We’ve all heard stories of freelancers who work 10 hours per week, earn hundreds of thousands per year, and take a 3-month vacation each year to Europe. While that may seem impossible to a freelance consultant just starting, freelancers get to that point by finding clients that are a great fit for their niche and using a value-based pricing strategy.
Let’s break down the 5 essential steps to help you figure out what to charge for your services.
Step 1: Figure Out What You Both Need and Want to Earn
To accomplish our goals, we need a target so we know what “good” looks like for us. Be honest with yourself and figure out these two metrics: what you need to earn and what you want to make.
For most of us, what we need and want in terms of income are two different figures. Since you’re just starting, focus on what you need first. Eventually, you’ll crush that target and can begin working towards your dream income level.
Determining income goals allows you to get to work on a pricing strategy for your freelance consulting work. For instance, if your goal is to gross $50,000 per year, that means making around $4,200 per month before taxes. If you charge $1,000 per client package (however you define a package), roughly four to five clients signed on gives you the income you need!
Start by figuring out what you need (and want) to earn, and develop a pricing strategy around that.
Step 2: Decide the Hours You Want to Work as a Freelancer
Think about how many hours you want to spend on the job. As with your income target, an hours-per-week target gives you something to work towards. Using the example from step 1 of charging four to five clients $1,000 apiece, if you want to work no more than 30 hours per week, you’d have around 6-8 hours to allocate towards each client. Is that enough to get all your work done?
Step 3: Understand the Different Pricing Models for Freelance Consulting
There are three main ways freelancers charge: monthly retainers, per hour, and on a per project basis. All can be suitable depending on the work you’re doing, but two are significantly more scalable. Let’s dive in.
Retainers are the best way to build a reliable income while freelancing. When charging with retainers, you’d bill your clients a certain dollar amount on a recurring basis (say, monthly).
Before determining retainer pricing, you’ll agree on a certain project scope with your clients and charge accordingly.
With retainers, you’ll want to be communicative with your client and update them on progress. You want to showcase your impact regularly. Further, if your clients want to extend the scope of your current retainer, you’ll want to increase the price to justify the increase in work on your end.
Why Monthly Retainers are our top choice:
- You know exactly how much you'll get paid each month
- You're incentivized to get the job done as efficiently as possible (while getting the same payment)
- No timesheets or uncomfortable conversations about "is the project on track"
- If the scope of the project increases or your client is moving slowly, that won’t affect you - you continue to get paid and will work with that client for longer
- Extensions are often easy without additional negotiations → you just agree to extend the retainer
Per Project (Fixed) Pricing
In this case, you charge a fixed fee for a given project based on the estimated hours you’ll need to put in. A lot of clients like this because it’s goal-oriented. Once you solve X problem for them, they pay you and that specific engagement has completed. However, more often than not, projects do not go according to schedule. They get bigger or change, other stakeholders get involved, you get multiple iterations of feedback, etc. So, you need to be very on top of the scope, the timeline, and where things are moving away from expectations.
The good thing about project-based pricing is that as you become more efficient and experienced, your earnings remain the same (and even go up with experience) when using a per-project model.
An example would be a freelance writer who charges $250 per 1,000 words. When she first starts, it may take her 15 hours to write those 1,000 words. After a year of experience, that same article may only take 5 hours. However, her earnings remain $250 per 1,000 words, rather than being slashed by two-thirds if she were charging hourly.
When considering your fixed fee, you need to know:
- How long this project will take you
- The value you’re delivering
A freelance copywriter whose newsletter copy generates $50,000 in sales will have a much easier time charging $3,000 for her packages than someone generating $10,000 in ROI.
Charging hourly can be great when you’re first getting started with freelance consulting. Pricing per project requires a more robust understanding of exactly how long it takes you to complete each task and what market rates are; you may not yet know these pieces of information.
Additionally, if you aren’t sure how long a new project will take, it can be best to charge by the hour.
However, there is a serious limitation with hourly work. The more experienced you become with your services, the more efficient you’ll be. This means a project that once took 30 hours may only take half that. In a sense, you’re being punished for becoming more experienced, even if your hourly rate increases.
If you opt for hourly pricing, you can only charge based on the hours you work, not the value you provide. That’s why monthly retainers or per-project fees are often better.
Step 4: Come Up With What You Want to Charge Based on Your Experience
Now that you understand the different pricing models, it’s time to figure out what you’ll charge for your freelance consulting services based on your current experience.
First, you can use a rate-calculator tool. The Mylance consulting community came together and created an excellent survey to determine what to charge based on what services you provide, years of experience, previous rates, and more. To access the database, apply to the Mylance Community and you'll immediately get access.
If you’ve got more specific questions, speaking directly with freelancers is an excellent way to learn more. You can ask them what they charged when starting out, how often they raised their rates, how they up-skilled, and more. Join the Mylance community.
Step 5: Build an Online Portfolio
Almost every potential client you come across will want to see examples of your work. A portfolio helps prospects determine the quality of your work and if your deliverables are what they’re looking for.