Ah, pricing: the eternal conundrum facing creative freelancers (and any business owner). When I surveyed Asian Creative Network, one of the most common questions asked was, “How do I price my work?” Along with several variations: What’s a fair price to charge? Am I too expensive? Too cheap? Going to die alone and hungry?!
Pricing freelance work can feel a little bit like calculus. (And not all Asians are good at math, OKAY?!) Unfortunately, there is no magic freelance rate calculator that will tell you what to charge. Your pricing depends on many factors such as your experience, availability, skills, and time needed to complete the work. While there’s no one pricing formula that works for everyone, here are some of my pricing guidelines for freelance work, gleaned over several years of mistakes and lessons learned.
(These will be most relevant for direct to client service-based freelancers like graphic designers, web developers, some photographers, marketers, etc. Some of the specific tips may not apply directly to product creators, freelancers who contribute to outside publications or studios for payment, or fine artists, but a lot of the general principles will.)
Set prices that work for you.
The biggest pricing mistake I see freelancers and business owners make is setting prices based on A) what they think clients “want to pay,” or what they themselves would pay for that service, or B) what they see everyone else charging.
Okay, so for starters, nobody really wants to part with their hard-earned money, so go ahead and scrap method A. As for method B, there is some wisdom to paying attention to what the local market will bear, but that is often a race to the bottom. Plus, no one else is living your life with your expenses. Maybe that photographer charging $75/session is just snapping some photos to earn some side cash, while you’re trying to pay rent and student loans. That makeup artist whose prices are half yours might have some kind of brand endorsement deal that provides free products to use. Set your prices based on what you need to earn. Speaking of which…
Know your costs and charge enough to cover them.
Your freelance pricing should not be a guessing game. Your prices shouldn’t change according to your emotions and how empty your calendar is. You need to set your prices so that your costs of doing business are covered and that you are able to make the kind of profit you want to make. Here’s how to do it:
- List all of your business expenses, whether one-time or recurring. That’s your studio rent, camera equipment, website hosting, professional memberships, wi-fi, client gifts, plugins and licensed software used in client work, all the things that you need to create. Divide the one-time expenses over 12 months of the year and add to your monthly expenses. This is your monthly cost of doing business (mCDB).
- List all of your monthly living expenses: rent/mortgage, utilities, groceries, transportation, loan payment, etc. Don’t forget to divide yearly or quarterly payments, like property and estimated taxes, by 12 or 4 and add that to your monthly living expenses. This is your monthly cost of living (mCOL). (I am not a financial adviser but if you have large debts to service, you may consider pursuing full-time employment until the majority of those debts are paid off.)
- Decide what percentage of your mCOL you want your freelancing to pay for. This is your freelance income percentage (FIP) and should be a decimal equal to or less than 1. Maybe you or your partner have a 9-to-5 job that pays rent and provides benefits and freelancing is a way to pay down debt faster. Maybe, like me, you’re a primary parent and your freelance work is intentionally part-time. It’s also okay for creative freelancing to just be a side gig, for now or forever.
- Multiply your mCOL by the percentage you decided in step 3, then add your mCDB. This is your target monthly income. (We can call it TMI because I like funny acronyms.)
- Here’s comes the trickier part. Decide, or at least estimate, how many hours you want to work per month. This is your monthly work hours (mWH).You might work 40+ hours a week or just 4. I recommend choosing specific work days and hours that fit into your lifestyle, and adhering to those work hours as much as possible. This is especially important if you are fitting your freelancing in around other employment, school, or family care responsibilities.
- To get your baseline hourly rate, divide your target monthly income by monthly work hours. Or, (mCDB + (mCOL x FIP))/mWH. This is the minimum rate you should charge per hour.
(This formula probably needs major tweaking to be relevant for anyone selling a product.)
Don’t charge by time alone.
Of course, your minimum rate is only the basis for your pricing. Not every minute you work will be billable time. You’ll need to spend time on bookkeeping, maybe inventorying supplies, marketing yourself, networking, and learning new skills. You also need to charge for the time and money you spent acquiring the skills needed for your projects. (This cost is distributed among your lifetime of work, of course.) You could certainly mark up your minimum rate to account for non-billable time and experience.
