A lot of new freelancers get hung up on pricing. Should I charge hourly? Or by the project? Is this too much? Am I really worth that much?
Today, I’m going to give you a system for pricing your freelance business. It’ll take you from getting your first client to raising your rates so that you’re eventually making $2,000…$3,000…even $5,000 (or more) every month.
It’s the same system that’s helped Ben, the circus performer, go from charging $0 to $60 an hour. It’s also what Julia used to build a successful business where her rates are now $250 an hour. Not bad for a caricature artist who used to make $8 an hour.
Just follow everything I’m about to share with you, and all the guesswork and uncertainty from pricing will be history.
Step 1: Get your first 3 paying clients
It doesn’t matter if you already have a website, business plan, and an LLC formed. If you have no clients, you have no business. Period.
Clients pay you money. And money keeps businesses running. Which is why your number one priority when starting out should be getting your first 3 paying clients.
I’m not pulling that number out of the air. We’ve tested this concept with thousands of students. Anyone can get one client. Maybe it’s a friend, or a friend of a friend who hires you. The second client might be your uncle Jim. Or his former roommate from college who is looking for help with something — who knows. But once you land a third client, you know you’re onto something. You have a service that’s in demand.
For these first three clients, as far as pricing goes, don’t worry about it. Charge whatever — even if it’s a lowball offer like 20 bucks.
The goal here is to get 3 paying clients. As long as they pay you something, you’re on the right track.
Here’s a strategy called Locate and Communicate that’ll help you land them.
1. Locate your clients
- Who is your exact client? Something like “small businesses” is too vague. Get specific. “Local fitness studios that want help with their email marketing” is much better.
- Where do they go to look for solutions to their problems? What sites do they read?
- Where are people already looking for solutions to problems? How can you make a match between them and your service?
This can be something as simple as posting and responding to an ad on Craigslist. Someone needs help moving, and you show up to help them.
Other times it’s not so straightforward. That’s when it helps to identify a specific target market and figure out where they might go to look for solutions.
- For marketing or content writing help it might be Inbound.org
- For tech companies, check out AngelList
- Or maybe you’re in an industry where referrals have lots of clout. How can you get a foot in the door?
The important thing is to do the work and research. If you’re a brand new freelancer, you can’t expect to set up a website and have people beat a path to your door.
Once you’ve done your homework, we can move to the next step.
2. Communicate with your clients
Email will be your most important communication tool for pitching clients. It’s cheap, fast, and direct. And once you have a good pitch that gets responses, you can use it over and over again with some modifications.
All good email pitches have 5 parts:
- Benefit to reader
- Foot in the door
- Call to action
Here’s how they look in action:
A busy person can read this and simply respond, “Yes.”
Use this script to get your first three paying clients. Then once you know you’re onto something, you can move onto the next part of this pricing system.
Step 2: Set an hourly rate
Congratulations! If you’ve made it to this step, you officially have a business. Now it’s time to set some guidelines for your pricing.
There are many different ways to do this. You can charge hourly, by project, on commision, or a monthly retainer.
Forget all these options for now and just set an hourly rate. It keeps things simple. Clients understand it, and they won’t get freaked out over large project quotes. It also reduces risk for them, so you might get more business as a result.
To find a good starting point for your hourly rate, use the Drop-3-Zeros Method.
Basically, you find the average annual pay for someone in a job that’s similar to your freelance service and drop 3 zeros from it.
For example, I looked up “email marketing” and saw that the national average for that role is roughly $64,000.
So if we drop 3 zeros we arrive at an hourly rate of $64. That’s a good starting point.
If your rate sounds higher than usual, that’s fine. Remember, clients don’t have to pay taxes and benefits on freelancers, so they expect to pay a little more per hour for their services.
Step 3: Raise your rates by doing high-value work
Most freelancers will work for a few months with a client and then ask for a raise. Here’s how that conversation usually plays out:
Freelancer: I’ve been working with you for about 6 months now, and I think I deserve a raise.
Freelancer: Ummm…well…I understand the company. So I’m much more efficient now. I can get more work done in less time. And you don’t have to train anyone.
Client: But isn’t that what bringing new people on is all about? You invest time training them early so that they can work more independently later?
Newsflash! You’re not entitled to a raise. You are paid for the job you do. If you want to earn more, you must do higher value work.
That could mean managing staff or projects, being responsible for certain revenue targets, or putting yourself in a high-visibility role like being a CEO’s executive assistant.
The definition of moving up the value chain will be different for freelancers depending on their industry. But in general, the closer you are to the sale, the higher you will be valued, and the more you can charge.
For example, a content writer is just responsible for writing a certain number of blog posts per week.
The latter is closer to the money, because customers are involved.
You can get the new higher value rates by using the Drop-3-Zeros method from step 2 and finding the roles that match the new level of experience and responsibility.
Now, that number might be very high. For example, someone who is responsible for sales can easily quote $100 an hour.
Many clients will balk at a number like that. This is when you can use a trial period to your advantage.
Here’s a short script you can use to guide that conversation:
First, it gets a foot in the door. The client is more likely to agree to the lower rate if price was the main objection.
Second, the trial period reduces the client’s risk in taking on a freelancer. Another point in favor of hiring you.
Third, it sets the stage for a renegotiation at 3 months. You won’t have to awkwardly bring up raising your rates. You just need to say, “Our 3-month trial comes to an end in two weeks. Would you like to continue working together at my regular rate of $100 an hour?”
And if you’ve knocked it out of the park, and delivered on everything you’ve promised, of course they’ll say yes.
After all, it’s hard to find good help these days. Good workers — freelance or not — are indispensable.
Using these 3 steps, any new freelancer can land their first paying client and raise their rates so that they’re running a profitable freelance business.
Just follow them in order, and any angst you have about pricing will be gone. Then, your only job is to focus on doing extraordinary work.