How to Calculate the Price of Your Work
“Even if you are the best at what you do in the world, if you don’t get your pricing right, chances are that you are going to struggle.” – Alistair Webster began his lecture at SlavConf Virtuality underlining the importance of understanding pricing for freelancers and self-employed creatives who are often facing difficulties competing for projects, sealing deals with clients and negotiating. As the market is becoming more and more saturated, dangers of undercharging and overcharging are a daily concern even for the best professionals in the industry.
The dangers of undercharging
The problem of undercharging has proven to be very dangerous for the industry because it damages everyone who is trying to survive as a freelancer forcing many to lower their prices in attempts to gain customers and projects. In addition, it might make you seem less professional in the eyes of clients who can afford to pay more for better quality. Here is what Alistair shared on the issue:
“The better quality clients, people you want to be working with, who are willing to pay more for higher quality, are used to paying more than you are probably comfortable pitching yourself on. If you are undercharging, that’s a real warning sign for them and it communicates a lack of confidence and competence in what you are doing. So a danger of pricing yourself too low is you start to bring in lower quality clients who don’t value you. They don’t really care what you do, they just want to get the most out of you.”
The dangers of overcharging
On the other hand, overcharging is not always a sustainable solution, especially with the growing competition and tendency of big corporations to outsource more and more work to freelancers. A lower price, according to Alistair, could keep the client and gain you more long-term projects:
“Even if you win a project it [overcharging] can be quite a short-term approach. Because in the long-term maybe you could have had a more long-term relationship with them [the clients] or you could work on multiple projects together. But they were desperate so they signed up for your overpriced short-term offer rather than working with you for a longer period and enjoying what you can do while making money together.”
Alistair explained the different ways to price your work: hourly, daily, per project and by value. He shared his view on the pros and cons of each method depending on the project and type of the work. Here are some of the formulas he gave for pricing that according to his experience are proven to be very helpful for the British market:
3 rules of pricing:
- It always takes longer than you expect
- Be the least risky option
- Make the buyer the hero
Project pricing formula:
- How much do you want to earn per hour?
- How long will it take?
- Double it
In conclusion, he underlined that being able to calculate prices reasonably is playing a major role in the market and is going to be more and more important in times of crisis when determining who will survive as a freelancer:
“It is a really tough period we are facing and it’s not likely to be a short-term thing so these lessons about pricing are going to be very important. We can’t afford not to raise our prices as people who are self-employed and selling our own product. We need to be getting paid enough to live on, to feel comfortable with what we are doing and to guarantee that we are in a safe place in the future. So be prepared to raise your prices now and start to make a strategy of how you would do it. There are ways to raise your pricing that are less disruptive than others.”