As a freelance developer, knowing how much to charge for a project can often feel like a gamble.

It's easy to wonder "Am I setting my price too high?"

This is normally the first question that comes to mind.

And your brain will probably meet this question with a resounding "Definitely," followed by a swift rethink and subsequent price drop.

Why it's Tempting to Set Your Prices Too Low as a Freelancer

When you're using a platform like Fiverr and can see the prices other developers are proposing, it can be tempting (especially as a newcomer to the platform) to beat them all by offering the lowest price possible.

Surely this is the only way to get a client to accept you, right?

Well, if you've come to this conclusion, let me tell you that you're one of the many, many developers who have thought and then done the exact same thing.

The result, unfortunately, is what's happening today on many of the popular freelancing sites where it's often a race to the bottom with your pricing.

As a freelancer, this is a game you don't want to play.

Once you start doing work for the lowest possible price, you're rushing through work to get as many projects done in as little time as possible (you've probably got mouths to feed, right?). This inevitably results in finished work with a drop in quality.

This also has the potential to negatively impact your reputation which could cost you future projects or, at the very least, prevent you from upping the price of your next project.

This is one of the more compelling reasons for not being the cheapest developer around. But there are several more which we will take a look at one by one in this article.

By the end, I hope you'll be convinced that it would be unwise to compete in a "Race to the Bottom". Instead, I hope to leave you hopeful and equipped with the tools and methods to break out from, or prevent, this "let me just be the cheapest" approach.

Why You Should Stay Away from Being the Cheapest as a Freelancer

Stop the Race to the Bottom

The "Race to the Bottom" refers to the situation when a client is offered services by several freelancers.

Unlike traditional bidding, something quite sad tends to happen – freelancers outbid each other by offering lower and lower prices until a minimum price (one that cannot be lowered) is reached.

This often means a client could pay you only a couple of dollars for work that will take you hours to complete.

Thanks to the global nature of many of the online freelancing platforms, a dollar has vastly different purchasing power depending on the country you're in.

For example, in some parts of the world, a dollar can get you a decent lunch whereas, in other countries, a dollar won't even get you a bottle of water.

New freelancers in places like the EU, USA, and other spots where prices are high don't always take this into account. It's easy to think that they need to set their lowest price to match that of the lowest they see on the freelancing platform. They think that this is the only way for a newbie project proposal to be accepted.

Since the dollar goes a much shorter distance in countries like those in the European Union, a freelancer often finds themselves in the position where they are making a loss on every project they take on.

This is a problem.

Clients View Your Services as a Commodity

When pitching services to a potential client, a freelancer will typically set a price per hour. This approach can lead to a client simply choosing another freelancer who has a lower price per hour.

You see, basing your potential value to a client on an hourly-based price is a disservice to you and, as a matter of fact, to your client.

By seeking to get more work, you might be inclined to drop the price of your hourly rate, prompting other competing freelancers to do the same.

Clients shopping around for a freelancer will do just that – shop around.

The problem here is not just that you are still competing on price by charging hourly, but also that you are not illustrating to the potential client the real value they can gain for their business by working with you.

If you want clients to stop viewing your skillset as just another commodity they can buy at the lowest hourly rate, you need to change your entire pricing approach.

We'll take a look at the solution to this problem later in this article.

Clients Don't Always Go For The Cheapest Option

You may think that by asking for the lowest price, you'll be bombarded by clients who are all eager to hire you for their next exciting project.

But, a word of caution before you decide to do this.

You see, many clients don't go with the cheapest option.

Often people in general will settle somewhere in the middle when offered varying pricing tiers. Chances are, you too have often turned down the cheapest price in favor of something a little pricier on the premise that you're receiving a lot more quality.

W. Poundstone's book, Priceless, illustrates this point with an interesting beer selling experiment.

A group of people were offered 2 kinds of beer: premium beer for $2.50 and cheaper beer for $1.80.

Almost 80% chose the premium beer.

After this initial test, a third beer was added as a cheap option for $1.60 in addition to the previous two.

The test was conducted again and found that 80% of people bought the $1.80 beer while the rest bought the $2.50 beer.

Interestingly, nobody bought the cheapest option…

On the third test, they removed the $1.60 beer and replaced it with a more expensive $3.40 beer. Most people chose the $2.50 beer, a small number opted for the $1.80 beer and around 10% opted for the most expensive $3.40 beer.

This is price anchoring in action and it is your friend when offering multiple pricing .

Remember it the next time you're tempted to set and stick to the cheapest price.

More Work Does Not Always Equal More Money

Setting the cheapest price for your services may very well do what you hoped it would – bring in more clients.

If you're lucky, you may even be turning clients down because you have so many. Well, at this point you should be making boatloads of money, right?

I mean, you literally can't take on any new clients because you already have more than you imagined possible!

If you're charging by the hour and you were offering the cheapest price, there is one thing I can tell you with certainty – you absolutely won't be rolling in dollars.

Why?

You've capped your earnings!

By placing a value on your time and setting that value to the lowest it can be, you've essentially lowered your potential earnings in a year. Even if you were working every hour of the year, you could be making a semi-decent income but you'd be physically wrecked.

Chances are, if you're in the freelancing game, one of the contributing factors to you choosing this lifestyle was that it would give you some semblance of a balanced life.

How will you achieve balance when you have no choice but to take on as many clients as possible and work endless hours just to make ends meet?

By setting the cheapest price, you're capping your earning potential and any hopes you had for a balanced life.

How to Avoid Competing with the Cheapest

Change Your Pricing Approach

If you're still using hourly-billing, now is the time to consider changing that in favour of something that is far more beneficial to you and your clients.

Value-based pricing is where you charge a fee based on the potential return for a business.

It's important to first get into the right mindset before you try to use this approach.

Keep the following in mind when getting used to the idea of using value-based pricing:

• You don't sell hours, you are selling a beneficial solution to a business problem.
• This approach is safer for the client as there are no hidden costs that inevitably crop up in hourly-based approaches (due to time delays, work inefficiency, and so on).
• By charging prices based on value offered, you can work with fewer clients with a focus on quality over quantity. This means you can charge more reasonable prices which, in turn, offers you the opportunity to build your client work around your ideal life and not the other way around.
• This allows you greater freedom as you can focus on building something great as opposed to constantly worrying about going over the client's budget.

I've provided you with the "Why". If you're interested in the "How" of value-based pricing, be sure to give Hourly Billing vs. Value Based Pricing a read.

Write Great Proposals

Clients often have problems with the prices offered by freelancers because they, the clients, don't understand the value or work that is going into the project behind the scenes.

In other words, they won't know the quality service you'll be providing for them unless you explain it to them.

You can change this by writing great proposals.

You send a proposal to an interested client after discussing the potential project. This is where you have the opportunity to position and present yourself as an expert.

In short, you want your proposal to show a keen interest in the business and its goals, provide solutions to how will help the business achieve its goals, and show various ways in which you can do this via pricing tiers.

This leads to the next thing you can do to avoid competing with the cheapest.

Bundle Your Services

Ideally, you want to include three options in your proposal for a client to choose from.

As we saw in the beer example earlier, price anchoring can greatly affect the option which the potential client chooses.

Use this to your advantage.

Include the services that you'll provide in each option. This not only provides a mini-scope but also serves as something for the client to use when justifying the price to themselves (apart from the expert positioning you use elsewhere in the proposal).

