Pricing Your Services
This is a sticky issue and has as many answers as there are freelancers. The fact is you must place a monetary value on your services that the market will bear. The good news is, as you gain experience and good feedback, the market will bear higher and higher fees—to a point.
In the Beginning
As you begin your freelancing journey and before you’ve built up self-advertising in the form of high ratings and feedback, you will have less power over your pricing. It’s a fact. It’s not beautiful, but it is temporary. This doesn’t mean you need to be taken advantage of and work for peanuts. It means you’ll make more money as you gain experience.
Initially, you need to base your pricing on what you see other contractors bidding, as shown in Figure 6.1. Study this. Look at similar projects and see what the bidding range is. Check out the price range on the projects you’re bidding on. If you don’t have extensive outside experience and credentials in your area of expertise, you will need to place your bid in the lower half of the range.
Figure 6.1: By hovering your mouse over the number of proposals submitted, you can see the current price range of bids.
 |
TOP TIPS |
If you’re a new contractor but have extensive credentials and expertise in your field, you can choose to place your bids higher. Your job is now to make sure the prospective client understands your expertise.
Don’t work for pay that’s just too minimal. Sometimes the lowest bids are ridiculously low. Don’t compete with these, ever. These lowball bids can skewer the price range and you might have to allow for this. Place your bid in the lower half or third of realistic bids. And if that’s still too low, search for another job to bid on.
Remember, you’re only doing this until you get your own feedback established. This might take you three or four jobs. Tell the client you’re working hard to get your feedback established. It’s the truth and most of them will love helping you out.
As You Progress
As that precious feedback builds up, you can sit back and reassess your pricing strategy. After all, the idea is to have a comfortable life to go with your work freedom, and for your talent and services to be valued.
At this stage ask yourself after each project, “Was it worth my time?” Working on Elance will help you establish your value to future clients. You will have proven you can do the work well and on time. As this continues, clients will pay more for you because you are no longer an unknown factor.
|
TOP TIPS |
When a job is awarded to someone other than you, take this as a learning opportunity for pricing. Assess the winning contractor’s profile and experience, and what their amount was compared to yours. Do this regularly and you will be keyed into what your competitors are charging.
Eventually you will set your own price ranges. It’s a gradual process but one that works. You will find where you fit within the market. If you begin to bid too much, you will lose out on the better jobs. You’ll notice this and bring your prices back in line.
A Pricing Formula
Once you have good feedback and therefore the ability to set your own prices, how do you know what they should be? Several factors come into play and they will vary depending on your specialties.
For hourly jobs you must arrive at a fee that’s competitive yet pays you appropriately. Study your Elance competitors but also the industry standards for your services. Over time your experience and feedback will justify higher fees, especially if you specialize. Clients understand value and are willing to pay for quality. You will have a feel by now for what your competitors are charging, and you can adjust your rate accordingly.
For fixed-fee projects, pricing is a little more complicated. Many times contractors still boil it down to what they will be making hourly. This is because the main product contractors provide is brain power, or put another way, time. In this light, consider the following formula:
• List all the project tasks that will need to be completed.
• Estimate the amount of time for each task.
• Include any expenses you’ll incur, including Elance fees, office supplies, and even travel expenses if they apply.
• Tally all the hours and multiply by the hourly rate you would like to make.
• Add in your estimated expenses.
The issue then becomes, some projects run smoothly while others turn into nightmares. To allow for this you can create two scenarios based on the preceding formula. This is an optional step and if you’ve worked with the client before, it may not be applicable.
The first scenario would be the amount of time the project would take if it ran smoothly. The second would be if you ended up with the client and/or project from hell. What would this time-based result look like?
 |
CYBER SNAGS |
Most clients are fair and reasonable and want to get their job completed in the best way possible. Others, however, will test you and try to wring out every last nickel. Take this as a sign that they’ll be difficult to work with in other ways, too. Carefully consider whether or not you really want to work with them.
Realistically, not all projects are made the same. If you come up with a normal and a “stressed” rate, you will have a range of prices to work within. Your final decision will be based on your impression of and history with the client.
Pricing Red Flags
Consider the following red flags in anticipating whether or not the project will run smoothly:
• The client is difficult to reach and slow to answer your questions.
• The client swears she will give you more work if you just do this one job cheaply.
• The project changes a lot during the bidding phase.
• The client is unsure about what the final result should look like but she’ll “know it when she sees it.”
• The client is indecisive when you ask questions.
• The client pressures you to lower your bid because everyone else is lower.
You will discover more warnings as you gain experience. When you see these, carefully consider if you really want the project, and what premium you will add price-wise if you do decide to bid on it anyway.
Negotiating
The vast majority of the time, stick to your price and don’t negotiate. If a client tries to negotiate you down, how much are they valuing the services you provide? They’re implying you overcharged them in the first place.
|
TOP TIPS |
The only time the most successful freelancers will lower a bid without an equal concession from the client is if they really want the job and the competition is intense. This is used rarely as a sort of last-ditch effort.
If you are willing to negotiate, know your bottom line in advance. State clearly to the client how much work is involved. If you really want the job and feel the client is being fair and honest, you can lower your price, but certainly don’t make this a habit. Ideally, you will ask them to sacrifice something, too, like three revisions rather than five, or whatever would work in your specific case.