Since I returned to freelancing a couple of months ago, I’ve been spending a great deal of time on the business aspects of my work (in addition to connecting with clients and working on projects). Something I have been learning more about is pricing my services. When I was freelancing in 2015-2016, I typically provided an hourly rate (or range) based on market rates (what others charged) and my knowledge of how much people actually pay for research/design services. I’m familiar with this because of my previous experience reviewing proposals/hiring vendors when I worked within companies.
Back then, I was comfortable with what I earned for my time and expertise, and did not get much pushback from clients. Four years later, I have decided to raise my fees, but I am also reassessing my approach to pricing my services so I can maximize the amount of money I earn (as any small business would do). After all, the more experience you have doing something, the better at it you become, and the more money you should make over time.
There are three things that have been useful in this exercise.
1. Talk with other freelancers to see what they charge
I have been asking other freelancers to share what they charge, and I do the same. Everyone I have asked has been willing to do so because there is mutual benefit. Knowing what others charge helps you stay competitive, or raise your rate if it’s too low (you may just not know how much you can ask for). It can help agencies, who hire researchers for projects, make sure they are charging their clients enough so they can pay their contractors well. It can also help people avoid agencies that underpay.
I use rates (plural) because there really isn’t such thing as one going rate. Rather, there’s a range depending on several factors (e.g., expertise, experience, client, urgency, efficiency, quality, reputation, value, etc.) Knowing others rates is potentially a great thing for raising incomes across the board, especially in a city like Portland where people get paid less for the same work being done by people in other locations (e.g., Silicon Valley, Seattle, NYC) but for the same large, wealthy clients. These conversations have helped me know where my rate stands compared with others. The more I learn from talking with people and giving clients estimates, I can continue to revise my approach.
2. Use insider knowledge
I mentioned this above, but it’s pretty simple. If you have worked in-house at a company, chances are you engaged with vendors on projects, which probably included reviewing proposals for services and costs. Use this to your advantage! It’s a powerful way of knowing what companies pay for things, and what vendors (freelancers, agencies, etc.) charge. If you don’t have this knowledge, ask a trusted friend who works in the industry to share what they have paid for things, even if it’s just a ballpark estimate.
3. Read this book
That brings me to the second resource – a book that has really helped me rethink my pricing strategy. In fact, it somewhat negates what I just talked about with hourly rates, but I’m thinking big picture here. The book is Dan Mall’s Pricing Design, a concise, well-written and inexpensive ($9.99!) guide to pricing consulting design services. I want to note right off the bat that as a researcher, I found this book equally as applicable to research consulting (not just because research is part of the design process, but readers can draw parallels with the book’s examples, and we work for similar clients with similar needs and goals). Here’s what I love about this handy book. I won’t share everything because you should go read the book yourself. Hopefully I can convince you to!
- It’s super quick yet highly valuable – you can read it in an hour and change and your view of pricing will evolve. And it’s an instant-download PDF – great for printing and making notes, and storing digitally.
- Dan Mall reviews the most common approaches to pricing design services, but the focus of the book is on pricing based on the value you bring to the client, and vice versa. What do both parties stand to gain?
- The book discusses various definitions of value for pricing projects – i.e., it’s not a simple formula you plug things into. For example, how much money will your client make? How much will they save? What is the long-term impact? Are you friendlier, more efficient than others? Do you come highly recommended? Is the deadline urgent?
- It makes a strong argument for not using hourly rates, which cannot possibly account for all of the variables involved in a project, let alone the abstract concept of value. You get compared to everyone else’s rate when clients are focused solely on price and not other types of value. Also, you can not infinitely raise your hourly rate with the years because it becomes laughably astronomical.
- In terms of what you value (other than money), what factors into your pricing? E.g., is this an area you’ve always wanted to work in? Is your schedule empty? Is it design for good?
- Dan Hall’s knowledge and advice aren’t based on assumptions, guessing or generalizations, but on his vast experience with consulting, client relations, and proposals. He has experimented a lot with different approaches and has found value-based pricing to be the best method for maximizing value, monetary and otherwise.
- There are several important reminders throughout that I found to be very motivational and empowering. For one, you are making money for people – it’s easy to forget when clients focus on tangible things like hours, deliverables and project phases. Also, position yourself equally with clients. They are not doing you a favor by “giving” you work – it’s a business relationship!
- There is a really useful section on evaluating requests for proposals (RFPs) to tailor your project proposals based on your inferences of what clients value most.
This book has convinced me to focus on using a value-based pricing approach for my projects, rather than an hourly rate that clearly has numerous short- and long-term downsides. It’s given me the info I need, triangulated with other sources (freelance rates, knowledge of service costs, etc.), to feel confident in experimenting with this approach and being a more effective salesperson. I also plan to do some follow-up exercises to better understand the non-monetary types of value I can provide, how to communicate them in pitch decks and proposal discussions with clients, and how to exemplify them during projects for return business. If there’s anything this book could use, that would be it – introspective and practical exercises/worksheets that help people delve into this topic a bit more (e.g., values-based explorations).
I highly recommend this book to anyone working as a freelancer or small business. As Mike Monteiro says in the foreword, “You are going to make more money from this book than you spent on it.” Get your copy here!