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Freelance: Setting Minimum Prices & Charging for Experience

Nikola Tesla visited Henry Ford at his factory, which was having a design difficulty. Ford asked Tesla if he could help identify the problem area. Tesla looked at the designs and made a small “x” in chalk. Ford was thrilled and told him to send an invoice.

The bill arrived, for $10,000. Ford asked for a breakdown. Tesla sent a second invoice indicating a $1 charge for marking the plans and $9,999 for knowing where to put the mark.

While that’s a cute joke and urban legend, it’s also something that freelancers face all the time. We do work that may be quick and easy–but it’s taken years of education, self-education, and practice to develop these skills.

When You Become Faster At Your Work

There are three options when faced with this situation.

  1. Change nothing, get paid less.
  2. Charge more hourly for this kind of work.
  3. Set a minimum price and charge at your usual hourly rate for anything beyond that.

Option one may feel fair, especially to women who’ve been taught to undervalue our work. But the work you’re doing is no more or less valuable to clients than it was when you were spending longer on it. If you weren’t a freelancer and were instead employed at a traditional company, you’d likely transition to a higher pay-grade as you became more experienced, which brings us to #2.

Option two works, and may be good if you’re only doing a few types of work. For example, if you’re a Thesis guru, you may charge $50/hour for Thesis work and $40/hour for something else. The problem is that if you have a number of different areas, it becomes hard to keep track of that–especially if the client needs work done in more than one field.

Option three involves first setting a fair hourly rate for your average work. Maybe setting a couple if there are some dramatic differences in the type of work you’re doing. Next, set a minimum price for the job at hand–such as $25. Then present both numbers to the client, e.g.: $50/hour with a $30 minimum.

Setting a Minimum Freelance Project Price

You are charging for:

  1. Taking the time to learn the underlying skills.
  2. Taking the time to learn this specific task.
  3. Taking the time to execute it.

This doesn’t mean setting some exorbitant price to take into account all the work you’ve ever done leading up to this point. Either consider your level of expertise and combine what seems like a fair hourly wage with a time estimate, or use what you’ve charged before for such work and found client to think an acceptable market price.

The Advantage of Minimum Price + Hourly

The biggest advantage of taking option #3 and setting a minimum price and then an hourly one is that you don’t undersell yourself and your skills. I’m still not as good at charging as I’d like to be, but when I use this method it helps me keep from doing more work (for free) than I’d included in my original estimate for the job.

Setting this up at the beginning makes a difference in how I feel (and I think how the client feels) if the job does take more time than the minimum. Instead of being in a position where I have to tell the client that I mis-priced and the client was expecting to pay X, the client (should be) thinking of a number as the minimum they’ll have to pay, but still have a framework for how it’ll be priced.

If you’re a freelancer, how do you price your work? If you hire freelancers, what method do you like them to use in pricing?


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July 6, 2009 at 2:27 pm

{ 5 comments… read them below or add one }

Miranda June 4, 2009 at 9:35 am

Great piece on freelance pricing. It really is difficult to decide how to set prices. As a writer, I usually find out what the client wants in terms of words, keywords and research they expect. I also find out whether or not a rush job is needed (a rush job costs more). Thankfully, I have been doing it long enough that I am pretty accurate with a per-project estimate up front. Although I sometimes think that I still undervalue myself…

Miranda’s last blog post: Timothy Geithner Can’t Sell His House

ABCs of Investing June 4, 2009 at 9:35 am

It’s very interesting to hear about this topic from a freelancer.

I think another point of view is from the perspective of a client. Clients have to consider how much time it would take them to figure out and do the task they could hire a freelancer for. Sure paying someone $50 for 45 minutes work seems expensive but the reality is that if you don’t have the skills – it might take you 10 hours to learn how to do that task.

As a one-off situation I’d gladly pay $50 to avoid 10 hours (of my time) of work. You would gladly take $50 for 45 minutes work. It’s an easy win-win.

Of course if I did spend that 10 hours learning how to do a certain task, then I would probably learn a whole pile of other info which might lead to me being more self-sufficient when it comes to these 45 minutes jobs.

It boils down to how I want to spend my time, what I’m interested in and how often I need those tasks done. If I’m continually tinkering with my theme then it’s probably worthwhile for me to learn to do it myself. If I just want to switch hosts, switch to self-hosted or get a new theme (and not do it again for 3 years) then I should really considering hiring Mrs. Micah.

Frugal Urbanite June 4, 2009 at 11:26 am

I am forever underselling myself. Part of it’s because I’m afraid to ask too much and part of it’s because of my clientele. I know their budget is small, so I have a tendency to lowball in a bid to get the job.

Frugal Urbanite’s last blog post: Quick Chicken and Pasta – Recipe Week

Kelly from Almost Frugal June 4, 2009 at 3:20 pm

I really have a hard time with this- I’m constantly underselling myself when it comes to charging for work! As I do more and more work for hire, I need to really work on this area.

Kelly from Almost Frugal’s last blog post: Q&A: How’s Your Job and Other Questions

mrsmicah June 4, 2009 at 8:57 pm

@Miranda it really does get easier to make sensible estimates of the work involved, anyway. I’m better than I was 12 months ago, but I still find pricing a job in itself.

@ABCs, yes! hire Mrs. Micah! 😉 You’ve extracted the main point of the article. 😀

Actually, you make an excellent point. It’s worthwhile to learn how to do things that you’ll be doing frequently. But if it’s a rare need and would take you a long time to learn to do right, then by all means hire someone. I’ve sometimes been surprised that people I regard as skilled bloggers (great marketers, great with affiliates & advertising) will contact me to do things I assumed they could do. But while they specialized in some things that they do all the time, they couldn’t care less about knowing how to move a WordPress installation to their new host.

@Frugal Urbanite, I run into the client problem a lot too. Some of my clients are doing just fine in terms of site earnings or can afford it otherwise. But many are hobby bloggers or mommy bloggers who just don’t have a big budget.

@Kelly sometimes I want to cry when I look back at my records and see how little I charged for some things. But it’s something you keep moving toward. It’s certainly a learning experience in valuing one’s own work!

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