What's Your Rate? Determine How Much to Charge Clients Using This Strategy

• Updated on: 2018-09-14
• Read original article here

MONEY
What's Your Rate? Determine How Much to Charge Clients Using This Strategy
Make up your pricing for every client. There is no formula, no rules, and no perfect way to do it.
By John Rampton
John Rampton is an entrepreneur, investor, online marketing guru, and startup enthusiast. He is the founder of online payment company Due . Best known as an entrepreneur and connector, Rampton was recently ranked No. 2 in Entrepreneur magazine's Top 50 Online Influencers in the World, and named a marketing expert by Time. He currently advises several companies in the San Francisco Bay area.
CREDIT: Getty Images
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You just launched your freelancing career . Everything seems to be in order until you get that first phone call from your first potential client. The conversation was running smoothly until they ask;, "So, what's your rate?"
You thought you had it figured out. But now here you are like a deer in headlights. Are you asking too much? Is it too low?
To be honest, there is no right or wrong answer. There are numerous factors, such as your experience and scope of the project, that can determine how much you're going to charge clients.
That's not why you came here though. You're looking for an answer. And, we may be able to oblige if you use the following strategy.
Common Pricing Mistakes
First things first, let's quickly go over some of the most common pricing mistakes that freelancers and business owners are committing.
You base your hourly rate by reverse engineering what your annual salary used to be.
You can't justify your pricing model and rely solely on calculators, market rates, or the previously mentioned salary.
You still have subordinate-to-boss mindset when negotiating your rate with a client.
You haven't been collecting social proof, testimonials, or reviews to validate your rates .
You still charge by the hour. As we've explained in the past, "you are stuck making the same amount of money each hour, no matter how long it takes you to complete an assignment. You can raise your hourly rate, and you might be able to charge a large amount, but you still need to base your earnings on how long you work."
You haven't raised rates - despite building a solid portfolio and a stable of clients.
Your New Pricing Strategy: Figuring Out the Pain Behind a Project
This strategy was developed by Brennan Dunn, Founder of DoubleYourFreelancing.com, who states that you must "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."
Instead, Dunn argues that "clients pay you because they're hoping that the results of your project will warrant the investment." In other words, start focusing on "the why behind a project instead of just the what."
Sound complicated? Not if you follow these six steps;
Listen. When discussing a project with a potential client, lead with asking what the technical aspects of the project are and when it's expected to be completed.
Identify The Trigger. You need to know what "sparked" them to draft, implement, and hire a freelancer like you for this upcoming project.
Highlight The Problem. Ask them what problem this project is trying to solve. For example, will it help them obtain new leads or find a new location for their business.
How Painful Is The Problem? After discussing the business problem, determine exactly how painful it is for them. How is it impacting their business? How stressed out or anxious are they?
What's The Cost? If they don't solve this problem, how will impact their finances or reputation? Just know that not every client knows this or is willing to share, but at least give them a chance to share.
How Should Tomorrow Look? After getting to the root of the problem behind their project, determine what would happen if the problem were eliminated. For instance, would increase or decrease new customers?
As Dunn adds, "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.'" This allows you to "demonstrate that you can give them a return on their investment (a ROI)" so that you can develop a tangible value to the project.
For example, if a client wants a new website in order to attract new customers, and each lead is valued at around $1,000 a piece, then you at least have a starting point when determining their ROI - which can then be used to figure out a rate.
Finally, spend time creating a killer proposal for the client. And, consider offering multiple packages from a minimal option to an all-out package. This way you're giving them options that meet their needs instead of a "take-it-or-leave" approach.
There Is No One-Size Fits All Formula
I love this advice from freelance web designer Jake Jorgovan; "Make up your pricing for every client. There is no formula, no rules, and no perfect way to do it."
But, there are some common considerations that all freelancers share when setting your rates ;
Do you like the client or the project? A client may not have a large budget, but you enjoy the work so much that you may drop your rate a bit.
How much do you expect the client to pay? A large-enterprise level business has a bigger budget than a startup that just launched last month.
How much value are you providing the client? Again, emphasize the value that you're providing the client.
Don't forget to include travel time, taxes, and additional expenses like edit.
Take into consideration your monthly income needs, such as rent, utilities, insurance.
Since there is no right or wrong way in determining how much to charge clients, don't be afraid to experiment with various strategies until you find one that works best for you and your clients.
How have you determined your rates? Let us know in the comments.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
Published on: May 29, 2017
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