how could he possibly charge that much when it only took him a second. Picasso responded, ‘Madame, it took me my entire life.’”
And now we’d love to hear from you! What challenges have you encountered when pricing and packaging your services? Can you relate to any of the mistakes above? Please share your thoughts in the comments below.