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What Should I Charge? How to Justify Your Freelance Rates

What Should I Charge? How to Justify Your Freelance Rates
Published January 29, 2015 by Brennan Dunn
When I first started freelancing, I thought I knew how to price myself. I charged $50 an hour because, well, it’s what my equivalent hourly rate was before I went out on my own. It was easy to justify — I could point to any number of other rate sheets, pricing calculators, and other resources to make it clear why I should be paid what I was asking. It was the “market rate” of somebody like me. 

But almost 10 years later, I now charge upwards of $20,000 a week. This is nowhere near market rates, and I haven’t come across any freelancing pricing calculator saying that this is what I should be charging. But I can justify it. My clients know they’re getting a deal, even though they’re paying me exponentially more than the other guy or gal. The key to getting a killer rate is to quantify the value you bring to the table, and how you can use this value to price or anchor your rate. How? Let’s dive in:

Go Beyond What You’re Given. 

When most of us are brought in to a new project, we immediately become technicians. For something like a website, we start asking questions like, “What should the site look like?” or “How many pages should it have?” 

It’s important, though, to realize that no client in the world wants to spend money on what you “technically” create. Whether you’re a web designer, a coder, or a writer, clients don’t pay you because they want a website, an application, or copy.

No client in the world wants to spend money on what you “technically” create.

Instead, clients pay you because they’re hoping that the results of your project will warrant the investment. If a company asks you for a website, what they’re really asking for is more customers. But most of us ignore the customers, and focus entirely on the website and how it will look and function. When you focus on the why behind a project instead of just the what, you’ll win more projects. Clients want you to know what’s at stake and why they’re willing to spend thousands on you. A freelancer who gets the why is less risky, but you’ll also be able to charge a lot more as clients will wager more money on a sure bet.

Here’s how you can figure out the pain behind a project:

  1. Listen. This is what we all do now, but you want to make sure you hear your prospective clients out. What do they want you to do for this? Note that this is the step that often leads into the technical aspects: the design of the logo, the font faces and colors of the website, and so on. But before we get there, we want to learn a bit more about the project. I just like to lead with “So tell me a bit about this project. What is it, and when are you looking to have it done by?”
  2. Identify The Trigger. We want to know what made them decide that they needed this project done. What “spark" led them to determine that it was time to draft up a project request and bring it to someone like you? Try something like “ Tell me how you came up with this project — what changed, or what happened, that made you realize, ‘I need to do X’?”

  3. Highlight The Problem. “OK, so [TRIGGER] happened and you decided to seek someone like me out. You wanted something fixed… Could you tell me more about what that something is? What is this project solving?”
  4. How Painful Is The Problem? After you learned what business problem (e.g. a lack of customers, inability to open up a new location, etc.) lies behind their project, you want to try to figure out how painful it is. How is it impacting their business? Are they stressed out about this problem? Are they anxious to get their new business off the ground?
  5. What’s The Cost? If this problem goes undiagnosed, what effect does it have on their finances or reputation? Not every client accurately knows this or is willing to share it at this point, but you want your client to vocalize to you that this problem, left unfixed, will adversely affect their business.
  6. How Should Tomorrow Look? Now that we’ve dug into the root of the problem behind their project, you want to figure out what would happen if this problem were removed. What would a sizable increase or more customers do for their business? We want the prospective client to dream about tomorrow.

One thing to note is that by doing this, you immediately set yourself up as something beyond just a freelancer. You’re a consultant. You don’t want to simply build, you want to architect

You don’t want to simply build, you want to architect.

You want to have a stake in the direction of the project. We all want creative freedom in our projects, and the single best way to achieve that is to become a trusted expert in the minds of your clients.

What Would it Mean to Solve Their Problem?

You now know what problem your prospective client faces, and where they’re hoping to be once that problem goes away. This is going to help you create a compelling proposal that’s much more than “here’s a list of what I’ll do and a price.”

The next step of this process is to help quantify what sort of financial payoff your client can realistically expect should you succeed. You want them to demonstrate that you can give them a return on their investment (a ROI), and if you can convince them you can do that, they’re going to be a lot more willing to hire you at a higher rate. An example (which came from a student of mine’s experience):

Suppose you’re talking with a rehabilitation clinic about designing a new website. You’ve discovered that they want more than just a new website; they want more patients. Now you want to figure out what factors you can influence to help your client become more profitable. 

