Five Things to Consider When You Set Your Rates

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn

By Jess Dixon

How much do I charge?

It’s taboo to talk about money. But it shouldn’t be! After all, that’s why most of us work. Freelancers, small business owners, and entrepreneurs understand the difficulties inherent in the process of setting rates for our work.

Pricing a physical product or a service such as a piece of software is hard enough. But setting rates for services – such as copywriting, coaching, social media work, or IT support – can feel like an absolute minefield. Charge too much, and you risk pricing yourself out of the market. Charge too little, and you’ll undersell yourself and end up feeling burned out and resentful.

Here are five things you should keep in mind when you have the money conversation with prospective clients.

Who is the client?

You don’t necessarily have to charge exactly the same for every type of client. In some contexts, it will make sense to do this. But in others, you’ll assess the rate you quote partly based on who the client is. For example, you might charge very small businesses and non-profit clients a lower rate than you charge larger or more affluent companies.

A word of caution: be wary about making quick assumptions about what a client can afford. You could be completely wrong. If there’s a way to enquire, it can be smart to ask what their budget is for the project. Not all prospective clients will put a number on the table without receiving a quote from you, but some will. If they quote a figure hugely under what you’d normally charge, you know it’s probably not going to be a good fit. But if you establish you’re in a similar ballpark, this puts you in a good position for negotiating.

How long is it going to take?

I have in mind a base rate of the minimum amount I want to earn per hour. If quoting an hourly rate, I’ll usually go in slightly above this base rate to begin with, so there’s wiggle room for negotiation. For example, if the minimum you want to make is £30 per hour, you might start off by quoting £35 or even £40. If the client agrees, great! If they come back with a counter-offer, you’ve got room to manoeuvre.

This system is more difficult when it comes to quoting on a per-project basis. I’ve taken on projects for what felt like a reasonable rate at the beginning, but they ended up taking so long that my actual hourly rate was far below what I felt comfortable with.

The more experience you gain, the better you’ll get at estimating how long certain tasks are likely to take you.

You should also watch out for project-creep. If you set a fixed rate for the whole project, some clients will feel comfortable coming back and asking for changes and add-ons ad infinitum. Mitigate this by getting an agreement in writing and making your policies clear upfront, and don’t be afraid to say no (or charge more!) if the scope of the project starts to expand beyond what you agreed to.

How much do you want the job?

Sometimes there are benefits to taking a project that go beyond just the financial gain. Though I don’t recommend taking on projects where you’ll be earning below your minimum acceptable hourly rate (and you should never work for free) there are instances where you can consider other factors too. Will this particular project open up new avenues of work, get your foot in the door with a hard-to-get client, earn you a prestigious testimonial, or enhance your portfolio in a significant way?

Don’t undersell yourself, but do consider benefits besides money when you’re deciding how much to charge and how much you want the job.

How much do you need the job?

I never advocate taking on absolutely any work you can get your hands on. That’s a recipe for burnout, frustration, and wishing you’d just stuck with the damn nine-to-five. But sometimes we fall on difficult times and need work quickly to pay our bills. Again, you should never undersell yourself. But in a situation where you really need the job, you might consider a small discount or preferential rate to sweeten the deal and help you win the contract.

What are other people charging?

This question is always difficult to answer – one of the reasons it’s hard to set freelance rates is because what other people charge varies so wildly. I recommend looking at it through a very contextual lens. If possible, find out what other people in your area and with approximately your level of experience are charging for similar work.

You don’t have to undercut others, and winning jobs through simply being the cheapest person available can backfire on you (people value what they pay for, after all.) But it’s a useful benchmarking strategy and will give you some figures to start working from.

How do you price your work as a freelancer or small business owner? We’d love to share some more top tips with our readers, so tell us your pricing hacks.

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn

More from Business Finance

  

Only Some Small Businesses and Self-Employed Helped in Budget 2021

As the dust settles on a Chancellor’s Budget speech that was more an animated short, rather than the summer blockbuster we all hoped for, there is a sense of relief for the majority of self-employed and small business owners around the UK. But there are still over 2 million self-employed and small business owners that are shaking their heads in further frustrations as quite simply, nothing has changed.

Small Business and Those Excluded Are Waiting To See What Help is Available in Today's Budget - YBKBS Small Business News for Smart Business Owners
  

Small Businesses Wait to See What’s in The Budget For Them

Some are saying this is one of the most important budget speeches since World War 2. Others are frustrated at the Governments continuous ‘leaks’ to the press about what’s going to be announced later this afternoon. But there could well be more help for the self-employed which are due to be announced in the Budget, including the possibility of first grants for an estimated 600,000 people.

There's a call on the Chancellor to help Small Business create jobs by tax incentives - article for YBKBS Small Business News for Smart Business Owners
  

Call on Chancellor to Help Small Businesses Create 1000’s of Jobs Through Tax Incentives

The Enterprise Investment Scheme Association (EISA) is lobbying the Chancellor to announce some small changes to the Enterprise Investment Scheme (EIS) rules in the forthcoming budget with a view to creating thousands of new jobs in growth businesses, funded by the private sector.

What a bitter taste for the small business owners in the pub trade because of lockdown -your best kept business secret small business magazine
  

What a Waste – A Bitter Taste of Lockdown for Business Owners in The Pub Trade

87 Million. Let’s just say that again…Eighty. Seven. Million. That’s the amount of pints that the UK pub trade, small business owners and landlords are having to waste because of our current lockdown predicament.

The Self Employed schemes that the UK Government created have left thousands of self employed business owners and workers 'forgotten' and in many cases on the verge of collapse.
  

The ‘Forgotten’ Self Employed That Government Don’t Know What to Do With

The Self Employed schemes that the UK Government created have left thousands of self employed business owners and workers ‘forgotten’ and in many cases on the verge of collapse.

passive income fact or fiction? small business article for YBKBS magazine
  

Passive Income: Fact or Fiction?

When people hear “passive income,” it conjures up images of money for doing nothing. It’s a very seductive myth. Who wouldn’t want to have the cash rolling in while they lie on the beach sipping a cocktail?

Listen to Our Podcast...