Done smartly, bundling your services is a fantastic way to prevent you from competing with the cheapest out there and differentiating yourself from simply being "someone who makes websites".

Bonus Tips

Niche Down

Niching down greatly aids your cause in positioning yourself as an expert.

By niching down, you can build trust in a community, charge a premium fee, and have clients reach out to you.

Over-deliver on projects

Clients that you have done great work for are excellent lead-generators. Doing a good job for them means they're likely to refer you to others. This can lead to clients approaching you to work for them.

How do you ensure you'll get referred?

Provide excellent service and over-deliver.

Summary

Competing to be the cheapest developer out there is a sure-fire path to frustration, work exhaustion, and minimal income.

I hope that by the end of this article you understand the "Why" a bit better and feel better equipped to break out of this "Race to the Bottom" trap.

Thanks for reading!

See you on Twitter

If you offer your services as a freelance developer, you have a major say in how you price your project.

But how do you go about charging for a website project?

"Well, I just bill by the hour and send an invoice every week or month."

...I hear you say.

Well, let me tell you that there are far better options out there.

In this article, we're going to do a little analysis of the different pricing options available to you as a developer to see which one would work better for you.

Which pricing strategy to use often boils down to the particular scenario, your time, your client, and your enjoyment, but there are general approaches here.

What I will do is show you a few advantages and disadvantages of hourly vs value-based pricing so that you can make a more informed decision on the pricing strategy you choose.

Hourly-Based Pricing

Hourly-based billing is the most popular and the easiest to understand and start with.

However, I'm not going to share the advantages of billing by the hour because I believe that there is a better way.

I'm going to discuss the disadvantages of using an hourly-based pricing approach before I show what I believe is a better method.

Hourly Billing is Harmful to Your Client Relationship

Billing by the hour can be quite harmful to your working relationship with your client.

How? Well, put simply, the longer a project takes, the better it is for you and the worse it is for your client.

This creates trust fractures that erode the relationship over time if your estimates are not accurate.

This can happen in several ways. But it is often exaggerated by the client not understanding how long it would take to implement a feature which in turn leads to the client thinking you're working slowly on purpose.

Another way this can happen is if the project was not planned exactly as it will pan out, which happens a lot in development.

If the project starts taking longer than initially planned, you will appear to be taking advantage of your client. Your client will start reviewing the timesheets that you sent their way to find discrepancies and there will be an erosion of trust.

In general, you can not truly partner with your clients if you’re billing by the hour, which means that you can’t do your best work. And this means that your clients aren’t getting all the potential you are putting on offer.

Yes, some freelancers do make it work, but that's a small %.

You also need to consider if you're sick – then what? You don't get paid while you're ill for 2 weeks.

Hourly Billing Discourages Efficiency and Innovation

You don't get rewarded for finding time-efficient ways to finish a project. If anything you're getting financially punished.

If you price your projects by the hour, you will, as a more experienced developer, get projects done sooner, meaning you earn less per project.

So you think you make up for this by charging more per hour?

Well, this might only serve to scare your future (or even current) clients off to another developer who charges less per hour.

Hourly Billing Discourages Efficiency

Certain web projects can indeed take a day or so to finish. If you're charging by the hour, what incentive do you have to find a way to complete the project in the shortest amount of time?

If anything, even if you don't do it intentionally, your work rate and efficiency will not be something you're too concerned about optimizing.

Here's an example to illustrate the point:

Imagine you're working on a project that has similarities to a previous project you worked on. You'd like to reuse parts of a component you had built for that previous project but by doing so, you'd cut down the number of hours you'd spend on your current project.

In this way, you've directly lowered your income because of a component that you built in a reusable way.

Or maybe you're using Tailwind UI or WebFlow and you can create a website in 1 hour – should you only charge your hourly fee?

Your Income is Capped

Hourly billing places an artificial limit on your income!

Let me explain.

There are only so many hours you can work in a year.

By providing a price per hour, you're limiting how much you're practically able to earn each year.

If you suddenly decided to increase your hourly rate because you'd like to start earning more, your clients will most likely not understand.

"Why," they ask, "are you suddenly valuing your services so much higher for the same work?"

Even before you explain whatever your reasoning is, you're entering the conversation with them on the back foot – and that's just your current clients.

Potential clients will simply turn away and look for another freelancer who can offer them the same service at a lower hourly rate.

If you think you can just earn more by working more, ask yourself:

Is that sustainable?

If yes, do it.

But know that there will come a point where there are simply not more hours in the day to get more work done.

There is a ceiling to how much you can work and, as a result, how much you can earn. At the end of the day, both you and the client will benefit from not using an hourly-based pricing approach.

Transitioning from hourly billing to value-based pricing is tricky and takes time if you're used to an hourly-based approach.

It requires a change in thinking, but once you realize how ineffective it is to trade your time for money, you will find your profitability increasing by a lot.

What is Value-Based Pricing?

The key takeaway about the difference between value-based and hourly-based pricing is this:

• In hourly-based pricing, you sell your time.
• In value-based pricing, you sell results.
• In hourly-based pricing, you ask what they want to be built.
• In value-based pricing, you ask why they want something built.

This makes all the difference and can be a real game-changer if you're switching from hourly-based pricing.

With the focus on results, there are suddenly a lot more advantages for you and the client.

When you and your client understand the "why" (the value gained), a higher, value-based price will make perfect sense.

Before we get into that, let's look at how to apply value-based pricing.

1. Find the potential value of a project to a client over a year.
2. Base your price off of those (potential) income returns.

The main thing you need to do is to figure out how much the site is worth to the business.

Here's an example:

A business sells 3D Printers and they want a website.

This is the system I follow:

1. Find out if the business has an existing website
2. Find out what their competitors are doing that they aren't doing
3. See if the business has active AdWords campaigns
4. See how the business ranks on Google (SEO)
5. See if the business has social media profiles
6. Find out how much the average 3D printer costs
7. Find out how many printers the business sells every month

With this information, I'd be able to figure out if I can really make an improvement in the sales of this business and I'd know exactly how much to charge for the project.

So if the business sells an average of ten 3D printers at an average of $2,000 each per month ($20k sales per month) and after calculating that I could potentially increase sales by 30% month after month, it then equals an extra three sales per month (or $6,000).

I then mention this to the prospective client and say even if we work on just 2 extra sales per month, it adds up to an extra $48,000 per year just by the changes and improvements I will be doing.

Therefore, spending $8,000 once-off for the website to potentially increase sales by almost $50,000 in one year is a no-brainer…

Now let's look into the advantages of value-based pricing.

Advantages of Value-based Pricing

Freedom to Make Great Products

You can focus on creating something great without worrying about going over the client's budget or counting every hour. This gives you work freedom and means that how you go about the process is up to you.

Incentivized Learning

Not only does this approach encourage you to find the most optimal solution, but it also incentivizes you to stay up to date with the latest technologies and tools that make your workflow easier and more productive.

No Hidden Costs for the Client

Due to the price being agreed upfront, you take on all the risk. This means the client will have no financial surprises down the line which helps facilitate trust. In other words, the client experiences less risk.

More Clients That You Enjoy

The nature of value-based pricing means that you will likely be earning significantly more. You can now start working with fewer clients and provide much better service to each while earning the same or more than you did while using hourly-based pricing.

