If you work for unconventional hours or if your work takes you around the globe it might be quite a challenge to estimate and access your work. Overall, there are only two ways you can do it:
- You charge based on an hourly rate;
- You give your clients a fixed fee.
Let us see what might be the preferred option in case you are a novice in freelancing.
When you start a service-oriented business figuring out how you will charge is crucial as it determines your business strategy and your reputation as an entrepreneur.
You need to remember that the biggest fear the client has relates to exceeding the budget. In this case, you risk losing the customer who, under other circumstances, would be ready for long-term cooperation.
On the flip side, if you agree to work for the fixed price but you estimated the costs wrong you might finish working for the minimum wage.
To avoid it, it is advisable that you pay close attention to the proper estimation. This way, you will be able to give the client the desirable cost certainty on the project calculations and reduce your own risks.
Your Personal Pricing Strategy
Prior to putting the price tag, you need to identify your skills and decide what exactly you would be able to monetize; in other words, what are you really good at?
Check on the rates this sector has and fix your price at max but reduce it by the lack of your experience;
When performing the first projects focus on building your portfolio.
Strive for quantity as the more completed projects you have, the less the ‘lack of experience index’ is.
If your goal is to expand the network: brand yourself. To look reputable, you need the list of your clients (recommendations are the best way to build the network).
Share your profile as self-promotion is the perfect option for branding and in the long run, pricing your work at a higher rate.
When you have to estimate the project fee categorize the client.
If you have to work with the obviously difficult customer, your time expense will surely overlap the expected estimated hours to charge accordingly.
And consider the ‘sensible’ ROI when fixing the price for your service.
For instance, if you work for a client whose business is selling apples at $2 per kilo, and you expect $500 for your service, the client will break even upon selling 250 kilos of fruit. But if your customer offers a deluxe car rental then the price for your service will be covered in less than a day.
It means you will have to calculate your own formula for pricing in most cases.
Side note: The market dictates its rates depending on your location.
The variables in the market rates are determined by the location from where you offer your service. If you look into the economic realities, the difference in cost for the same type of work can be quite confusing.
That said, be ready that the customer will prefer the freelancer with the same skills as yours but offering his/her service at a lower price.
Remember that the biggest difficulty is scaling as you trade your time for money, and time is always limited so you need to invest in tools that would ensure the optimal estimation.
Once you worked on your strategy, you will need software solutions to implement it.
Fortunately, there are lots of tools to manage this process.
One of such tools is TMetric – a time-tracker, which can:
- Calculate work time with precision;
- Generate time and earned money reports;
- Compose an invoice;
- Collect the app usage data;
- Set a time or money budget for a project;
- Have an overview of the project/tasks on a daily/weekly/monthly basis.
- Integrate with dozens of apps like Trello, Jira, Asana, and many more.
Applying time tracking is the most effective way to achieve the results as it will allow you:
– To visualize the timeline of your productivity,
– Calculate all the hours you worked,
– Collect the data for further analysis and more accurate estimating.
On the next step, when you feel quite confident about the estimation of your projects, you can, so to speak, productize your knowledge and bill hourly as at this stage you will be able to scale up your expertise and afford the smart risks.
When drafting the bills, it is essential that you write clearly. If the system you use doesn’t allow text descriptions on the actual invoice, add the memo or the cover letter. It is advisable that you apply the tool for assisting your writing. So, another tool you might find handy is Grammarly as it will help you:
– Make the bill simple to understand;
– Avoid misspelling;
– Skip proofreading.
write a cover letter or memo to clearly restate the charges and any necessary explanation.
Billing steals your time:
Especially if you work as a ‘Solopreneur’. It happens in case your business lacks system and optimization. If you do not search for a reliable tech solution you might feel like giving up. The tedious tasks must be automated, and it will give you that gift of freedom that most creatives crave for. The accounting software can be a turnkey solution for any finance-related issues. With Lessaccounting, you will be able:
– Record business expenses;
– Categorize expenses;
– Send invoices and get paid;
– See who owes you money.
-You can activate tracking:
– Expenses by a project;
– Expenses by income type;
– Expenses by category.
Besides, you can activate reminders of due expenses.
If you want to give a ‘level up to your invoicing you can try Cushion, an effective tool that:
– Helps you generate the invoices;
– Project your future income;
– Gives an overview of the cash flow;
– Facilitates planning the oncoming projects.
Lots of freelancers can confirm that at least once they came across the client who booked a week project but it turned into a month, and instead of launching the next project with a clean plate, the freelancer had to readjust to a horizon-like deadline.
The cushion is really great as it prevents time overlap when performing the projects. Besides, it makes your cash gaps easily identifiable to have a better understanding when planning. Another thing that should influence your price is taxes. No matter where are you based you still have to pay taxes for yourself. And it may take some percentage of your income. Read more in this guide from CrushTheLSAT.
Freelancing seems an alluring employment option as it promises you to schedule flexibility, thus, the work-life balance you cannot have while doing 9-5 jobs that with all the time expenses for commuting have the tendency to turn into 8-6. But being a freelancer means you have got to systematize, organize and optimize your time at max so invoicing, for the best-case scenario, must be fully automated. Without a doubt, your invoicing experience will vary a bit as it depends on your customers and your business but in any case, you will find charging the clients gets so much easier once you have the well-thought strategy and the effective tools for implementing it.