Common Freelance Pricing Mistakes and How to Avoid Them
January 16, 2019
Working as a freelancer is a constant state of making decisions—when and where to work; which clients to accept; how to market your business, what your logo should look like; and more. When it comes to success—and profitability—one of the most important decisions that freelancers can make is how they’re going to approach pricing their work.
Unfortunately, figuring out how to properly set prices isn’t easy, especially for new freelancers, and it often requires some trial and error. Your strategy may change based on a specific client or a project, or as you gain more experience or pivot into a new area. While the perfect strategy will differ for each freelancer, there are some universal pitfalls that you should watch out for.
Here’s six freelance pricing mistakes to keep in mind:
Mistake # 1: Not negotiating with new clients
Just as you should never accept the first salary offer from a potential employer, you should never as a freelancer accept the first offer from a potential client. If the offered rate is within the ballpark of what you’d like to make, counter with a rate at the top end to see whether the client will compromise. If you’re not happy with the pay they’re offering, counter with a simple, “That’s a bit below my typical rate, is there any wiggle room?” Many clients expect you to negotiate, so they’re holding out their best offer for negotiations.
Getting your client to throw out the first number puts you in the best negotiating position, but if you have to start, go with an opening offer slightly above what you’d like to make. That will give you some breathing room to come down in negotiations, but it also means you might take home more than expected if your highest rate is still within your client’s budget.
Many clients expect you to negotiate, so they’re holding out their best offer for negotiations.
Either way, have a number in mind ahead of time below which you won’t take the work, and be prepared to walk away if the client can’t beat it. Do your research to make sure you’re in line with typical market rates for the service that you provide.
Mistake #2: Holding rates steady for long-term clients
From a freelance perspective, once you’ve been working with a client for a while, you’ve earned institutional knowledge that should make you more efficient on day 400 than you were on day 10.
Just because you’ve been working with a client for a long time, doesn’t mean that you can’t re-examine the relationship. If you’ve established an ongoing relationship and proven your value, it’s reasonable to ask the client whether it’s possible to bump the rate slightly higher. “From a freelance perspective, once you’ve been working with a client for a while, you’ve earned institutional knowledge that should make you more efficient on day 400 than you were on day 10,” says Rich Oakes, president of GigSmart.
Audit your client list once a year to see which clients are paying the least and notify them that you’re raising rates. This strategy can also work for your neediest clients—if your most high-maintenance clients begin paying higher rates, they may actually feel less frustrating. Position the request as reflecting your rising expenses and rising market rates for the type of work you do, and give the client at least 30 days’ notice before implementing the change.
Mistake #3: Accepting too much low-paying work
When you get into a dry spell (all freelancers have them), it can be tempting to say ‘yes’ to any paying client, no matter how low the pay. Competing on price, however, and taking extremely low paying work may send a negative message to other clients. “If you’re too cheap, clients may start to question your value,” says Jake Poinier, author of The Smooth-Sailing Freelancer: How to Find, Sell, and Retail More Freelance Business.
Rather than accepting the lowest-paying work, spend the time you would have spent on that project networking, building your skills, and looking for a better-paying gig.
The best clients are willing to pay for quality freelancers, while those simply looking for a deal may also have less respect for your time or your expertise. Rather than accepting the lowest-paying work, spend the time you would have spent on that project networking, building your skills, and looking for a better-paying gig. Getting a handful of high-paying clients, means you’ll be able to earn more money, putting in less hours than if you had a higher number of lower-paying clients.
The exceptions: There are a few cases where it may make sense to take lower-paying work. New freelancers who haven’t yet built up a portfolio or a stable of referrals to help them get higher-quality gigs may need to start at a lower pay scale. Similarly, if you’re doing a project for a non-profit or a company that you truly believe in, taking a lower per-project pay may be the right choice for you personally.
Mistake #4: Charging by the hour
While there are some fields, such as law or childcare where it’s standard practice to charge by the hour, for most freelancers a project rate will be more profitable. It’s always important to internally determine your target hourly rate and aim to hit it—but it’s typically more profitable to charge your clients a project rate instead. That’s especially true if you’re an experienced freelancer who produces high-quality content, quickly. Charging a project rate also sets expectations around price up front, which most clients appreciate.
Mistake # 5: Not charging extra for the unexpected
While you should try to charge project rates for you work, that rate shouldn’t be set in stone. If a client requires you to do work in an unusually short period of time, for example, it’s perfectly reasonable to ask for a rush fee to accommodate the request.
Similarly, if you find yourself dealing with scope creep—when a client begins asking for additional work beyond what you’d initially agreed to—you should ask for additional compensation to cover the extra work, unless they’re due to some mistake on your end. You can prevent scope creep by making sure that you have the details of each project spelled out clearly in writing before beginning work.
For even more tips on setting your freelance rates, such as figuring out the cost of doing business and planning how many clients to aim for, download our free Field Guide, How to Price Yourself as a Freelancer.