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The Freelancer’s Smorgasbord of Pricing Methods

The Freelancer’s Smorgasbord of Pricing Methods

I hope you have your stretchy pants on... cos this smorgasbord is PACKED! (literally my longest blog ever)

I hope you have your stretchy pants on... cos this smorgasbord is PACKED! (literally my longest blog ever)

If you struggle to put a dollar amount on your time, click here to grab my Free Pricing Calculator here and run your numbers for yourself.

It’s the best way to work out your unique recipe for your prices.

Like many of you, I’ve spent my fair share of hours doing some of my best design work and feeling entirely underpaid (and under-appreciated) for it.

In the early days of being a freelancer, I relied on hourly rates to build my pricing. While this served me for a season, and definitely has its place in the freelance journey, the real dollars didn’t arrive until I changed up my pricing methods.

I started my journey by charging an hourly rate (as most of us do), however I soon realised that hourly rates had some serious drawbacks. I was always scared of quoting wrong and losing a potential job, so I ended up underquoting and working for far less than I should have.

Once I became more efficient and more skilled, I realised that I needed a whole menu of pricing strategies to really bring in some serious dough. With that in mind, let’s tuck into the different flavours of pricing.

I’ve gone ahead and popped a difficulty rating on each method for you to help guide your choices BUT even Michelin star chefs cook easy recipes from time to time…

Easy = New Freelancer | Medium = 3-5 Years | Hard = 5+ years Freelancing

Charging by the Hour

Difficulty: Easy

When you’re first starting your journey as a paid creative, hourly pricing can be the best way to work out your rates. Charging by the hour is versatile and compensates you if the project takes longer than anticipated. It’s a good way to establish the lowest amount you’re comfortable being paid, especially while you’re still finding your legs as a creative professional.

However, hourly charging likely won’t serve you forever. The faster you become, the less you’ll be paid. It can also be a drawback when trying to land certain jobs because many clients need to know, up front, the total cost they’ll be expected to pay, and all you can really do is estimate.

While you will end up with a fairly good idea about how fast you work, there are almost always unexpected twists and turns that can blow the project out and add on extra hours. This can cause conflict with the client, and then you’ve got the awkward task of trying to navigate towards a solution. Hourly charging also limits the amount you can earn because it doesn’t consider factors such as value, access, or usage.

Hourly Blocks

Difficulty: Easy

Selling hourly blocks can be a good segue strategy if you’re thinking of transitioning from hourly rates to project pricing. Hourly blocks are like selling the client a ‘credit’ to put towards the work they need done. While this is somewhat similar to hourly rates, you’re not as restricted by the number of hours the work takes. The client pays you a lump sum, and you track how long the project is taking you, deducting ‘credit’ off their account as you go.

When charging in hourly blocks, it’s really important that you give the client plenty of notice if their credit is running out and the project isn’t finished. One of the drawbacks to this pricing method is the potential to miscalculate how much credit they’ll need to get the job done.

You can overcome this by being honest and open from the beginning.

If a client pays you $1000 up front for 10 hours of work, and you’re not entirely confident you can get it done in that time frame, make sure you explain that before any money changes hands. The client may be happy to pay the $1000 and just see what it gets them, knowing it may end up costing more. However, if you’ve said (or implied) that 10 hours will be enough, you can end up with an unhappy client when you tell them they need to pay you more.

Half/full Day Rates

Difficulty: Medium

This is similar to hourly blocks but is for a specific half or full day. Some people also call these VIP days. This pricing method can be used when a client needs miscellaneous tasks done, or to tidy up any loose ends. Ensure you communicate exactly what hours are included (eg 8:30am – 12:30pm) as well as what you’ll be working on.

Some freelancers also include ‘ask me anything’ communication during this time, however you need to make sure the client knows that this may take time away from the tasks they need done. Be transparent about how you’re spending that time, and never over-promise on the outcomes. It’s ok to estimate what you think you’ll be able to get done, but always with the disclaimer that there are no guarantees.

Never use this pricing method for large ticket items such as branding packages or website builds.

Half or full day rates are best suited to smaller jobs like setting up their EDM platform or small design jobs (like social media templates or PowerPoint slides). Keep communication open during the time frame, and let the client know how quickly you’re progressing and any unexpected hiccups you’ve tripped on along the way. This helps to set realistic expectations and avoid disappointment at the end of the time frame.

