How to Answer the Question “How Much Do You Charge?”
Simply answering the question, “How much do you charge?” is an opportunity to make a good first impression on a potential client.
And if you’re a new freelancer, trust us, you will get asked this question all the time.
What you may not realize is how you deliver your answer could be turning people away.
It’s easy to get stymied up at the moment and fumble over words before arriving at an answer. But by then, you’ve likely already killed any interest this person had in working with you.
That means you need to prepare your response well in advance to come across as the thriving professional you are.
Entrepreneurs like yourself need to develop a pricing strategy that communicates the depth of services you provide to new clients while still creating a profit margin.
Complicated, right?
No worries, we’ll talk you through every step so that the next time someone asks you the amount of money you charge, you’ll respond with confidence.
How to Price Your Services as a Freelancer
If you haven’t determined your pricing yet, you should take the time to do so as soon as possible. Not knowing how much you charge is like asking potential clients to find the same services elsewhere.
There are two models to determine your pricing options.
Market-Based Pricing
Market-based pricing is when you set your price based on the market. The market price includes everything from your location, to the services offered, to other freelancers with comparable skills and experience to your own.
Market-based pricing is great for new freelancers because you can quickly determine your base price by researching your competition before putting together your deliverables.
Value-Based Pricing
Value-based pricing is quite different and requires a bit more experience to work out in your favor. This model allows you to base your price on how valuable your goods and services are to the target market.
This pricing model is suitable for those with skills that are valuable to a niche market and highly experienced or reputable.
Things to Consider When Pricing Your Goods and Services
Before you can start putting the proverbial price tag on your goods and services, there are a few factors you need to put into context first.
Demand
If there’s not enough demand for your goods and services, good luck trying to overprice!
Lack of demand for a particular product suggests that there’s already an alternative, so you shouldn’t limit your market even further by overpricing.
If there’s a lot of competition, don’t consider undercharging, either. Price competitively instead to positively influence client perception.
Overhead
In business, overhead is essentially the ongoing cost of keeping the lights on — which is precisely what it means for you as a freelancer.
You can calculate your overhead as the amount of income you need to keep your small business going.
To do so, simply add up all of your monthly or annual expenses. You want to set your pricing to ensure that these needs are met (more on this later).
Billable Time and Expenses
When deciding how much you should charge a client, you need first to determine how long it will take to complete the project.
Secondly, you must also consider what that amount of time is worth.
Don’t be shy when billing a client add-on expenses, either. If you have to drive to meet up with them, include the cost of gasoline when you invoice them. Your time is as valuable as you allow it to be.
Profit
Your profit is what you make after expenses.
Consider what you’d like to make in profit after your expense. If you can pocket 10-20% of your gross income after overhead and costs, you’re in great shape.
However, this isn’t always possible for new freelancers. But if you continue to work hard, win over clients, and deliver stellar results, you can raise your price point over time and grow your profits.
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How to Charge Clients
Once you’ve estimated how much your time and experience are worth, you’ll need to figure out how you plan to charge clients.
There are three simple ways to charge clients, and they work for just about every type of freelancer.
Hourly
This is the simplest way to price your services, but billing can get tricky if you don’t consistently record your hours.
You can use a time-tracking app to help you record working time and make billing simpler.
Hourly pay is best for small or short-term projects and long-term projects — especially when project goals and timelines are unclear. This will also ensure your client respects your time.
For example, let’s say you’re a web developer and you have a client who wants a new website to launch a promotional campaign.
If the client wants to be present for every step of the process, you may want to charge an hourly fee, as you’ll likely spend more time maintaining the site than you would if they just wanted you to create it.
On the other hand, if you’re able to create deliverables quickly, you’ll be much better off charging a flat fee per project.
Per Project
For those of you who can produce high quantities of deliverables in a short period, this is how you should charge your clients.
You can maximize your profits by charging per project if you work fast.
This can sometimes allow you to tailor your price to the needs and demands of the client and project.
Your per-project rate might take a little longer to calculate for each scenario. However, if you work out a system based on demand, overhead, billable time and expenses, and desired profit, you’ll get better at creating quotes as time passes.
Most projects are similar for specific fields, though.
Here are a couple of quick examples:
- The going rate for a ghost-written novel is between $10,000-$60,000
- A classical musician might charge between $2000-$60,000 for a one-hour concert
- A logo from a graphic designer can cost anywhere between $10-$2000.
When you learn about similar work in your market, you’ll be able to price your deliverables accordingly without involving too much calculation.
A Combination of the Two
Some projects may require both methods.
