Aired Wednesday, June 24, 2015. Episode 136
I lead a conversation about pricing with the group. Would you like to know what you should be charging for your freelance work? I opened the conversation to the group talked about everything from hourly rates, project rates, when to charge rush fees, and charging friends and family for your work. I am sharing with you a pdf of a I use for my clients. Feel free to copy it and use it for your contracts or use it as an example and make your own.
The economy is not the only thing that causes rates to fluctuate, your location influences your prices as well. Back in 2000 I moved from Denver, Colorado to Richmond, Virginia my rates did not drop significantly in the move but to stay comparable I lowered my rates. But as I moved to Mobile, Alabama in 2003 to grow my business locally, my rates had to change significantly.
INCREASING YOUR RATES
How often should you increase your rates? Every two years my hair dresser increases her rates, what goes into this decision for her? Cost of materials increase, price of living, training she has undergone, plus experience. So why should you increase your rates? Because your knowledge and experience increases along with your cost of materials and software, your ongoing education, and the price of living is always increasing.
EXPERIENCE & EXPERTISE
If your experience in one particular area causes you to be considered by your peers as an expert in that area, you should increase your rates accordingly. Look to someone you know who’s business specializes in a particular area, if you look outside the field of graphic design and you will find that people who specialize can charge anywhere from three times as much as someone who doesn’t specialize. Think of a therapist who handles cases of depression and anxiety and think of one who specializes in a particular anxiety disorder dealing with the texture of food and her focus is on children age nine months to 7-years-old. This is a specialization that people will expect to pay more for, this area will bring in less clients than a therapist who deals with anxiety and depression, but this specialist has clients visit from all over the world. Again this means you have years of experience in this area (not a handful of projects).
CHARGE WHAT THE MARKET WILL BEAR
Let’s go back to the therapist example for a second. If I am a parent of a child with this type of eating disorder then I will probably pay to have this type of therapy, but times are tight and I do not have an endless amount of money, therefore I can not afford this therapy if it costs exceed my budget. It is the same in design. Here is a tip for whether you are a generalist or a specialist, you don’t want to set your prices at the lowest rate you need to survive or the most extreme expense. You have to think about what it costs you to acquire a customer and what it costs for you to keep them. It is better to set your rates higher than lower because clients are more apt to disregard something that cost them $100, but will value something that cost them $10,000.
If you buy a t-shirt for $5, do you care that much if the t-shirt gets ruined in the dryer? No, you say, “Oh well I got to wear it a few times, it was worth it.” But what if you had spent $120 on a shirt, you probably would take better care of it and maybe not even put it in the dryer. You would wear it with more pride than you wore the $5 shirt. Your value to your customer is to some extent based on the perceived value. When you devalue your service or product, you undervalue your worth.
I have found that most designers will undervalue their services because we feel “bad” charging so much. Does the mechanic “feel bad” charging you $1500 to fix your air conditioning? No, that is the price. So you need to calculate your service and creativity. You need to be confident in your prices and stand firm. If you have them set to high, you will not make any sales. But you can do a few things: you can run a sale, discount your services, or adjust your client market and go after clients who are willing to pay for the exclusive services you are offering.
Want to know more about what your rates should be, but don’t know where to start? I use the MyPrice app, it is really thorough and includes many elements that you might not include if you are trying to calculate this on your own.
It is your responsibility to prove your position and your expertise. I call this your SuperPower, these are skills and talents that come natural to you and set you apart from others offering similar services. You may create killer magazine headlines and they come to you easily and often, or maybe you create an amazing client experience that makes your services and business unique. Often people don’t realize all the things that set them apart, they regularly discount their natural skills and abilities thinking everyone possesses them. If you want to learn more about this, click here.
WHEN TO CHARGE OVERAGE FEES
You should charge an overage fee when you go beyond the stated expectations listed out in the contract. AGAIN CONTRACTS ARE A MUST! If you stated that you would have two revisions and you are on the third revision, you charge for it. It should state in your contract how much the rate is and when the rate will be implemented. Again I would offer the ultimate client experience and let them know as you are on the second revision that the contract is for two revisions and they need to understand that anything after this revision will be billed at the agreed upon rate. I try and give my clients more time to make sure the second revision is the final. Please don’t sell yourself short and give away your expertise and services for free.
If initially the writing is poor, another idea is to offer to add to the contract the price of a writer or an editor to help them. Use your editor, if this is one of your SuperPowers help them but give it a rate, don’t do this for free.
WHEN TO CHARGE RUSH FEES
If a client needs something in less than a week, that is when I charge a rush fee. It is best to start out doing this and not charge it just when you aren’t busy. People get upset when they are charged different than their normal. If it is a regular, repeat client or a client that has you on retainer (you don’t create a contract for every project), create a contract that states your rates and what time frame you consider a normal turn-around time. State clearly what is time frame is expected for regular feedback from them and what time frame you need to complete each type of job that you are normally creating for them.
For example: Create an advertisement for an existing ad campaign (not a new campaign): one week (five days). Or for web updates: Monthly Calendar updates: One week (five days).
If they need something rushed like three days or next day determine what that rate will be, usually it is a percentage of your regular rate. Example: Regular hourly rate is $100, rush fee for next day $250/hour; rush fee for three day turn-around is $175/hour.
Rates are tricky and if you are less confident you might devalue your work and your rates. I would love to know what you think. Write a comment below and share the article with your friends.