Project Pricing

Difficulty: Medium

Project pricing is where you quote an upfront price that includes every aspect of the project. This pricing method is always bespoke and is best suited to complex projects, ones that can’t be rushed or ‘done in your sleep’ (you know the ones I mean), and those other projects that add significant value to the client.

When calculating your project price, start with a base number that’s built from the project costs (eg materials, etc) and the approximate number of hours you think it might take. Then consider the deliverables (what they’re actually being handed at the end), then finally the value your work is providing.

Project pricing is always bespoke, meaning it’s always created in response to a specific job brief and will, therefore, not be the same as other jobs you’ve quoted for. Before any money changes hands, ensure the client has signed a service agreement that clearly outlines the inclusions (and exclusions if necessary), the revision process, the payment terms, and any other terms and conditions.

Pre-set Packages (package pricing)

Difficulty: Medium

This method of pricing allows you to really establish yourself as the creative professional in the room. It’s best suited to clients who need specific outcomes but need to see a tier of options you have available, and then choose which one best satisfies their appetite.

A copywriter, for example, may have an e-commerce client who’s looking to boost their sales using email marketing. The copywriter may then present various packages they have available (because they pre-baked them up already), with each one providing a different range of solutions (eg a 10 email nurture series, a 5 email sales funnel, etc).

If none are exactly the right solution, the copywriter could tweak or tailor things to create a solution that fits. These packages are pre-set and pre-priced, often using price anchoring to differentiate between them and using pricing psychology in the process. The client knows exactly what’s included and what’s not, and the price has little to do with the time the job takes to complete. The price of the packages should reflect not just the deliverables, but the value being provided to the client.

Price per Page/per Word

Difficulty: Medium

This method of pricing can give you, as the creative, a method of pricing something that may end up being lengthy. This pricing strategy can become a little more complex by creating some confusion for the client, especially if the pages are all different (eg the design of a contents page VS a page that’s half images).

For this reason, I really only use this method to calculate the final number I give the client, without really telling them how I landed on it.

All the client sees is a proposal with a whole number equalling the total price of the entire project. If you’ve got a price-per-page in your mind, it also makes it easier to re-quote if the client ends up changing the original brief. If a 20-page brochure turns into a 30-page e-book, you can easily calculate the new fee and keep it consistent with their original quote.

Size or Area Based Pricing

Difficulty: MEDIUM

If you’re a creative who offers large scale works such as murals or signage, consider structuring your pricing by the size or area you’ll be covering. While I recommend presenting your proposal as a lump sum for the entire project, you can land on that final number by having a price per foot/square metre/etc.

For these types of projects, I sometimes split the fee into two parts: a design/creation fee and an installation fee.

When coming up with your price/s, make sure you assess factors such as the complexity of the design, the colour palette, the style and texture of the surface, and any other variables. All of this should be reflected in the price.

Also, if the client turns around after that beautiful mural has dried and wants the same design on tshirts, time to requote as a licencing deal babyyyyy!

Productised Services

Difficulty: Medium

Productised services maintain the integrity of your service offerings while adding an epic convenience factor. It is, essentially, set service packages that can be selected, added-to-cart, and paid for all via your website.

There are three key factors that make a good productised service . Firstly, they only solve a single problem for their clients that is costing them money/time/stress. Secondly, that problem is one you have solved before and gotten really good at solving it, so much so that you could bake the solution in your sleep. And finally, it needs to be check-out-able, meaning there’s no sales call or briefing before they pay. This is how you get those purchases while you’re tucked up in bed, only to discover the paid notifications over your morning coffee.

They are solution focussed, problem specific, and paid for up front. For more info on productised services, check out this blog.

Retainers

Difficulty: Medium

Retainer pricing is ideal for clients that need access to your genius ongoing. They are usually calculated per month and have set hourly inclusions (eg 20 hours per month). Retainers generally have a minimum term (eg 3 months) that is honoured, even if the client doesn’t use all the hours they’re entitled to.

When calculating your retainer cost, consider the term the client is willing to commit to, the guaranteed income it’s providing, and any other benefits your business may be receiving (eg strengthening relationships, increase in word-of-mouth referrals, etc). Because of these benefits, retainers are usually charged at a slightly lower hourly rate, or sliding scale based on the length of time they’re committing to. The higher the benefits to your business (eg signing on a 6 month retainer instead of a 3), the more value-packed your retainer pricing should be.

