One of the most straightforward ways to make money online is to charge for a service. Whether you are working as a writer, a web designer, a programmer, or even a music composer, this is an easy way to earn money doing the things you love.
But when you’re self-employed, there’s no template, no manager telling you what to do; everything you decide is entirely up to you.
This means you’re forced to wear multiple hats. No longer is it enough merely to sell the service that you provide. Now you need to think about things like marketing, managing clients, branding and everything else. Seemingly simple decisions can now have huge ramifications for the success of your business, and what your day-to-day work looks like.
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One of the most important of these decisions is deciding what to charge. How do you value the work you provide? How do you ensure that you can remain competitive? And how do you do that while still supporting the lifestyle you want?
The first thing to realize is that there are options regarding how you go about charging. This will drastically change the way you structure your pricing, and it will
The most obvious method used by many freelancers in the gig economy is to charge per hour. This way, they charge a fee that reflects the amount of time and effort they put into the work.
I am not a fan of this option. For one, this means you are exchanging your time for money, which in turn means you lose a lot of the flexibility that may have attracted you to working in the gig economy, to begin with! There is no option to have an extremely productive day and then clock off early – in fact, you’ll find that this method of payment incentivizes you to work slowly and lazily.
This is another issue I have with getting paid per hour: if I have a bad day and don’t get much done, then I end up feeling guilty as though I have failed to provide value! You’ll find that some clients are also very suspicious about how you’re using “their time,” which may lead to them forcing time-tracking methods on you.
Finally, this option leaves no space for scaling. Working more efficiently won’t allow you to take on more work. An hour is an hour is an hour.
That said, charging per hour can be useful if you have no way of estimating how long a project will take. It means you won’t run into a snag that ends up costing you a day of free labor. And it means that clients will be as eager as you to get projects finished quickly (funny how that works!).
Still, all the highest paid individuals in the world charge per value rather than per hour. All of the options below will put you in that category.
Another option is to charge for each completed project. This works best if you offer a fairly predictable and structured service that results in a tangible end project. For instance, you can charge for a complete website, you can charge for an article, or you can charge for a completed research project.
The good thing about this method is that it now liberates you to choose how you work within a given timeframe (there will likely be a deadline). It also makes the business more scalable using the efficiency methods that we will discuss below, and it results in “no qualms” value.
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The problem is that projects can vary a lot, meaning that you will need to set strict rules about what you are delivering. How many pages is that website? Is it a WordPress site? How much do you charge for added functionality? You may also find that some projects change and evolve, adding more complications.
Certainly, types of service can be broken down into distinct sessions. For instance, if you are a life coach, then you might charge for a one=hour session. This is slightly different from charging strictly per “hour” because it more rigidly defines what you will be provided in that time slot. This does limit the scalability of your business (unless you can teach and outsource the skill), but it also gives you a bit more control and clear definition regarding what you will be doing each hour that you work.
Finally, you can also charge “per unit.” The easiest example of this is charging per word if you are a writer, or per line of code if you are a programmer. An editor could charge per minute of video, while a digital artist could charge per 100×100 pixels.
This only works if the work you are doing work that can be broken down in this manner. But if you do have that option, then you’ll find this strategy allows you to gain a lot of flexibility over the way you work, while also committing yourself to a certain level of productivity.
The main drawback of this method is that it is very inflexible should a client ask for additional service (they want deep research to go with that writing), and it does require a lot of discipline on your part. There is no option to “pretend” that you are working now!
Deciding what is right for you
Which of these is right for you will depend on the type of work you do, the lifestyle you want to lead, and the amount you plan to charge. That said, it’s worth noting that you don’t always need to pick and choose. It may well be that you need to negotiate specific terms with an individual client who has a complex request, or you may offer multiple versions of the same service.
Ultimately though, you should be guided by the way you prefer to work, and the option that will let you receive and provide the most value.
How much to charge
With this in mind, the next question is knowing precisely how to charge for the work you’re doing. Start by doing a little research to find out how much other service providers are charging for comparable work.
If you are selling through a platform like UpWork or Fiverr, then this becomes very easy! If not, then pretend you are a client looking for services like yours, and see what you can find and at what price. What you are likely to find, is that the same service can vary drastically in price! (More on why this is in a moment.) Make a note of the highest price and the lowest price, and then try to find a sweet spot within this range.
Another tip is to look for job ads. How much are the clients you will be going after offering service providers for similar gigs?
High prices vs low prices
If you price yourself at the upper end of this spectrum, you are telling clients that you provide a premium service: and you need to be able to deliver on that if you want them to come away happy and order repeat service. You will likely find you get fewer orders, but that each one is worth more to you. There is certainly a psychological value to working on higher-quality projects and giving them the time and effort they deserve.
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If you price yourself at the lower end, you will likely offer a cheap-and-cheerful service to match. This results in more diverse work as you’ll take on a greater volume of orders. It can also make your business appealing to a greater range of businesses: such as white label companies that will sell your work on at a profit.
But keep in mind that lower rates can sometimes scare clients off as they believe they’ll be getting lower quality work. And contrary to popular belief, working for a low price often actually results in more difficult clients!
Being honest with yourself
Ultimately though, the right price is the one that reflects the value you’re providing. Be honest with yourself about what you offer. Do you have the experience, skill, and reliability to go toe-to-toe with the best in your industry? (And crucially: can you prove that?)
Or are you just starting and looking to build a portfolio?
What may surprise you, is that the biggest issue is with people undercharging for their work rather than overcharging. That’s because many of us downplay our skill, and suffer from the “imposter syndrome.”
