“How much should I charge my client?” is a question often asked by freelancers. After all, you don’t want to scare off your first potential client by charging too much, but you don’t want to be charging peanuts and end up begging your old boss for your job back either.
It’s a tricky situation and one that can lead to imposter syndrome, but i’m here to tell you that there are plenty of people out there willing to pay for your services, the question is…
How much can you charge for those services?
The answer is, it depends. There are many factors that go into deciding how much to charge your clients, and that can range from your level of experience to the quality of leads you’re getting through. You’ll want to begin on the lower end of the spectrum until you build up experience and positive referrals over time.
With that being said however, you’ll want to charge enough to ensure that you’re not putting yourself under financial stress, and give yourself some elbow-room for any mistakes or problems that could arise during the life of the project.
The 4 Best Ways To Price Your Services
There are plenty of ways to calculate how much to charge a client, and none of them are black and white, however here are some that I have found most helpful during my time as an entrepreneur…
#1 – Charging by the hour
This isn’t the pricing strategy that I would personally recommend, however it is a good place to start. By working out your hourly rate, you can figure out the amount of hours that you are willing to work and also how much you would like to earn in return for that time.
For instance if you know that you’re going to spend 10 hours of the month working with a client, you want to earn £3,000 per month (minimum) and you’ve got 10 clients, your hourly rate would be at least £30 per hour.
To clarify, that calculation works as follows…
#2 – Cost-Plus Pricing Strategy
A much more accurate & efficient way of charging clients is to use the Cost-Plus strategy. This pricing strategy involves calculating the costs of your work and adding a desired margin on top, in turn giving you your monthly or project quote.
For instance, I might add up all of my monthly costs of working with said client, and the total comes up to £1,000. These costs might include the price of servers, software or materials, to name a few.
You would add these up and then add a percentage margin on top, this margin should also take into account regular costs, such as rent, food, internet etc, obviously you wouldn’t charge the client your rent money but it’s worth factoring some of it in, after all… you need to live!
#3 – Competitive Pricing
This one’s fairly simple. With Competitive Pricing you’re required to look up as many competitors as possible and note down the cost of their services, these services should be similar, if not exact, to what you’re offering.
After a while you’ll notice that there might be a wide scale of pricing, ranging from dirt-cheap to jaw-droppingly expensive. Once you’ve gathered a long-list of your competitor’s prices, you should aim to price your services around the middle of the spectrum. It may be worth discarding any anomalous prices though.
#4 – Tiered Pricing
Now that you know what hourly rate, your ideal markup & what your competitors are charging, you can provide a variety of priced packages to your clients.
Each package should appeal to a mix of audiences, one for a lower-tier, one slightly higher and then the last package for your premium-clients, this can be set in line with the highest amount your competitors are charging (if not more).
The reason why I recommend including a tiered pricing system, is that it allows you to catch a wider variety of audience, I mean, how frustrating is it when you can’t quite close that sale because your package is too expensive, or worse yet it’s considered cheap – and perceived to be of a lower quality, purely because of the price.
The usual structure may include a Bronze, Silver & Gold package, with each tier including greater or more features (or services) than the prior tier. The Gold package for instance could be more of a done-for-you service.
Things to consider
Whilst I’ve given you many different ways of calculating your fees, it’s also worth considering some of the following points…
Budget for leisure, holidays & down-times
There’s going to be times where you need to rest or take holidays, meaning that you’re less likely to be making money during the downtime, you’ll need to factor that into your long-term pricing strategy.
It also goes without saying that you’ll need to cover your minimum running costs of the service, after all this isn’t a charity. You need to live. Set a big enough margin to fallback on should any mistakes or unfortunate events happen, and trust me… they will eventually! Don’t let a profitable project turn into a financial nightmare.
Those that pay the least, often expect the most
If your pricing is based on being the cheapest, then you’re setting yourself up for failure. Instead, set your pricing in line with the value that you bring to that client. Think about this…
- What problem do you solve?
- What’s the severity of the problem?
- How quickly can you solve it?
- How much does it help their stress levels?
- What is the standard of work?
When you take on ‘cheap’ clients, they’ll continuously expect freebies and “just a few changes” every other minute. What was initially a generous offer on your part, just became your biggest nightmare.
I went through all this when I first started out, and when I started charging a higher fee – I naturally started getting higher quality clients. I even have one client now that asks me how much something is… I tell him the fee & he just says “Cool, get it done”. Easy as that.
When you charge peanuts, you get Monkeys. Monkeys that’ll just chuck shit at you all day. Nobodies got time for that.
Charge what you’re worth.
Your fees will rise
As you continue to gain clients and experience, understandably your skill level will increase too, leaving you far more confident in raising your prices. So don’t be so quick to shoot for the same prices as top entrepreneurs like Tony Robbins right away, build up to it!
Should you ever work for free?
Doing free work should be a means to an end. You need to evaluate the potential return from doing so. At the very minimum I would request a testimonial from the client, with preference being for a video testimonial.
You should be the judge of whether this free opportunity is worthwhile, with the main point being that this potential (free) client has demonstrated that they are serious about business.
The times that you should work for free is when you look to build up a portfolio, get testimonials, (re)gain confidence, experience and/or significant exposure. If a client is coming to you with the offer of ‘exposure’ then run for the hills, however if it was you that approached them – then its fine. Also make sure that they’re capable of providing that exposure, i.e. – have a large and engaged following or network.
If they’re a bit iffy about what they do or don’t want, or have no experience in their market then I would avoid them at all costs.
That being said, you shouldn’t have to work for free at all, even when first starting out.
How much to charge a friend
I thought i’d throw this in as. Don’t screw yourself over thinking that a friend is going to be the perfect client, sometimes they can be, but other times they can take your time for granted, seeing the work as more of a friendly favour as opposed to a professional job. Bad projects can ruin friendships so consider that before taking on friends & family as clients.
That being said though, feel free to offer a friendly discount as friends do, but also be sure to leave yourself with a profitable margin. You’re not a charity.
At the end of the day there are many ways to figure out how much to charge a client, and I recommend a combination of the Competitive Pricing & Tiered Pricing Strategies. To make this easier you can sign up to my Resource Library to receive a free Service Fee Calculator which you can use right away to figure out your fees!
Did you find this post helpful? Let me know in the comments below!