When agreeing to sign up a client on retainer, make sure you consider your actual capacity to complete the work each month, and whether or not this is a client you’ll enjoy working with long-term.

Retainers are not something I ever offer to clients I’ve never worked with before because I don’t know if they’re someone I want to keep working with. Retainers, essentially, are for clients who have earned a VIP status If a client is desperately pushing for a retainer-type agreement and you’re not entirely all in, offer an hourly block first as a bit of a trial. A guaranteed 6 months of income isn’t worth it if the client turns out to be the biggest headache you’ve ever had. Relationships are a huge contributing factor to the success or failure of a retainer setup. If you wouldn’t agree to a 6-month relationship with someone after only one date, don’t agree to a retainer with a client you barely know.

Subscriptions

Difficulty: HARD

Subscriptions are suitable when you’re selling products (including digital products) or productised services, but not for selling actual services. Products like digital downloads, memberships, courses, content libraries, and generic content that’s targeted at larger audiences will work on the basis of charging a recurring payment (eg a price per month).

Subscriptions can be great for creating passive-type income because you’re selling the same product to multiple people, however you also need to ensure your subscribers are getting value on an ongoing basis. This may be continually updating your digital resource library or providing monthly masterclasses or courses. Think about your subscriber demographic and what they need from you. If you don’t offer value ongoing, they’ll all end up unsubscribing.

Subscription as a pricing strategy is best suited to creatives who offer education as part of their business.

This could be an experienced and successful photographer who still runs a photography business, but also coaches new photographers. Subscription pricing isn’t suitable for creatives who only offer services.

Licensing – Non-exclusive and Exclusive

Difficulty: HARD

When a client comes to you with a new project, consider whether or not the deliverables are something you could resell. If so, it’s in your best interest to license it as opposed to charging it as a project.

Licensing simply means the client pays a fee to use your work for a specified amount of time, and in a specific way (or ways that are agreed on in your licensing contract)). If a company asked you for an illustration they could print on t-shirts, the licensing parameters (and fee) would include the number of units being printed and the amount of time the image can be used for.

You also need to address whether or not the client wants an exclusive license or a non-exclusive license. An exclusive license means they’re the only ones licensing your work for the specified time period, and your licensing fee needs to reflect this. A non-exclusive license should be cheaper because other clients may be licensing the same thing at the same time. When setting up a licensing agreement, always make sure the client knows the difference between these two licenses and that they agree on the license type (exclusive or non-exclusive) by signing an official licensing agreement.

Value Based Pricing

DIFFICULTY: EXPERT

In full transparency (because you know that’s my style), value-based pricing carries bigger risks, can be the trickiest way to calculate rates, but also offers a higher profit potential.

Value-based pricing is where your fee reflects the value you’re providing to the client, and the outcomes your work could achieve for them. If a client comes to you wanting an entire rebrand and website build, the final products you create have the potential to scale the business to new heights.

When deciding on the fee you’ll charge, you could consider how much revenue your creation could generate, and work off a percentage. If the new website brings an extra $30k to the business, only charging $3k/10% doesn’t compensate you for the true value you’ve provided. If they can’t achieve the same outcomes without you, your price should reflect this.

Consulting/Coaching

DIFFICULTY: EXPERT

While this might feel like you’re selling time (and could charge an hourly rate), the pricing method for this should be a hybrid of multiple methods we’ve already discussed.

While you are charging for your time, your skills and experience also provide value to the person you’re coaching. If you’re solving their problems and/or fast-tracking their success by teaching them from your own experience and expertise, you’re providing value as well as offering your time.

If your coaching includes digital downloads like templates or worksheets, that’s a whole other pricing method on its own. When setting your rates for coaching, carefully consider all the different value points they’re receiving and use that to determine what you charge.

Being able to identify all the different pricing methods is only the first step in using pricing psychology to drive your success. With so many methods to choose from, knowing how to select the right pricing strategy is a whole other skill set on its own.

But how do you choose the right one?

Lemme show you the recipe…

Join me for the Pricing Methods Pairings Masterclass, and learn how to choose the right pricing strategy when the clients come knocking.
(Because choosing the wrong one will almost always leave you hangry).

Still hungry? Check these dishes out…