Scope Creep Insurance

Once a project has been defined in terms of the business outcomes (for example, increased traffic, more sales) instead of deliverables (like change the font size of the navigation bar items, the password reset form needs ReCAPTCHA) it’s fairly easy to control scope. This is because business needs don’t change that often, and random requests from the client can be judged against the desired outcome.

The crucial factor with value-based pricing is this:

It is up to you to make the business see your services as a necessary investment and not a cost.

You need to explain how you are the right person by explaining how both of you benefit from the pricing approach you're taking.

Bring their focus to the importance of results and what value the project will bring them.

Ultimately, this approach takes a lot of trial and error, but trust the process and your future self will be thanking you.

Base your value-based quote on the client’s perceived value of the project outcome instead of your estimated labor. This allows you to set your fees significantly higher, deliver more effective results, increase client satisfaction, and more.

You want to charge for your head, not your hands. Smarts, not labor. Results, not deliverables. Outcomes, not activities.

So Which Pricing Method Should You Use?

To me, it's clear that value-based pricing is the best way to price your projects.

Of course, the method you choose is up to you and, for many people, hourly-based pricing works perfectly fine.

There are other pricing methods like Fixed Pricing, where you calculate you assumed costs, add a profit to it and provide the client with that pricing, but I generally prefer Value-Based Pricing over this method.

If you do choose to switch to a value-based approach, remember that this new approach will take some getting used to but it will certainly be worth it in the long-run.

I have a helpful eBook talking about pricing and freelancing a lot more if you're interested.

Hope you found this article helpful :)

See you on Twitter.

Even if you're working full time, you may still want to earn a side income. That's where freelancing comes in.

Maybe you need the extra cash to get by each month. Or maybe you just want to save up for a big vacation. Either way, the steps in this article will help you do just that.

Today you’re going to learn how to earn a side income through freelancing (in your pajamas).

Without further ado, here are the 5 steps to earn your side income:

1. Figure out what service you can offer.
2. Determine your ideal clients and target market.
3. Create a targeted website outlining your services.
4. Reach out to your ideal clients using online marketing and outreach.
5. Analyse, learn, and adapt your approach to keep improving.

Step 1: Figure Out What Service You Can Offer to Generate a Side Income

Some examples may be:

• Frontend Development
• Backend Development
• Digital Marketing
• Content Writing
• Design

Don’t worry about being an “expert” at a certain skill.

The only way to improve is to DO IT and make improvements along the way, but you need to get started and believe that what you have to offer can help businesses.

You can't keep waiting until you are a "pro" otherwise you'll never get started.

In this article, I’ll mainly focus on Frontend Development and Digital Marketing as services. But you can apply these principles for other services as well.

Step 2: Determine Your Ideal Clients and Target Market

Without clients, you wouldn’t have a freelancing business.

The only question is, how do you get clients?

You don’t just want “clients,” but what you really want is the “right clients.”

Your Client and Niche

Finding your ideal client will help you lay the foundation for what niche you will be targeting and you can then align your marketing efforts accordingly.

Some client examples may include:

• Florists
• Bakeries
• Coffee Shops
• Health Shops
• Fitness Trainers
• Pilates Instructors
• Beauty/Hair Salons
• Printing Businesses
• Small Local Businesses in [Your Area]

(Note that the business needs to be independently owned – not a franchise businesses. Otherwise you'd have to deal with a large corporation.)

Once you’ve decided on your niche/client, you need to buy a domain related to the niche you choose and create a website like the portfolio template shown in step 3.

Step 3: Create a Targeted Website Outlining Your Services

The next step involves a portfolio site that you need to create. Refer to this portfolio template as a guideline:

Can you notice that this looks different to most other ‘portfolio’ sites?

This portfolio site is different to others which focus on primarily getting a full-time job that highlights your skills. In this example, it focuses on getting clients and how you can help their business.

The best way to think of the Portfolio Template is like a ‘Mini-niche Agency Website.’

It showcases your knowledge, expertise and how you can grow the business in the niche that you are targeting.

With the theory out of the way, let’s get into the actionable parts.

Create Blog Articles

Blog articles are important because it benefits you and it benefits the potential client.

It benefits you because the client will trust your expertise more and this will encourage them to work with you.

It benefits the client because they can learn something about how to grow their business.

You only need to have 2-3 articles to start with before you start approaching clients.

You can add an additional article once every month to make it seem like your freelancing business is still active and it will add more credibility.

Here are 3 article ideas:

• 5 Ways to Grow Your [insert niche] Online
• Why Every [insert niche] Needs A Website
• What Almost Every [insert niche] Does Wrong

How do you write the articles?

You can either outsource it to writers on Fiverr.com or write it yourself. I would recommend writing the first few articles yourself as it will help your confidence in selling to prospective clients.

Get Client Testimonials

Anyone who has tried to sell websites previously will know that one of the first things clients respond with is:

“Can you show me previous work you’ve done for [insert niche]?”

You know you can create a good website, but the client wants to see proof – which is fair after all.

Just like you’d research reviews on almost any product you’d buy online, it’s no different to the psychology of prospective clients.

How do you get around this? What’s the solution?

Well, I have two solutions that ALWAYS work in any niche I am in, but you might not like it.

Solution 1: Do two projects for free in exchange for a testimonial.

Solution 2: Buy two domains and create the websites (you just don’t get testimonials of course).

Solution #1 Requires Two Steps:

Step 1: You need to email the business owner of the niche that you’ve chosen. If they don’t reply to your email, then phone them.

How do you get their email?

Look in local website directories, yellow pages, local magazines or do Google searches until you find it.

Send them this email:

Hi [name],

I recently came across your [niche] business and I noticed you don't have a website.

I am a web designer and I would love to create your website for FREE (no catches or hidden fees) in exchange for a testimonial from you that I can use on my website.

I'm looking to get a few testimonials as it will help me in the future.

Would you be willing to take me up on this offer?

If you have any questions, please feel free to contact me.

Regards,

Your Name

Your Contact Number

Step 2: Create the website.

You can either do this quickly by purchasing a cheap template on Themeforest.net or TemplateMonster.com (often for under $20) or you can code it yourself – whichever you feel more comfortable with.

Another option is to use Divi which allows you to create WordPress websites with ease. I use it for every WP website I create.

You can try Divi here.

Solution #2 Requires More Explanation:

What is the purpose of a prospective client asking to see your work?

All they want to know is if you can deliver quality work.

Think about it…

If this is all they are concerned about, why can’t you just buy the domain, create a website and add it to your Portfolio?

It’s a different story if they are asking for case studies on how you’ve helped businesses increase sales, but that is not an issue for this income strategy as you are dealing with the ‘small fish’ here.

You don’t have to tell them you actually own the website either.

Remember, all they want to see is previous experience. Owning the site is something irrelevant and not a priority for them. All they want to see is if you can deliver quality work.

I’ve honestly never had any issues with this strategy whatsoever. It’s a secret weapon that works every time.

Price Your Services

Pricing is vital to your success.

Overprice and that means you won’t get any clients. Charge too little and you might get clients who question your credibility or you may be overworked with small profits.

Pricing is relative to the niche you are serving.

For example, if you created a website for a small local florist vs a 100+ employee accounting practice, your pricing should be significantly higher for the accounting practice.