Or you can move away from time-based billing altogether. Billing by time alone is devaluing your skills, even though that’s what many clients may expect. It also punishes you for being efficient! If you finish in one hour what someone else needs a day to do, you’d get paid less than the other person even though you deliver the same product. No fair! Your hourly rate can and should be the basis of your pricing, but don’t forget to think about the value you’re delivering for a client.
When you design a logo, that may represent a brand on multiple platforms for many years. That is worth way more than the time you spend on it, particularly if you can whip out a design very quickly because you have a lot of experience translating brands into visuals. When you build a website, that’s often the first impression your client’s customers will have of them. If you write a landing page that generates $50,000 in revenue for your client, your $3,000 copywriting fee is actually a great investment for them.
For my copywriting, marketing, and web design projects, I charge a flat fee 95% of the time. I’ve been at it long enough to know how much time I need for most tasks, which I round up to account for overhead and unexpected project snags, and multiply by my hourly rate (~$125USD, depending on the specific project, for those who care). I then add on any project expenses like licenses or design assets, but I never mark those up because 1) I didn’t create those assets; and 2) I don’t need to mark up expenses because my hourly rate is already profitable. Speaking of which…
Always price for profit.
I had a small portrait photography business several years ago and mostly just copied what other local photographers were charging. I eventually purchased a few courses on creating a profitable photography business. One common suggestion was to charge a very low session fee, then mark up prints and albums by 500-1000% to cover the time spent editing. I saw this in practice when I bought a $99 Groupon for a boudoir photography session. But then I had to shell out several hundred dollars on the spot just to see my images. The studio policy was clear about this but it felt kinda gross to me then and now.
Don’t bait and switch your clients, or yourself, by relying on making huge upsells to be profitable. It’s sneaky and will probably make you feel and act desperate and pushy in the sales process. I’d be willing to guess that this practice emerged because photographers started trying to bill for all the hours they spend editing (which is fair). But then they freaked out because they were getting up to 15-20 project hours that pushed their session cost into the hundreds and thousands of dollars. And sure, that can be a hard sell for a photography session, but probably not as hard a sell as charging $100 for a 4×6 “professional print.”
Maybe I’m just a tough customer because I know how the sausage is made. But I think it’s better to be transparent and simple with your pricing. Plus, for the record, I once did a bit of VA work for a Toronto-based photographer whose basic portrait package cost more than my entire wedding coverage (which wasn’t minor). I saw her sales sheet and she didn’t sell hundreds of sessions but she did steady business. My point is that there are providers at every price point and customers at every price point. Always price for the profit that you need to make.
Use your friends/family rate sparingly.
Once you start advertising your creative skills, you may find a lot of friends and distant cousins in your inbox asking for help designing their company website or a logo for their business. There may be a lot of familial pressure to do this work for free or cheap, and/or you may feel the need to take these projects on to get your portfolio established. In these cases, I would ideally recommend doing spec work in which you charge no money but retain complete creative control over a project. Given the *ahem* flexibility/NON-EXISTENCE of personal boundaries in Asian cultures and families, however, this may not always be possible.
Enter the friends and family rate. There are several ways you can honor your relationships and your own time and expertise.
- Charge only your baseline hourly rate and any project costs. This essentially means that friends and family pay just for your time and any materials, and not your overhead expenses.
- Charge your usual project rate but deliver more, as long as it doesn’t cost you (too much) cash. Agree to design a logo and then deliver a few variations to use in different contexts. Letter the envelopes for your cousin’s wedding and throw in the extra envelopes that came with your order.
- Offer a percentage or flat discount on work you know you can do quickly.
Be judicious with your friends and family rate. With my photography business, I was overly generous and also too chicken to raise my prices. One of my clients, who was a church friend, started galloping around bragging about how nice and affordable my photos were. He meant well but
“affordable” is not the first adjective I want next to my name. I am not H-Mart. Neither are you. Nowadays, I only give my friends and family rate for small, one-off projects with star clients that have worked well with me before, and sometimes nonprofit organizations.
Manage clients with your pricing (and contract).
