Charging the right price: Price optimization for freelancers

27. Jan, 2010 0 Comments

Finding the right price as a freelancer is hard.

It’s hard because we are so involved in our business, that it becomes difficult to take a step back and take an objective look at what we’re doing.

What is price optimization? Price optimization is the process of getting your prices to the point where you’re working the amount of time you want to be working and you’re making the amount of money you want to be making.

This article looks at the internal factors involved in pricing, and not the standard external ones like quality and value (which are also important).

How healthy is your sales pipeline?

A healthy pipeline allows you to be a bit more choosy with who you work for and at what rates. If you’re constantly turning down work, it’s time to up your rates and work with the ones that can afford you. (Instead of working with the ones that came to you first)

When starting out, my sales pipeline was fueled entirely by me. It had people that I had cold-called, emailed or saw an ad… and not a whole lot else. With a patchy pipeline, price optimization means working at below market rates.

How much do you want to work?

The price for our services is determined by supply and demand. People often think about increasing demand, but perhaps not as much about cutting back on supply.

If you’re selling websites for $1k, is it possible that you can double your price to $2k and do half as much work? It would result in the same amount of income but at half the price. If you don’t think it can be done, why? How do you know?

We freelancers can have perceptions about what we think clients will pay, but they may or may not be grounded in reality!

I remember quoting on a project with one of my first clients. I remember thinking to myself and debating whether the price should be 500 or 600, and I was scared that if I charged 600, the client would think it’s too expensive and not go ahead with it. Looking back I feel like a fool. I have no doubt they would have paid much more.

But the point of the story is, what we think other people think can have no grounding in reality, and is more a reflection on our own (in)experience and thoughts than any objective measure.

How do you know if your rates are right?

You know your rates are right if:

You’ve always got some work on
You’re making the amount of money that you want to make

And a final thought – If you’re dealing with the right leads and you’re hitting every sale, and you’re never facing price objections, chances are, you’re not at the right rate.

When I miss a sale because my price is too high, I see it as a sign of my growth, rather than a rejection of my services. You can’t service everyone, and if you somehow manage to, you’re not servicing yourself.

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