So, if you charged the florist $1,500 for a website, they might say that’s too expensive for them.

Whereas if you charged the accounting practice $3,000, they might think that’s too cheap and may question your expertise.

Read my article How to Charge for a Website to find out how to price your services in more detail.

The following is an example breakdown:

My Niche: Coffee Shops

My Services: Web Design, SEO and Social Media

Pricing Once off:

$495 for a professional one-page website

$595 for a professional one-page website + SEO submissions + Google Map submission

Pricing Monthly:

$350 – Social Media Management (posting on Facebook and Instagram twice per week).

$495 – Social Media Management + SEO

You might think my pricing is low, but remember to view it in context.

The goal is not to make a good full-time income here. A side income of $1,000 - $1,500 per month is a good and realistic benchmark to aim for.

Why this pricing model?

I want to appeal to the budget of most coffee shops. Charging $1,000+ for a website might get me a few coffee shop clients, but most of them are on tight budgets and marketing is often seen as an expense and not as an investment.

This pricing model is affordable for most of them and you will get a lot more clients with this pricing structure compared to more expensive alternatives.

You are also more likely to get a few clients paying you a monthly fee which helps you earn a more predictable income each month.

For a more advanced understanding of pricing (Value vs Hourly), read this article.

What it includes:

One-Page Website

For this price, the client can’t expect a detailed website with multiple pages. It must be professional and to the point. If they want a website that is more advanced, they need to pay you more.

In this case, the website needs to have the following:

• Good images (look on Pexels.com or DepositPhotos.com or tell the client to send you professional images)
• Information about the coffee shop (history, what makes them different)
• Trading hours, location and contact details
• Any promotions/events
• Menu

Refer to Themeforest.net for some inspiration or to even buy a cheap one-pager (under $15) if you are struggling with this to get started.

SEO Submissions

We’ve all heard the word/acronym ‘SEO’ by now. In short, it’s the process of optimizing a website to rank higher on Google (or other search networks).

All you need to do is submit the website to local directories which will help the initial stages of the website ranking higher on Google.

Directories vary based on your city and country, so a simple Google search “local business directory” would give you more than enough options. You can also search for “[insert niche] directory listing”.

3 common directories are:

1. Yelp.com

2. YellowPages.com

3. FourSquare.com

Google Map Submission

We’ve all seen the Google maps on Google after doing some searches, but have you ever wondered how businesses get listed on there?

It’s a very simple process and I’m not going to explain that here as there are plenty of free online resources for this.

Local SEO is a MUST for small businesses.

If you'd like to learn more about Local SEO, take this course:

Many people search for “coffee shops near me” (or the niche you choose) and they often just click on the map options.

By having your client on the maps can be highly beneficial to getting more customers.

Social Media Management

I find Twitter is a waste of time in terms of engagement and it ultimately leads to a ‘customer care’ format when it comes to business profiles.

I generally prefer Instagram and Facebook for business profiles as the engagement is much better.

Make sure to create and adapt the social media channels depending on where your client’s target market is.

Read this guide on social media platforms to help you get started.

All you will be doing is posting on Facebook and Instagram (or others) twice every week.

The posts can be informative, funny, giveaways, promotions, helpful and asking questions.

The bottom line is that the purpose is engagement. If potential customers can see engagement and a good looking social media profile, it helps them trust the business more and they are more likely to visit and recommend it to friends.

You can get images/content from the owner, or just look on Pexels.com and then also look at what competitors post to see how you can be different.

Be smart about it and plan the posts in advance. Don’t start finding everything the day you need to post it.

It’s only 8-10 different posts a month – it’s not difficult, but it requires some thought and planning for it to run smoothly.

You can also use a tool called Grum.co to help you schedule Instagram posts in advance. Facebook has this option for free. Also look at Hootsuite which has a free plan as well.

SEO

Your goal is to get the business to rank higher on Google. I wouldn’t do advanced things here because the budget is so small.

Read this SEO article I wrote to help you understand it better.

Make sure to optimize the on-page SEO as well.

In this scenario, I would only do one 1,200-word article with some nice-looking images from Pexels.com or DepositPhotos.com.

If the articles are good, then Google will eventually rank the articles higher and that will boost the site’s long-term SEO results.

SEO is considered to be more of a long-term marketing tactic. You can start seeing good results between 3 – 12 months depending on the industry.

The bottom line is that SEO should be seen as an investment. It’s just about getting started.

Some SEO article ideas to consider:

• The 10 Best [insert niche] in [insert suburb/area]
• How to Choose the Right [insert niche]
• 5 Health Benefits of Coffee

Benefits of this overall strategy:

Once you’ve done a few websites, you’ll already have a few different website themes that you can use for new clients that sign up in the future.

All you need to do is upload images, add content, update a menu download, upload the website to the host and you’re done.

You can easily complete the whole website in 3–4 hours as long as you get the information from the client.

It’s important to remember that you are not doing a 10+ page website here.

It’s one page.

Even a simple 3-pager won’t take much longer – especially after your third client.

Don’t be disheartened by the small income amount. It’s a numbers game.

Even if you get just one client every month (the small package) + only one client signing up for the monthly package, that equals over $800 per month.

If you only get two clients per month + one client signing up for the monthly package, that's over $1,300 per month.

This can be done. It's seriously not something that is unrealistic and it doesn’t require a lot of time to keep it going.

The hard work is initially upfront with creating your site, building your portfolio and improving on some marketing things mentioned below.

Step 4: Get The Clients

What I’ve mentioned may sound all nice and fluffy, but without the clients it means nothing.

Here are the three best ways to get clients for this marketing strategy:

1. AdWords

2. Facebook Group

3. Outreach

1: AdWords

AdWords is an excellent way of getting new clients.

Briefly, AdWords are the ads that you see at the top of all Google searches.

Every time someone clicks on the ad, the business (or you) needs to pay for it.

The point of AdWords is this:

You sell a website for $495. Would you be willing to spend $50 to get a confirmed client with the potential of them signing up for a monthly marketing package?

Sure.

Would you be willing to spend $200 to get a client to buy a $495 website?

Probably not.

It’s all about figuring out what you are willing to pay in comparison with what you will earn.

Searches your ad should display for are (depending on your niche):

“Coffee shop website template“

“Coffee shop website theme“

“Web designer for small business“

“Web designer for coffee shop“

“Website design for coffee shop“

In this case, each click might cost $2 on average.

I understand that there will be many searching for these terms just out of research – maybe web designers trying to get inspiration or buy the themes themselves, but this is something that just needs to be accepted when it comes to a niche like this.

One way to combat this is to avoid your ads showing with searches including the word “ideas” or “inspiration” in the negative keywords so that it’s more relevant.

Not all searches are from a curiosity standpoint. Many are legitimate business owners just wanting to figure it out themselves, but because the pricing is so low, it’s something they will likely go ahead with compared to doing it themselves.

If you don't have any AdWords knowledge, take this excellent course on Udemy:

2: Facebook Group

So many people overlook this strategy.

All you need to do is create a Facebook Group relating to your niche and focus on getting the owners of the niche you are targeting to join the group.

In this case, I would want coffee shop owners in ‘XYZ’ city to join my Facebook group.

Then I would just add value to the group. Post awesome articles on how coffee shops can grow their business, psychology tips, productivity tips, funny memes, etc.