More important still, is to think about the amount of money you need to maintain the quality of life you’re looking for, and the number of hours you are available to work. Can you sustain your lifestyle at this rate, without going crazy? Will you be able to cope when the boiler breaks and you suddenly need to fork out $30,000? Will you be able to cope when you have a dry spell with no orders for a few weeks?
There was a time I would take on only take on work I loved and was happy to do it at a low price. Today, I am the sole breadwinner for my family (I have a wife and young daughter). We have a mortgage to pay, and any number of bills.
Read also: Working from home while raising a family
This is scary when you are self-employed, and so I now have no option but to charge a minimum amount. Even a higher rate won’t necessarily translate to a comfortable style of living depending on your circumstances. When you are self-employed, your lifestyle and your business become inextricable.
There are ways to optimize your workflow to charge less and provide the same value. For example, if you offer editing services, why not create some templates and graphics that you can easily reuse? Doing this will save you a huge amount of time, meaning that you can increase the amount you earn without working more or increasing your prices.
Likewise, think about earning from the same work more than once. Of course, you can’t sell the rights to a piece of work to one person and then reuse it. But what you can do is reuse the research you did for an article – making that topic much quicker to write next time. Likewise, you can discuss with clients whether they’d be okay with you selling altered versions of their work.
If you’re extremely efficient, you may even be able to automate entire aspects of your service, or “productize” what you offer. An example might be to create a tool that writes bespoke training programs for clients, rather than speaking with each one directly.
Do you want the work?
Finally, ask yourself whether you want the work that you’re taking on. If you hate the project, charge more! But if the work is going to be fun, and especially if it will be a big boon to your career and portfolio, think about relaxing your usual pricing.
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Another factor to consider is reliability and volume. As I mentioned, it’s scary being a family man who freelances. And with that mind, it makes a lot of sense for me to chase clients that I know will be able to provide steady work and steady pay.
Your circumstances may be different!
Can you afford to be picky?
Another thing to be honest about is whether you can afford to be picky. As you build up a list of clients, as you gain a better reputation, and as you become more confident in what you do, you’ll find that you can create a fairly stable income at a good rate.
At this point, when someone new comes in looking for work, you need to think hard about whether taking on a new client at your old rate is still worth it.
I have recently begun selling personal training through my website. At first, I didn’t want to charge a lot, because I wanted to make sure I was offering great value and not excluding potential clients. But then I realized that seeing as I earn a certain amount per-hour already from my writing and my website, it didn’t make any sense for me to offer “cheap” personal training. Apart from anything else, if there was a big demand, I wouldn’t have time to take it on!
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And so, it made sense for me to price myself at the higher end of the spectrum. Someone might balk at the price and decide not to hire me, but that’s fine seeing as that isn’t what I rely on for my stable income!
If you want to increase your rates, try to get a steady supply of work at your current fee first. This will put you in a strong position to begin negotiating a pay raise, and even get clients bidding against one another!
If you’re unsure how much to earn and you don’t want to risk scaring people away or undercharging, another option is to provide different tiers or packages for your services. This way, you can provide a “basic package” and a “premium package” and as much as you like in-between. The more options you provide, the more clients you’ll be able to appeal to.
And this way, you have the potential to land a massive client and earn lots of money for a huge project, but you still won’t drive away from the smaller businesses looking for affordable work.
There is no rule about how much to charge
An example that I like to recount when discussing this topic, comes from a plane trip to Germany. While traveling, I overhead some businessmen talking behind me about hiring someone to build them a website. Thanks to my high-quality eavesdropping, I learned that they wanted a simple website that would act as a kind of online portfolio. They didn’t need anything fancy, like a portal for their staff, or anything overly flashy.
They were in talks with an agency that was charging $20,000 for the privilege.
This blew my mind. Today, the most sensible way to build a website is to use WordPress. This is a tool that makes it extremely simple to build a site, to the point that you can get the main framework up and ready in a few hours (if that).
From there, you can download a ready-made theme for about $50, then customize that to the point that it looks entirely original. Throw in a few vector designs for a logo, a bit of advice on color theory, some plugins, and nice font, and you’d have your website up and running in a few days!
Why companies want to spend more
And this struck a chord with me because I had once seen something similar. A friend had once told me that the company he was working for was looking for a website. He asked if I would be interested in offering my services, and wanted to know how much I charged. I said I’d do it for $500. To me, this was a day’s work!
My friend told me that he wouldn’t be able to put that offer forward to his manager. At that price, they would assume I wasn’t very good at what I did, or wasn’t taking matters seriously!
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In truth, the task would likely have involved a lot of back-and-forth and communication overhead. It probably would have been a major headache to offer that work for $500. But it needn’t have been.
Often, those with buying power will be under pressure to spend more and take longer. They want to look like they’re doing something!
And seeing as the value of a website to big business is almost limitless, they can afford to mess around!
Knowing what you are worth
And this is the point I want to make: it’s really up to you what you charge. You may feel at times that you aren’t working hard enough, or that no one will pay for your services. But no matter what you charge, I can almost guarantee that someone out there is charging more for the same thing!
The key is to remember that people pay for the value you provide, and not the work you put in. They pay for the end product, and they pay for the knowledge gap. Don’t ask how long it took you to do it, ask how long it would take someone else to learn the necessary skills and then do it themselves.
This way, you can optimize your salary, while simultaneously ensuring you provide amazing value! That is how you know what to charge.