For those of us raised to think that frugality was next to godliness (hello!) or those who grew up lacking financial or cultural capital (hello again!), asking clients for money can be terrifying. But ultimately, money is just a tool. Money is simply a shorthand way for our society to quantify and exchange time, skills, and products. Your prices are therefore an extremely effective way to specify who you want to work with and how. You’d rather work with people who value your expertise, right? Charge more. You’d rather do creative and strategic work than monotonous tasks, right? Charge more, especially for the monotonous tasks. You’d rather have clients who respect your boundaries and aren’t texting you with requests at 3am, right? Charge for unscheduled phone calls (or better yet, don’t give them your cell number, but that’s a different conversation.)
Use your prices to fill your calendar.
You can also use your prices to manage your workload. If you’re overbooked for this month, offer a small discount for anyone willing to wait two months to get started. You can also offer a discount or bonus perk to fill a spot that’s currently empty, but I wouldn’t make a habit of lowering your prices to fill your calendar. (Again, race to the bottom.) If you offer payment plans, tie your payments to specific deliverables. This reminds clients what they’re paying for. It also greatly reduces the need for refunds, since you or the client can choose to walk away at several points, rather than grinding miserably to the end and then complaining.
For my bigger marketing projects, I ask for 40% of the total project fee up front to cover my onboarding and discovery process, 30% before I hand over the strategy or site map, and 30% before I start implementing. I also learned to include a hefty rescheduling fee in my contracts (think $2,000USD) to make sure clients are committed to the deadlines we set. I book childcare and other projects based on my anticipated workload, so when clients drag their feet in making decisions or giving feedback, I literally lose money. My business will go under if I keep giving away time for free, hence the pause clause.
Raise your prices strategically.
Pricing can’t do all your client management for you, but you’d be surprised how quickly the quality of your leads improves when you bump your prices up. Of course, if you raise your prices, you also have to raise the quality of your work and the process your client experiences. But that means it’s worth investing in some tools (and maybe training) that allow you to deliver a seamless, easy, process. I get compliments on this a lot in my business, and those compliments typically lead to referrals. (Which is totally worth the $10/month I pay for my CRM program.)
When you raise your prices, there may be a lag period when your previous clients can’t afford you but you don’t have new ones yet. Don’t panic. Like I said earlier, there is a customer for every price point. You just need to find them and clearly express the value you deliver. (This is a lesson for another time!)
You can mitigate some of this risk by setting (and openly talking about) deadlines for price increases. But rather than tying these deadlines to arbitrary dates, peg the price increase to your workload. (Unless your cost of doing business is increasing by a certain date, like your studio rent or materials cost going up.) Book ten coaching clients at your current rate, then bump your package price by 10%. Book another ten, then bump the price again. This rewards people who are eager and available to work with you now, while making sure you don’t leave money on the table. Bottom line…if you’re fully booked, you’re not charging enough.
Remember your why and be proud of your prices.
With my photography business, I felt a lot of guilt about charging people money to take their photos. My parents paid the smallest possible senior photo package at the studio endorsed by my high school. I didn’t get any kind of boutique senior photo experience. We sure as hell didn’t spend $2,000 on an album or wall canvas. It took me a long time to move past thinking, “I/my parents wouldn’t pay this much for photos, why would anyone else?”
Now that I’m a parent and partner, my perspective on work, time, and money has changed a lot. I’m not ashamed of my prices anymore. I know that charging what I do enables me to do work I enjoy and be present for my family. There are other things I could do to earn more money, but they would require more time and energy. In our case, this would decrease our quality of life more than the extra money would be worth. Because I run my business profitably, I am also able to extend a lower rate to nonprofits and give time and money to causes I believe in.
Thriftiness is great. I will never tell a freelancer to waste money, and I’ve even turned away clients whose businesses were not mature enough to invest in my services. But we Asian American freelancers need to shed some of the scarcity mentality of our immigrant parents or grandparents. Most of us have enough financial and cultural capital to move beyond the high-volume low-margin pricing models common to many immigrant businesses. And isn’t that ultimately what previous generations worked and sacrificed for, so that we wouldn’t have to?
So let go, if you can, of any guilt you feel around your prices or your freelancing work in general. There are many ways to make a living, and if you price your freelance services wisely, creative work can bring you fulfillment, freedom, and financial stability.
Featured Image credit: The Gender Spectrum Collection
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