As freelancers, you often work on multiple projects with diverse objectives. Since there is a variety of clients and varying complexities of jobs it is important to apply the right pricing strategy to outperform and earn without feeling burnt out.
Friz can help you with sending invoices in minutes and requesting upfront payment in 24 hours — so we have your cashflow problems covered. In this blog we will discuss about various pricing strategies and how freelancers can apply them to grow their incomes.
Time based Pricing (Hourly): The time-based pricing is directly associated with the amount of time you would need to complete a project. It is a primary strategy and many freelancers would start their journey with this as it gives them a better picture to value their time. It is widely accepted method of billing clients and can be easy to apply to projects where the objectives are not clearly defined. You can use the following resource here to estimate the hourly amount.
- You get paid for the actual time they put into the work and there is less danger of miscalculating the time and working for free.
- It is easy to calculate their offerings and monthly expected income.
- It is largely used for loosely defined projects where the scope is likely to change.
- The earning potential is limited as the number of working hours are defined and you can hit the ceiling in a few months once they start working on it.
- You are wrongly incentivised to work for longer hours and sometimes become oblivious of time that they put in to complete a simple project.
Project Based pricing: It is used to price projects that have a clear and defined scope. This will also help the client to clearly understand the deliverables and eliminates time-based billing and provide him/her with the security of knowing that the price of their project will not change. Moreover, in this pricing model you should be vigilant about the potential cost upside if there are changes made during the interim period and should have a control over it.
- The client is guaranteed the deliverable and not worried about the time consumed and output delivered per hour.
- Great strategy for a clearly defined scope of work that is less likely to change.
- There is a very less chance for errors as freelancer can know exactly what they are delivering and what they are getting paid.
- There is a high chance of miscalculating the complexity of deliverables and freelancers may work beyond the amount of time they have planned earlier.
- There is often a chance to revise the final deliverables and it might change the effort of freelancers for a predetermined price and this could reduce the expected earnings.
Value based pricing: Value based pricing is different from the time based and it solely depends on the value or financial gain your client can achieve from the work and it can be a percentage of that profit earned or a fixed fee. In this model, clients often pay based on the performance of freelancer. If the results are tangible and well quantified, freelancers will have a longer and healthier relation with the client.
- The earning potential is not limited as the value gained per client can extend to any level.
- Time- tracking is not necessary and freelancers can be incentivised to all the effort they make.
- The results are not under your control and there might be several factors influencing the outcome of the project. In such cases there is a risk that you would get paid nothing or paid less.
- There might be some scheduling problems and projects might last longer than expected resulting in a lower hourly payment.
Monthly Retainer: Monthly retainer pricing model is best suited for projects that require the long-term commitment and the objectives of every milestone are clearly defined. In these projects, the client pays up-front to the freelancer and the freelancer also knows the objectives clearly and can schedule his/her work and time to attain maximum efficiency. This kind of pricing is mostly suited for marketing and IT support jobs where the scope of work is wider and can extend to a longer period of time.
- You can have a well-defined and recurring payment structure.
- You can provide a wide range of services and pricing models and can develop a long term relationship with the client.
- Some projects in between might need less resources and the clients will not be comfortable in paying the equal amount of retainer fee that they usually pay.
- Sometimes the client may increase the scope of the work but still pay the same retainer amount which could limit the financial gain of the freelancer.
A right pricing strategy always depends on the freelancer and the type of project that he/she is taking up from the client. Don’t be afraid of experimenting with different kinds of pricing before you find out what works best for you. Always remember that your pricing should reward the kind of effort and the time consumed. Moreover make sure to benchmark your pricing against the competitors and charge the clients with this approach in mind. This would help you to be in a good position and have a healthy relationship with the client. A right pricing strategy can definitely help you to grow your clientele and the value of your work in future.