The next step would be to message each member directly or post occasionally to the group about how you can help them grow their business.

You don’t need 1,000 members here. 50 members are excellent. Remember, it’s super niche and these are the exact clients you’d like to work with.

It usually takes up to 3 months to get your first client from this marketing channel, but then you’ll notice improvements after this.

Just focus on converting 10% into paying clients and then focus on growing the group from there.

More targeted members = More clients in the long-run.

It’s an excellent way of gaining new clients and it helps position you as an authority in your niche.

3: The Manual Work

There’s no shortcut on this part. It requires some research and work.

You need to do the following:

1. Look at Yellow Pages

2. Look at local online business directories

3. Look at local print media (newspapers, pamphlets, flyers)

4. Look on Google for coffee shops

In each of these examples, you need to find out the following:

1. Do they have a website? If not, carry on with the next step.

2. Do they show up on Google for their coffee shop?

If the answer is no to both questions, that’s good news. Now it’s time for you to sell your services.

Before I go further, you need to be aware that you can’t be sensitive when it comes to this.

You must mentally prepare for over 90% of your outreach being completely ignored or you might receive a straight “NOT interested” reply.

This doesn’t mean you shouldn’t still go ahead with it, but I don’t want to paint a fairy-tale picture here because it doesn’t work out like that.

Many of you will face a mental barrier because I said the word “sell.”

I also faced this barrier, but then I came to this realization:

I am providing the coffee shop (or business niche you decide) with an effective marketing tool that will help them appear more professional and it will lead to more customers.

I’m HELPING their business grow and they are just paying me to do so.

It’s an exchange of value for value.

Once you understand that it’s in their best interests to partner with you, everything will fall into perspective and you will feel way more confident to “sell.”

The next step would be to find their email and/or contact number from the media mentioned earlier.

Send them this email:

Subject Line: [Business Niche Company Name] Website

Hi [name or company name],

My name is [insert name] and I am a web designer based in [insert city].

I came across your [insert niche] business in the [insert media] and noticed you don’t have a website yet.

I have experience in working with [insert niche] businesses to help them create effective websites for only $495 (with no hidden fees).

Would you be interested in discussing this further?

We can set up a call or I'd be happy to discuss this via email.

For more information about my expertise, here is my website: [www.mynichewebsite.com]

Thank you and I look forward hearing from you.

Regards,

[your name]

If you don’t receive a reply after 3 days, send them this email:

Subject Line: RE: [Business Niche Company Name] Website

Hi [name or company name],

I'd just like to confirm if you received my email I sent a few days ago?

Regards,

[your name]

If you don’t get a reply 2 days after your follow up, phone them.

Sometimes prospective clients genuinely consider your proposal but they are too busy and forget to reply.

The follow up often receives more responses than the first email as it often seems spammy.

Businesses receive emails from companies wanting to design their website and do SEO services almost daily, so to them, you are much like the rest.

The approach I mentioned above is if the business doesn’t have a website, but what if they already have a website?

After you’ve got a few projects to your name, you should approach coffee shops that have existing websites but that are poorly designed.

Just some [insert niche] Google searches will pick up all you need to start.

Once you feel more confident about easily pointing out the errors and giving some valid recommendations, email them this message:

Hi [name or company name],

My name is [insert name], I recently came across your website after searching for [the search term you used].

I noticed that your website doesn’t display the important aspects that a [insert niche] website should display, such as:

· Clear contact details

· Clear company history

· Professional images and content

· Social media profiles

· Clear location and trading hours’ information

· Menu and specials

Making these changes will help your [insert niche] appear to be more professional and you will gain more trust with potential customers.

I'd love to set up a call to discuss how I can help you get more customers through effective web design changes.

If you have any questions, feel free to contact me.

For more information about my expertise, here is my website: [www.mynichewebsite.com]

Thank you and I look forward to hearing from you.

Regards,

[your name]

Step 5: Analyse, Learn and Adapt

After 3 months of actively applying these strategies, it’s important to see where you can make improvements.

By this point, you’ll get an idea of how clients respond and then you can adapt your emails and marketing accordingly.

The truth is that it requires a lot of hard work, but it’s important to be smart about it.

These strategies work and if you are willing to stick it out and improve along the way, it’s only a matter of time before you reach your goals.

I hope this has helped you on your journey in creating a side income.

If you'd like to learn more advanced strategies, check out my popular freelancing bundle.

Until next time,

Kyle

Pricing can be the life or death of a bootstrapped startup.

When I started the process of trying to price my startup I became overwhelmed with questions and doubts. Should we have usage-based or a tiered pricing model? How much storage can we offer at each tier? Should we offer a free plan? What should the base price be? What if no one wants to pay for this? What if Tueri is a failure?

I have spent countless hours trying to answer these questions and pricing has been the single most daunting part of launching Tueri. Tueri is a completely bootstrapped startup and ultimately, pricing can be the life or death of it. Investor money is non-existent, meaning the company needs to be profitable at every stage of growth.

It boils down to these two essential questions:

1. Can I provide exceptional value and service to my customers at this price?
2. At this price, can Tueri continue to grow and be on the leading-edge so I can continue to deliver exceptional value and service?

These two questions may seem at odds, but they are essential for building a long-term, customer-centric company.

What is Tueri?

The word Tueri is a Latin word that means: preserve. Tueri is an image management and optimization platform based on the idea of an immutable master image.

Tueri uses just-in-time image transformation, compression and conversion to deliver the perfect image to each one of your users in just milliseconds.

The idea for Tueri came during my work as an application developer. As a developer, I build customer-incentive applications for automotive parts companies. The basic premise for these sites is the more auto parts a customer (mechanic shop) buys, the more points they earn. Customers redeem points online for everything from golf clubs to TVs to vacations.

These websites receive daily file feeds from vendors with new, discontinued, and updated products. There are thousands of products and no standardization on image dimensions, file sizes or image hosting HTTP protocol. I built Tueri to solve these problems.

The first version of Tueri was a simple proxy server designed to fetch remote HTTP images and re-serve them over HTTPS, removing insecure-content warnings on our customer-incentive sites.

The next version was a simple one-page PHP script using GraphicsMagick. This script fetched a remote image, resized the image if it was over a predefined width, stored it on the server and served the image over HTTPS.

These iterations soon progressed in scope and features and somewhere along the way, I realized it was saving me obscene amounts of time.

I needed to share this with other developers.

After a lot of work converting a personal project into something I could host for others, I was ready to launch. The only problem was, I had no idea how to price it.

Should we offer a free plan?

Here are some reasons why a free plan makes sense:

• User Acquisition — Offering a free plan can help you acquire a ton of new users. This, in turn, should drive growth through word of mouth marketing.
• Upselling — A user on the free plan can be upsold to a paid plan.
• Supporting the Community — In my jobs as a developer, I have relied on countless free services and have benefited greatly from the open-source community.

My fear of not offering a free plan was that I would have a very hard time acquiring new users. I struggled with this question what seemed like hundreds of times, so I did some research.

I researched countless other startups. I wanted to know whether they offered a free plan, what features they included, what percentage of users were on it and if they were profitable.

