Here’s a tip that all really successful freelancers know: the price you set for your work is a marketing tool.
Some freelancers think the price they charge is about what they want to make. And, to them, it is.
Clients view the price they pay for something as what the work is worth. (Sometimes that view is combined with how much will I grow my business by spending this money?) In other words, if — to the client — the work is worth $1000 for what you perceive to be 10 hours of work, then you should be charging around $100/hr.
If you charge the customer $400 for those 10 hours, then the customer is perceiving your work as being worth less than they think it should be worth and they will wonder why you are undercharging them so much.
How will the customer know what the work is worth?
Lots of times, on first meeting a freelancer about a project, the customer has no idea what the costs are going to be. Instead, they have an idea about the cost for NOT doing the job, since not doing the job also affects their business. Your job, as a freelancer, is to set the customer’s expectations about how your rates are in line with the market in your area, how working with you will have additional value beyond just the rate, and so on. That’s the selling part.
Setting your rate in line with what the customer expects to spend is marketing.
How will you know what the customer expects to spend even if the customer doesn’t?
First, figure out where your rates fall in relation to other freelancers in your market. If you don’t know, call around and ask other freelancers who offer similar services what they charge [if you think they won’t, try asking as though you were going to subcontract a piece of a project to them].
Once you have an idea of what the market will bear for your services, figure out whether you are able to get projects done faster and cheaper than your competitors. This task is usually one that comes from experience and from talking with customers about other projects they’ve had freelancers do. Have your customers compare your performance to other freelancers with whom they’ve worked. The feedback is important and will help you figure out if you’re charging too little or too much on a per-hour basis.
What about being a low-cost leader in my area?
You can always do that, but I’ve found that customers who are looking for the cheapest price are also the worst customers and they will value your services less. These customers are more demanding and less forgiving than customers who value you on something other than the amount they spend on you. I also think that if you compete on price, there’s always going to be someone who’s cheaper somewhere else.
The price you set for your services is one of the messages you convey to customers about your services and about yourself. Make sure the message you send isn’t “My work isn’t worth much.” That kind of message will get in the way of making the sale.