You’re going to want to start at what you probably can’t control (like how much money they make from each patient), and work your way toward what you can control. 

You: “What’s the average value of a patient in a bed?" 

Clinic: “About $30,000."

(We’re not there yet, but now we know the value of a customer.)

You: “And how many people do you typically need to talk to before you get a new patient?"

Clinic: “About 10." 

(We now know that a lead is valued at around $3,000. But we can’t control how effective their sales team is. But we can influence how many leads they get.)

You: “If I could build you a website with the sole purpose of getting you at least one new lead a month, that website would help you generate at least $36,000 in new revenue in the first year alone — right?" 

Clinic: “That sounds right." 

Now we’ve attached a tangible value to the project. Sure, we can’t guarantee the exact results they’ll be getting. But because we’re not selling “a website”, but instead “a website built to generate more leads at $3k a pop”, we’re talking about a less risky and higher value project than the other guys. Your competition might be selling a website—which might get them new leads (and consciously or subconsciously, that’s exactly what the client wants)—but because you’re selling the client what they’re looking for, you’re now a much safer bet. And you’ve come up with a way for this website to generate $36,000+ a year. 

Now Anchor Your Cost and Write a Killer Proposal.

You now have everything you need. You know what’s aggravating your client’s business, and you know how it’s affecting them and their business. But you also know where they want to be, and you’ve helped them figure out how valuable their project is.

The last step is to ask them to hire you.

Almost all of your competition typically writes a proposal that says something like “here’s what I’ll do, here’s what it will cost, and here are some terms and conditions”. This requires the client to mentally weigh whether the list of requirements presented to them will actually solve their problem. And since all they’re doing is supplying a list of tasks with an associated price tag, why shouldn’t someone take that list and price shop? Or respond back with, “why should I pay you that?"

Your proposal should read like a story. Set the stage by describing the client and the problem their business faces. Don’t be afraid to use any juicy statistics or data point that they’ve given you to really highlight the pain (such as the cost to acquire a client).

Next, describe the ideal tomorrow to them. Where do they want to be? What will that do for them and their business? How much more successful will they be once their problem wants to be? Your goal is to pitch yourself as the best possible ferry that can get them from the problem to the solution. There are a lot of talented ferry captains out there, but you’re the only one who knows exactly where to steer.

Your goal is to pitch yourself as the best possible ferry that can get them from the problem to the solution. 

Finally, present your offer. Your offer is simply a way to connect the problem with the solution. And ideally, you’ll present multiple offers at multiple price points. Once you know where the client needs to be, this becomes easy: the offers you give are different paths to the solution, each with different degrees of completeness. Your low tier offer might get your client to only the halfway point of where they want to be, but it’s cheap. Your tier offer will get them exactly where they’re hoping to get. And your highest tier offer will go above and beyond where your client wanted to be.

With these offers, you’re going to want to supply a price. Either as an estimated cost (three to four weeks at $20,000 a week) or a fixed cost. But what’s most important here is that your price won’t be the first number they see in your estimate. The first number they see will be what they stand to make off this project, and ideally it’s quite a bit higher than what you’re asking. 

If you offer a lead generating website for a hospital clinic at $15,000, and they stand to bring in $36,000 in the first year alone off it, suddenly that number becomes a lot more palatable. You’ve price anchored your cost against the payoff. You’re now an investment, rather than just an expense.

Most freelancers fail to significantly raise their prices because they don’t justify their price. They don’t offer any context around what they’re asking for. So the client needs to reason, “is this worth the price?” You don’t want clients doing that, because then they’re liable to either try to drive down the cost (to mitigate their risk) or shop around. So if you want your freelance career to truly takeoff, avoid the price calculators, market rates, Google searches, or other forms of justification for low-ball, commodity rates. Instead, share the end value you provide by working side-by-side with your client. It'll end up being much more enjoyable, and your wallet will thank you.

How about you?

What’s been your process for figuring out the value you bring to the table?

More about Brennan Dunn

Brennan Dunn is an agency owner, software startup founder, and teacher. He's helped tens of thousands of freelancers learn the business of freelancing at Brennan's also the author of a free email crash course on pricing, Charge What You're Worth.

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