I discovered the following:

• Free users will drive growth through word of mouth, but they will drive more free plan growth.
• A free plan will help you acquire more users, but only a very small percentage of those users will ever convert to a paid plan.
• A huge percentage of support is dedicated to free users.
• A free plan product is often inferior due to costs associated with back-end services.
• This inferior product is the product that people come to know your business by.

The Free Plan Decision

I have decided not to offer a free plan in order to dedicate 100% of our resources to our paying customers. This ensures both the quality of the product and exceptional customer service.

Should we have a usage-based or tiered pricing model?

Usage-Based Pricing

Pros:

• Only pay for what you use.
• Better for companies with seasonal usage fluctuations.
• Better for individual developers where low monthly spend is a priority.

Cons:

• Difficult to understand what your actual monthly bill will be.
• Potentially drastic monthly bill fluctuations.
• Harder for a developer to pitch to their company.
• Customer mentality is focused on limiting usage to keep costs down, thus decreasing the perceived value of the product.

Tiered Pricing

Pros:

• Easy to understand your monthly bill.
• No monthly bill fluctuations.
• A fixed monthly amount is an easy pitch for a developer to make to their company.
• Customer mentality is focused on getting the most value out of their plan, thus increasing the perceived value of the product.

Cons:

• Harder to appeal to all use cases.
• Not as ideal for seasonal use customers.
• Hard to appeal to individual developers with a minimal budget.

I scoured hundreds of pricing pages from different Software as a Service (Saas) companies; some simple, some complex. I continually gravitated toward tiered pricing models based on the fact that they were easier to understand. Many companies with usage-based pricing dedicate an entire page to explaining how to calculate your monthly bill. Even after following the examples I still could not say for certain what they would cost me.

Let's talk about an example of usage-based pricing for Tueri. Let's say its priced per image transformation. You have a simple responsive website with 10 pages and 10 images per page for a total of 100 images. You check Google Analytics for device usage: you have one desktop resolution, one laptop resolution, two tablet resolutions (portrait and landscape) and two mobile resolutions (portrait & landscape). If every image on every page gets viewed ten times by each resolution you have a total of 6,000 transformations.

Easy right? Not exactly.

In reality, you may have 10,000, 50,000, 100,000 or more page views a month. You could have 20+ different resolutions, HiDPI displays, pages with varying levels of views, and new images added regularly.

You can see how this gets complicated.

The Pricing Model Decision

While it was not an easy decision to make, I concluded that tiered pricing was right for Tueri due to its transparency and simplicity.

What should the base price be?

This has to be the single most difficult question to answer, at least it was for me. One that I will continue to ask and re-evaluate throughout the lifetime of Tueri.

I had to assess:

• Are we a premium or a value company?
• What type of users do we want to focus our service on?
• Do we want to serve millions of customers at a low price or thousands of customers at a higher price?
• Can we continue to provide exceptional service to our customers at this price?
• What is the time value we are providing to our customers?
• What is the monetary value we are providing to our customers?
• What does our competition charge, are they profitable, and is their business sustainable?

It boils down to defining priorities:

• I want to provide an exceptional level of service to fewer customers.
• I am in this for the long-haul and our pricing needs to be sustainable.

The Base Price Decision

Pricing should not be static, you should assess it over time based on feedback from customers, the added value from new features, and operating costs.

We are constantly evaluating our pricing and I would love to know your use case and if our pricing works for you.

Conclusion

I finally realized that I was never going to have it all figured out, so I made the best decisions I could with the available information and launched.

There is no definitive answer to pricing your startup, but keep these things in mind and you won't go wrong:

• Exceed your customer's expectations in the service and value you provide.
• Price your business for growth.
• Launch your startup.
• Reevaluate your pricing continually.

Do you have any tips or questions about pricing your startup? Get in touch at dane.stevens@tueri.io.

_Originally published at Tueri.io_

If you are a web designer/developer who currently bills per hour, I hope I can persuade you to change your pricing method to value based pricing.

In this article, I discuss both of these methods in detail and without the fluff so you can just get the nuggets and practical understanding to make an informed decision from there.

On a serious note, if you apply what you will read about today, you can really earn more, work less and be a more fulfilled freelancer - and I don't just say this half-heartedly.

Enough fluff, let’s get straight to it:

Billing By The Hour

I’ll start with this pricing method first because it’s the most popular.

I am well aware that there are many web designers/developers out there who make a very good living by using the hourly billing method, but in my opinion, value based billing is far better than hourly billing.

To explain why, these are some common truths about hourly billing:

• There are times when you argue over invoices and timesheets which wastes time for both parties (yes, there are software programs to track this, but even that can be disputed by a client).
• Feeling like you have to be “micro-managed” by the hour. Clients would often want an estimate of the total hours before the project starts. They would then make a decision to go ahead with the project based on the estimate and not the final cost.
• There’s no incentive to stay up to date with the latest technologies, software or tools to make your job easier because if you do, you get paid less.
• The longer the project is, the better it is for you (more income) and the worse it is for the client (more expense).

Billing Hourly is Harmful for Your Working Relationship with the Client

To illustrate this point, let’s say you wanted to build an additional room on to your house.

The builder tells you it will cost $75k based on his best estimates and you go ahead with the agreement.

The builder completes 80% of the project and then says it’s going to cost another $15k to finish the remainder.

How would you feel? Would you work with them again? Would you refer them to friends?

Probably not. And it’s the same thing with web design/development projects.

If the project is not planned correctly, things can really turn bad if you now realize you are losing money and then tell the client it’s going to cost 30% more because of “xyz”.

Hourly Billing Discourages Efficiency and Innovation

Let’s say that the same web design project comes to you and 9 other web designers. You each have different hourly rates that you decided would be fair for your expertise.

“John” charges $45 per hour and others charge $75 per hour and then there’s this one guy (who I’ll name Bob) who charges $150 per hour.

Bob, with his experience in finding better ways to complete projects, codes the website in 3 hours = total fee of $450.

John, with his lack of experience, knowledge and efficiency, codes the website in 16 hours = total fee of $720.

Hourly billing encourages you to not work smart and to drag the hours so you get paid more.

Look, some websites can be done in less than a day – even a few hours if you have all the info ready and you know exactly what needs to be done.

If you are charging by the hour, why would you rush to get this website done as soon as possible when you could delay it by a few days and get paid more for it?

Maybe there’s a snippet of code you can buy for $100 that can save you 3 days of coding time, but you are hesitant to do this because that means you lose out on getting paid more and you have bills to pay.

In other words, the client is paying you for 3 days extra (which would be more than $1,000) because you don't want to use a $100 code snippet as this means you lose out on $1,000.

Can you see why this is harmful to you and your client?

Here’s another practical example:

If you are working on 3 client projects (retainer or once-off) at the same time and it takes you up to 2 hours per week to track your hours, prepare invoices, process payments, organise the accounting/tax side, etc. that can take almost a full working day each week just to handle this boring administrative task.

This is beyond crazy. You are not hired as an administrator or debtors clerk or whatever else – don’t fall into this pit.

On top of that, you’ll deal with one or two clients who always question everything and this takes even more of your time. This leads to a lack of trust down the line and nobody wants to work like that.

I know these are very simple examples, but it still holds true in more complex projects as well.

Your clients need to know this. Use the same analogy above or something that makes sense to you, but this is very important in moving forward.

Your Income is Capped

There are only so many hours you can work in a year. Let’s say you are earning $60k per year.