If you own a recording studio, you might charge a day rate for a band to use the space for a day (like a deposit). Then you might also charge an hourly fee for your services as a recording engineer.
If necessary, set a base price for the project, outlining what goods and services you will include.
On top of that, you can charge an hourly rate for extra goods and services provided during the life of the contract.
This is great for multifaceted projects that require varying levels of your involvement.
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How to Calculate Your Hourly Rate
Calculating your hourly rate isn’t as arbitrary as it may seem — especially if you already have monthly expenses you need to pay.
Simply add up how much you need to survive (the essentials), add your business expenses (overhead), and add your desired profit. This will give you your desired salary.
So:
The essentials + business expenses + desired profit = desired salary
Once you have your desired salary, determine how many days you’re willing and able to work during the year and how many hours you can work each day.
Let’s go through a quick example.
Since you’re a freelancer, you may want weekends off (104 days off per year). You might also want to travel (20 vacation days). And if you’re a healthy person, you may only need five days per year off in case of illness.
That all adds up to 129 days you won’t be working during the year.
Now for the math:
365 – 129 = 236 days that you’re available to work
Assuming you’re able to work six hours per day (you can always work more, or less!), then you have 1,416 hours throughout the year specifically for work.
To calculate how much you should charge per hour, divide your desired salary by the number of days you can work. After, divide it by the number of hours you can work per day.
Here’s a quick example:
- You need $40,000/year to survive, including business expenses
- You want to profit 20% ($10,000)
- So you need to make $50,000
- $50,000 divided by 1,416 (available working hours) = ~$35/hour
*You may want to adjust this to account for self-employment tax.
Because you’re a freelancer, you get to calculate how much you charge per hour.
This is your Minimum Acceptable Rate (MAR), which you can adjust to suit your needs.
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How to Calculate Price Per Project
Calculating the price per project isn’t as cut and dry as figuring out your hourly rate.
You need to understand pricing within your particular market and how your skills and experience compare to it, like with value-based pricing.
However, you can easily estimate how long a project might take you and use your hourly rate to calculate a price per project.
Otherwise, determining your price per project might involve scrolling through the different prices on the profiles of other freelancers on platforms like UpWork and Fiverr.
You can note their hourly rates and their per-project rate if it’s available and base yours similarly.
A clever way to maximize your profit is basing your fee on the projected revenue your services will create for your client.
If you can calculate how much revenue your project will generate, you can charge a percentage of that instead of a fixed fee.
How Do You Answer, “How Much Do You Charge?”
As we mentioned earlier, how you respond to this question is crucial. You know it’s going to happen, so be prepared to answer before anyone ever asks you.
Responding with uncertainty can make you seem inexperienced and turn away potential clients.
Most people don’t want to work with someone who can’t articulate their products or services, so let’s walk through this together.
Never Discuss the Fee First
Sometimes all potential clients want is a quick quote — which they’ll get, but first, you need to direct the conversation elsewhere.
Begin by establishing a relationship and talking about what they need before naming a price.
Discussing the project’s needs shows that you’re interested and possibly willing to work within their budget — before you ever even name a price!
Avoid Offering Discounts Right Away
This devalues what you’re offering before they even consider selecting your services. It turns you into a cheap watch salesperson nobody wants to buy from.
As we mentioned already, sometimes people just want to know a ballpark number so they can quickly determine if you’re within their budget.
So instead of getting frustrated when you hear them ask, be understanding and try to find out more about the project.
Most importantly, for the future success of your freelance business, don’t leave them hanging. Get back to them ASAP — but only after you have all the necessary information to provide them with an accurate quote.
The quote you give should be as accurate as possible.
Making sure that the final price of your services closely resembles the quote you gave will help to gain your client’s trust, assure their satisfaction, and generate more referrals in the long run.
Some Examples of How to Answer Client Pricing Questions
Having an answer to the question, “how much do you charge?” in your back pocket is essential.
To help you out, these are some easy responses you can keep in mind for the future:
- I’d love to find out more about the project and what you need first so that I can give you an accurate quote. Would you like to set up a time to talk?
- I’m happy to answer, but I’d like to ask you a few questions about your company first.
- That’s a great question, but what exactly are you looking for?
With time, you’ll figure out what works best for your niche.
Conclusion
Working as a freelancer gives you the freedom to blaze your trail, but it’s all too easy to get lost in the thick of things.
Joining Selfgood can give you the answers to all of your questions as a freelancer by providing you with financial benefits, as well as health and wellness, legal, and everyday benefits, too.
