The Foolproof Way To Price Your Solo Business
Congrats! You’ve just heard from a prospective client who wants you for their next project.
Before you start patting yourself on the back, take a moment to consider the question that always comes next:
“So, what’s your going rate these days?”
Here’s how to keep your cool (and your upcoming gig) when going solo as a freelancer, contractor, or small business owner.
The Pricing Conundrum
Do I want to be paid hourly? By the project? Am I asking for too much? Or gasp, too little?
These questions can, understandably, plague any burgeoning solopreneur.
Before we start talking numbers, think of the wonderful world of full-time freelancing as being in a healthy, functioning relationship with another (willing) individual. As long as you’re holding up your end of the bargain (e.g. offering your client valuable, consistent work), there’s no reason why you shouldn’t be paid well. In other words, you get what you give.
When you’re first going solo, it’s easy to get ahead of yourself and accept whatever number your client first throws at you. You’re just thrilled at the thought of getting paid, right? Think again. It may prove difficult at first, but it’s important to establish and set some guidelines when it comes to properly pricing your services.
Although pricing by the hour is one option, it’s not necessarily the best option. Consider selling the outcome first, then pricing yourself accordingly. For example, if you’re an SEO expert, try first “selling” to the client that the user traffic to their website will increase given your awesome SEO skills. If you have a proven track record of doing this for previous clients (or when you were perhaps full-time employed), all the better. Sure, it may sound like you’re tooting your own horn but really, this is how you separate yourself from the competition.
And although it’s different for everyone who is just starting out on their own, we recommend first setting an hourly rate to keep things simple. When you’re working with a client on a long-term basis or juggling multiple projects at once, it’s easier to keep track of your time when you’ve got an hourly rate set and in place.
Clients these days seem to be less likely to panic over a proposed hourly rate of $70/hour than an estimated project sum of $700.
Your Time Is Money
If Dolly Parton could rewrite her infamous “9 to 5” song for the modern-day solopreneur, she’d certainly be singing a different tune.
Full-time freelancing, contracting, or running your solo business can undoubtedly be very lucrative. You often have more freedom, more opportunities, and as a result, more responsibilities.
With one of those cushy 9-to-5 gigs, you’ve already got your benefits lined up (think vacation time, sick days, weekends off) whereas when you work for yourself, it’s basically up to you to set your own hours (calling all early birds and night owls), how much vacation time you’ll be able to take off (if any, le sigh), and to anticipate your annual earnings so you can make a cushy living, too.
When you’re self-employed, keep in mind there are a plethora of costs to incur: computer maintenance, a co-working space (if you choose not to work from home), monthly Internet fees, invoicing and task management tools, and the occasional unpaid invoice.
And, no matter which way you slice it, you’ll also have to eventually tackle self-employment taxes, paying for health insurance, saving up for retirement, and start saving up some money for a rainy day. Add all this together and you’re looking at thousands of dollars in added business expenses.
Remember, hourly rates don’t guarantee you’ll be working 40-hour weeks. This is why it’s crucial to make sure you price yourself right from the get-go.
Know Your Numbers
This requires a little research on your part, but not much (we promise).
Let’s say, for example, that up until recently you were a copywriter, working full-time for an advertising agency in New York City, benefits and all. Your annual salary? $70,000 a year, with a holiday bonus.
Now, since you decided to recently go solo, you’re probably wondering what your hourly rate should be.
A good rule of thumb to follow? Drop the last 3 zeros from your previous salary and ta-da, you’ve got a nice little hourly rate of $70/hour that should suit you nicely.
If you’re still unsure, you can always check out the average annual salary for someone who is in a similar role as you at PayScale, Glassdoor, or Comparably. Or better yet, ask your fellow freelancers what they charge. (It never hurts to know what you’re up against, right?)
If you think you can push the envelope a bit further (meaning, you think your client might be able to afford some wiggle room), feel free to up the hourly amount a little bit. Remember, if your rate seems a little steep, remember that they aren’t responsible for paying taxes or benefits on you. That’s a whole lot of savings on their part.
Saying “No” to Pro-Bono
While there’s nothing inherently wrong with wanting to help out a friend who needs your expertise in a pinch (whether that’s writing some catchy tagline for their business or designing a new logo for their family-run company), if a client approaches you and expects you to do the same for free, in most cases don’t walk—run.
There are exceptions to the rule, of course. If it’s a project you’ve dreamed of working on and a client you’ve always wanted to work with, then it’s perfectly OK to negotiate a quid-pro-quo ‘job-swap’ if there’s no financial reward in it for you. For example, this could be something as simple as a glowing testimonial of your work that’s guaranteed by the client so you can add it to your personal website after the project is complete.
You may very well encounter clients along the way who will try to offer “exposure” as that enticing carrot stick to get you to work for free. If you’re tempted to do so, whether that’s to build your budding portfolio or gain some exposure, it’s far better to spend that time working on your own content (creating new artwork if you’re a graphic designer, blogging if you’re a writer, or even donating your skills to a worthy nonprofit if you’re a life coach). This way you’ll gain more experience, own your content or do some good for the world, and you won’t be tied up doing unpaid work for one client if a paying gig comes around.
In our Westernized world, we’re wired to value our time, and subsequently, our money. Some companies may sing your praises and promise you the world but if they don’t pay you for your services, then talk is cheap.
As the mantra goes, “exposure” doesn’t pay the bills.
Know Your (Financial) Worth
It’s true what they say—good workers are seriously hard to come by. This is especially the case when it involves freelancers, contractors, solopreneurs, and the like.
And although asking for money can seem intimidating, remember that if the client in question could do what you do, work-wise, then they wouldn’t be asking you for help in the first place. They would be the one, then, to make their own app from scratch, design their beautiful website, or write that memorable blog post.
Without getting too preachy, remember that your skills are highly valuable. And to become truly successful going at it alone, you must know and charge what you’re actually worth. Catherine Watkin offers a solid pep talk on how to actually do this.
Adopting this sort of confident mindset will allow any pricing anxiety you may have had in the past to disappear. Your only focus now? Keep sticking to your guns… ahem, rates.