As a freelancer, you are in complete control of your earning potential. But one of the first questions you need to answer is how you price your time and services. A common method is an hourly rate, but pricing your services hourly has several flaws. In this video, learn a different approach to pricing your service that will elevate your earning potential.
- One of the most important and sometimes stressful decisions a freelancer makes is how to price their services. Most frequently, freelancers tend to price their services based on the number of hours they work on a project. This can lead to a standard hourly rate they share with each client. Right off the bat, this puts a limit on your earning potential as a freelancer. To earn more income, you would need to work more hours and of course, there's a limit to how many hours you can work. Even raising your hourly rate creates a new limit.
Hourly pricing also creates a disconnect between you and your client. Hourly rates mean you'll want to work more hours while your client wants to get the project done as quickly as possible. If you work efficiently and do great work quickly, you're actually penalized for it. The only time you might want to charge hourly is if there's a small update or maintenance type thing that you can do for a current client. Otherwise don't waste your time. Instead, I recommend value based pricing. That means pricing your service based on the value it offers the client.
Let me explain what I mean by value. It breaks down into why the client needs your service and how you can quantify that need. We'll pretend you build websites. When a client is hiring you to develop their website, you'll want to look into why they want it. Simply building a website isn't enough. What value are you creating for them? Maybe the website helps them sell directly to customers. Or maybe it's used to cut down on customer support calls. They obviously know why they need a website, so you can simply ask, "Will this help you serve more customers?" Next, you'll want to look at numbers to know what to charge for your service.
You could even say, "What's a new customer worth to you?" You can probably start to see my point. If a new customer is worth $20,000 to your client and the website helps to sell to that customer, they see your price as an investment. It's easy for your client to justify a quote of $10,000 if that investment can earn them $20,000. That's just an example, but putting a figure on the value you're creating helps you sell your service to the client. And instead of pricing your hours, now no matter how quickly you finish the project you still earn $10,000.
That's a win for both of you and you want your client to feel like they got a great deal. If the client is small and doesn't think your services will create much value for their business, then they're probably not a good client for you, even if you do charge hourly. Of course, value based pricing gets easier over time as you start to build a name for yourself. As more and more of your clients get greater returns from using your services, it becomes easier to justify value based pricing. And instead of competing on price with other freelancers, you get chosen for the real impact you make.
- Identify what types of tasks to prioritize
- Examine the components of the payment section in a contract.
- Summarize how to productize your services.
- Recognize why having a website is important long-term.
- List the key information needed on an invoice.
- Describe the benefits of selling offline.
- Identify examples of a downsell.
- Explore the differences between a case study, testimonial, and white paper.