If we work on roughly 250 working days, this is $240 per day and $30 per hour (8 working hours each day).

Firstly, not many web developers/designers are booked every hour for the whole year, but let’s say this is the case. What if you wanted to earn $100k next year?

That would mean you need to increase your hourly billing to $50.

Although it’s only $20 extra per hour, that’s $160 extra per day, $800 per week and over $3k per month extra for a client to consider. It can often be a deal breaker in keeping retainer clients or signing up new clients for weekly/monthly projects.

Unless your existing clients really value your services, they will not understand why you now all of a sudden value your services at almost twice the price for the same amount of work.

It’s very likely that they will start looking for other freelancers with a lower hourly rate.

New clients or prospective clients may not sign up with your premium service as you are almost double the “going rate” for other freelancers with similar expertise.

Bottom line: increasing your income is not easy. Although you want a higher income, the clients you work with really don’t care about your income desires and they don’t want a higher expense.

Bottom line of the bottom line: Guess who really makes the final decision at the end? (it’s not you)

The solution is not some fancy tool or time-tracking software.

Yes, these can help, but this is more like a temporary fix and it doesn’t deal with the main issues mentioned above.

Remember: It’s in the client’s best interests that you don’t bill by the hour. You just need to educate them on this.

Value Based Pricing

To avoid any misconceptions about this pricing method, it’s not a fixed amount that is calculated by your cost + your desired profit.

Here are some common truths about value based pricing:

• You don’t sell hours (like everyone else does) – you sell results (or the potential results).
• There’s an incentive to stay up to date with the latest technologies, software or tools to make your job easier and to become more efficient.
• It allows you to really create something amazing and not to worry about going over the client’s desired budget.
• There are no hidden financial surprises to clients. You take all the risk in delivering the project within the total cost you’ve informed the client about.
• You can work with less clients and provide a better service because you are often earning significantly more.

You are essentially providing a fixed amount based on the projected return or outcome of the project.

You must probably be thinking that this sounds all fancy, but how can it be applied?

Here’s a short summary:

Find out the potential value of the project to the client over a year. In other words, find out the potential increase in sales that the business could be making after you create the website.

Then base your price off of this potential return.

Example #1 – The Existing Business Website:

A business sells agricultural drones via their website. They ask you to create a website focused around getting more sales.

After you ask the basic questions (refer to the Prospective Clients Checklist), your 2 main questions should be:

• 1. How many sales do you currently get each month?
• 2. What is the average sales value of a drone?

They answer with:

• 10 sales per month
• $8,500 each

You then do simple math to figure out how much they make each month ($8,500 x 10 = $85,000).

You look at their current site and see where they are losing sales and you work on a low estimate of what you expect sales could increase by after you make a conversion-centred website.

In this scenario, let’s say you are confident it would at least be 2 sales extra per month.

This would mean the business would make an additional $16,000 per month and almost $200,000 after one year.

After informing the client of this in the proposal and why you feel this is a low and realistic estimate, you then give your website cost based on the potential annual return.

For this example, your price could be $10,000 - $15,000.

Would you, ‘as the business owner’ be willing to pay around 5% of what you could potentially make after one year?

Of course.

Example #2 – The New Business Website:

A business sells agricultural drones and they want a new website.

They ask you to create a website focused around getting sales.

After you ask the basics questions (refer to the Prospective Clients Checklist), your main question should be:

• What is the average sales value of a drone?

They answer with:

• $8,500 each

After doing further research about the market and their marketing plan, you are confident that you can create a conversion-centred website that can convert into at least 4 sales each month (or one sale per week).

This equals $34,000 per month and over $400,000 in a year.

Your price could easily be $10,000 - $15,000 and it would make sense to the prospective client after you have explained the value of the potential return.

Remember: your responsibility is to make the business see this as a necessary investment and not a cost. You need to explain why you are the right person for the project.

By breaking it down like this and being practical about it, you instantly stand out from the crowd of other freelancers who say things like, “I estimate that this project will take about 120 hours X my hourly rate of $45 = $5.4k”.

The bottom line is that it's a win for you and a win for the client.

By thinking about OUTCOMES, it shows you understand the project as the business does. You are not thinking about HOURS like everyone else does.

Now of course this is a very simplified summary. You would have to deal with the objections clients or potential clients may have like:

• 100% payment upfront

• Questions about pricing

• Doubts of the client

As far as I know, this method works in any product or service industry – even lawyers and accountants. The issue is not whether it works, but rather who is actually doing it effectively.

The truth is that this model is simple in theory, but in practice you might stuff up in a few areas.

That’s OK… don’t have a narrow mindset. You are running a marathon and not a sprint.

It takes a lot of trial and error and ultimately you will learn by experience about what, how and when to say the right things that will get you higher paying clients.

Learn from your mistakes, see where you can improve and each year you will become better in how you handle objections, how you communicate and more.

I hope this has helped you to rethink this topic.

If you’d like to learn more and improve your skillset and become a happier freelancer that earns more, make sure to check out my course.

Until next time,

Kyle

How to think in terms of value, not time. Follow this pricing strategy to find your true market rate.

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When you first start freelancing it’s very difficult to determine what to charge. You have no previous context, and colleagues are often tight-lipped about their own financials.

I admit I was clueless about pricing when I started. How about you?

Many freelancers make the mistake of using an online rate calculator to set their freelance hourly rate. There are heaps of these calculators online, and they all follow the same pattern:

1. You start with your desired annual income.
2. You add up the cost of doing business — like office space, internet, hardware and software costs.
3. You add up other living costs, such as insurance, self-employment tax.
4. You add these things together to get your desired adjusted income.
5. Then you calculate your billable hours by starting with your maximum working hours per year, and subtract for things like vacations, national holidays, and sick days. You arrive at a realistic number for the number of hours you could work each year.
6. Divide adjusted annual income by billable hours, and that equals your hourly rate.

This seems logical, but it’s completely backwards.

Let’s ignore the fact that there may be better ways to price yourself than hourly rates. When you first start out, value-based pricing isn’t a realistic option. Most of us will come to terms with the fact that we are trading our time for money by charging by the hour, at least for the first few stages of our careers as consultants.

The problem with these popular hourly rate calculators is that they get off on the wrong foot right from the first step. There may be no connection at all between your desired annual salary and your actual value to the market. If you’ve come from being previously employed, it’s easy to think “I’d like to keep making at least as much as I was making at my last job.” But why assume that you’ll retain that same value in the freelance market?

If you haven’t been previously employed in a capacity that provides enough reference for this decision, then you’re literally picking a number out of thin air. The alternative is to spend the time to interview colleagues with a similar skill-set and experience level as you, in order to form a baseline as context for this figure. And that assumes you can find enough of these people that will be open and honest about their pricing!

It’s a big ask. No wonder most people take the easy way out and ask a calculator to figure it out for them.

So you end up with a starting figure that rarely has concrete justification in real life, and all other calculations from that are tainted. The resulting hourly rate isn’t backed up by much of anything, and can be way above your actual value. You struggle to find work and think freelancing is too hard.

This is all a misunderstanding of what rates mean. Let’s look at some pitfalls of the rate calculator system that amplify this confusion.

Pitfalls

Billable hours are never as many as you think

Let’s say you did manage to get some solid context for the determination of your desired annual income. You went through the calculation to come up with an hourly rate. You paid close attention to detail on all the expenses to ensure you didn’t short-change yourself.

