How to Price Your Service as a Freelancer
I was fortunate enough to have an opportunity to become a freelancer since a year ago. Since then, one question that keep on bugging me is how would I price my customers. For me, my freelance business is mostly about creating a website for my customer, but sometimes it accompanied with some design work. This is where the pricing issue comes in. Design work is very subjective. Your customer might not agree with your design philosophy and might cause them to disagree with your pricing. This is not limited to design work, what about consultancy, social media handling and other intangible services?
** Originally published on LinkedIn
Therefore, I come up with 5 pricing model for your freelance business. These are mostly just a thought experiment of mine accompanied by some online research. So please only take this article as a grain of salt. And if you find this article is vastly inaccurate and stupid, please take this as a joke instead.
10% of the Value You Bring to Your Customer
This can be use as a rule of thumb if you have no idea or no reference on how to price your service. Although your service might be intangible and hard to quantify the actual revenue you will bring to your customer, but I believe there must be something you can do to measure the degree of value you brought. For example, if your service save cost, then you can charge them for a portion of the cost they saved. However, this may not be feasible for all types of business or services. Some might need to increase the percentage, and some service might not be quantifiable.
Fixed Price based on Past Experience or Competitor
If you have enough past experience on freelance business, you can probably determine accurately what the project is going to cost you and how much time you may need to complete that. But if you don't, then you could look for your competitors. Find out your competitors in your field, and research on their pricing models. In the meantime, also look at their past project and determine the quality of their work. What I would suggest is to plot out all the competitors pricing in a table, and correlate their price to their product quality. Do not lower your price! Some business like to offer their service dirt cheap, but this doesn't guarantee the value that the customer get is good. What you need to compete in is the value you can bring. So price yourself against competitors, but don't go into a pricing war with them.
Hourly Rate based on Your Skill Level
Sometimes you can't determine the project complexity because the customers demand keep changing. If you price them using a fixed price model, you are putting yourself into jeopardy. In this case, an hourly rate is a good pricing model to go. But first, you will need to gauge your own skill level, as in most cases, skill level is closely related to the time you need to spent to complete a project. This can protect both you and your customer, but will require a certain level of mutual trust.
Add On Model
Ok, this is a bit stretching, but hear me out. You do not need to show your hand to your customer with all the services you can provide. You can first charge them a fixed price for a basic service package, then along the way drip feed them with your other more advanced services. I remember reading somewhere on Reddit, as a software developer in order to have job security, present a buggy software to the customer, and make solving the bugs as an add on service. Well, this is obviously a joke, but this can be a viable model if design appropriately.
Subscription Model
If your business or service is conducted throughout a long period, a subscription model is a way to ensure your customers' stickiness. This has the similar benefit from hourly rate pricing model, as it protects both you and your customer. The difference is making the hourly rate into a monthly fixed rate. If your customer did not enjoy your service, they can stop the subscription. And if the project is getting more complex, you can take more time to complete it. Thus give a great degree of flexibility.
Overall these are just my humble opinion. If you think any of the information is misleading or wrong, please correct me. I am happy to learn from you too!