You’re still going to land short of your goal, because your billable hours are a fantasy.

When you’re a freelancer, you are also running a business. You are doing everything: admin, marketing, accounting, proposals, quoting, networking. If you used to be an employee, you either didn’t have to do those things, or you got paid to do them.

As a freelancer, you have to wear all those hats and you don’t get paid for most of it. The amount of time you have for actual focused work is 75% or less of the time you’re “working”. That means a standard eight-hour day might only have six billable hours.

If you start with the false assumption that you can bill for 40 productive hours per week, you’ll be quickly disappointed, unless you’re willing to work a lot more daily hours to make up for the admin time. But most of us get into freelancing because we want a more flexible schedule, more time for family, more time for leisure. Working a lot more is not part of the freelance dream.

I run a really efficient freelance business, with admin and marketing time cut down to a bare minimum, and I still average no more than six billable hours per day.

You won’t have work all the time

Don’t forget that you may not have a continuous stream of work to fill all potential billable hours. In fact, if you’re new to freelancing, you’ll almost certainly not have consistent work until you build up a reputation and a larger client base. Even very successful, in-demand freelancers like myself will have bits of downtime — maybe a week or two between projects when schedules can’t align perfectly, or a slow patch around the holidays— that can eat into expected earnings.

Your definition of billable hours needs to account not only for the extra admin tasks required to run a freelance business, but also for the uncertainty of work in your pipeline.

Unrealistic charging rates run rampant

The result of all this faulty rate calculating is that you’re told to charge more than you’re actually worth, if you want to meet you annual earning goals. The reality might be that your current level of value can only earn you half of what you expect. You’re not yet valuable enough to make full-time freelancing work for you. More on this later.

At best, these online rate calculators can be a useful tool to help you learn about your costs of doing business, and to budget a baseline rate you’ll need to make ends meet. That can form a good reference point to fall back on when you determine your rate.

But it should not be mistaken for a real-world rate. Those calculators don’t take into account almost everything that’s really important about determining the right rate for you.

A better way to think about pricing

Time to get back to reality. Forget your preferred salary or even your baseline living wage. Your hourly rate should have very little to do with how much you think you’d like — or need — to earn. What really determines your rate is how much value you offer your clients.

I’m not a gung-ho capitalism lover who thinks “the market” will solve everything. But you can only command a rate that clients are willing to pay. They have to perceive enough value in you to justify that rate, otherwise you’ll get no work. And no work at a high rate is worse than some work at a fair market rate. The amount of money you think you need to make doesn’t enter into that equation.

Change your frame of mind towards value, not time

We need to stop thinking about this backwards. Stop framing the decision about rates around what you need to earn and how much time you can work. Instead, start thinking in terms of value on offer. Your rate is a reflection of your value to your clients — compared to the value of your competitors — and nothing else.

With this frame of mind, we can see that rate calculators — based on expected earnings divided by time — don’t account for the value you provide your clients. The only assumption is that more time equals more value.

But we know from experience that this is rarely the case.

If you have five more years and experience and heaps of new skills along the way, but your cost of living has stayed the same, should your rate be higher? A rate calculator would say no. But of course the answer is yes. Rate calculators don’t take into account skill, experience, professionalism, or effort, when in fact those things are the largest contributors to the rate you can command.

If you’ve learned new techniques that allow you to do the same work twice as fast as you could before, you want to be compensated for that by doubling your rates. Rate calculators don’t take into account the speed at which you work or the quality of work performed.

Think of rates in terms of abilities such as experience, speed, skill-set, location, project management capacity, communication skills, and reliability. These are the metrics you should be judging yourself by.

How do you increase your rates?

Simply increase your value. Gain more experience. Learn new skills. Refine your soft skills. Beat everyone on effort. Be ultra-professional.

Do you work faster or offer better quality work than a competitor? Charge more than they do.

Are you more professional and reliable than your colleague. Charge more than they do.

Do your extra years of experience allow you to come up with the right solutions more economically? Raise your rates — because your experience is directly contributing to a better outcome for your clients, and your efficiency is saving them money.

Your value determines the right time to go freelance

If you’re not yet valuable enough to earn a living at the freelance rate your market dictates, it could mean full-time freelancing isn’t right for you yet.

Consider getting employed for a few years to up-skill and increase the value of your craft, while freelancing in evenings and weekends to practice the skills of running a business. Then when you have the experience and confidence to command a higher rate, ease into full-time freelancing.

You learn faster where you have collaboration and mentoring. Freelancers who don’t have the same resources are disadvantaged. I went straight into freelancing after I graduated university. Looking back I would have been better off finding employment at a design agency for a few years or, at the very least, a business/design mentor to learn those early lessons twice as fast, and increase my market value quicker. Then I could have transitioned into freelancing at a point when the value I offered better correlated with the amount of money I hoped to earn.

I was fortunate enough to have a low cost of living at the time, which allowed me to gradually build up full-time work and respectable rates over a transition period of 6–12 months. But not everyone has that luxury.

If you need to make full-time freelancing pay the bills from day one, don’t make the leap until your market value/rate is adequate to support your earning goals. Until then, find a career path that emphasizes increasing your value over all else.

A gateway to value-based pricing

The added benefit of basing your rate on value — rather than expected earnings divided by time — is that it’s easier to start thinking about value-based pricing methods and transitioning away from trading time for money.

Value-based pricing requires a huge shift in mind-set. Even if you’re thinking about your hourly rate as a reflection of value, it’s still tied to time. Decoupling your earning entirely from time spent on the job is another massive mental hurdle. To be perfectly honest, after 17 years of freelancing I’m still coming to terms with it and wrapping my head around the unique challenges of value-based pricing.

This is a huge shift for your clients as well. They need to buy into the concept of value-based pricing as much as you do, because it requires complete transparency and trust to help you define a project’s true value.

Try weekly, instead of hourly, billing

One way to ease this transition is to start pricing your time in larger, more abstract chunks. I often price based on a weekly retainer system, where my work is charged by the week, instead of by the hour or day. I still define minimum and maximum numbers of hours that will be worked during each week. But it’s perceived by clients as a weekly fee, rather than an hourly rate. If the scope changes and we need to extend the project, no problem. Simply add on an extra week.

It’s a pricing system that retains most of the flexibility of hourly billing, and all the same ease of understanding and fairness. Yet, because the unit of time measurement is larger, the perception is that my rate is less connected to the number of hours I work. That forces clients into thinking more about the value I’ll be supplying during that week, rather than just how many hours.

It’s a subtle difference. But that could be all it takes to tip the balance towards value-based pricing. If you get clients comfortable with a week-based pricing arrangement, they’re one step closer to embracing the abstraction of true value-based pricing.

Hourly pricing is here to stay

Whether we like it or not! It remains the default method of pricing creative work. So — like many of us — if you’re stuck with hourly pricing, the least you can do is do it right.

Do everything you can to make sure your rate is in context of your industry and location, and is justified by your skills and experience.

Shift the way you present your pricing to clients so that you’re perceived as being more about value and less about time.

When you do so, you’ll find you never get questioned about your rate. You never get called too expensive or too risky. Because your clients fall in love with the value you’ll offer them, and finding the right person to trust is invaluable.

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This story can also be found on solowork.co