Freelancers: Are you setting your prices right?

Price Setting

Good freelancers spend lots of time sharpening their skills and upgrading their tools. They take pride in what they do, put souls into their work, and always endeavor to offer the best to their clients. Freelancing is nothing but personal, because your name is the brand.

But that’s just one side of the equation.

You have meticulously listed the deliverable items on your quotation with confidence, and now you are about to add numbers on the “Price” column. A little voice starts ringing in your head: should I write $8,000, $7,999, or $8,130? Or should I write $9,000 and then give a $1,000 discount at the bottom?

This happens because you are serious in getting the job and you want that number to look “just right” to your prospective client. In spite of all the great values you are offering in your proposal, it all equates to this magic number at the bottom line.

We are not talking about how to calculate your prices with reference to your cost structure or how to buff up your margins. Instead, this article explores how to “present” your prices in a manner that would put your quotation in a more favorable position in the bidding process.

 

Clients don’t like zeroes

According to Lindsay van Thoen at the Freelancers Union, she suggested that clients don’t like zeroes on your price tags. She made an example that if you were to quote a project fee of, say $5,000 to your client, chances is that they will come back and haggle you down another $500, even if you had provided detail cost breakdowns. Why? Because they would think there must be some buffers behind those zeroes. Now if you were to quote something like $5,180 instead, your client would probably feel a lot happier because your price appeared to be more calculated and exact with no padding and rounding up.

Will this little trick work and make it harder for your clients to bargain? As a project owner, I find rounded numbers with more than 3 zeroes usually suggest they are ballpark figures – either the freelancer is not being confident and took a cut back on his side (rounding-down), or he is trying to charge a premium (rounding-up). Either way it is a gesture in the communication process that suggests “let’s have some flexibility”. Freelancers often do that because of anticipated project uncertainty, especially if they know the client is unsure of what they want initially.

On the other hand, exact figures suggest precision and certainty – the total price was a “computational result” of the itemized cost breakdown. It’s another form of bargaining gesture that basically says “I am a pro, I know what I am doing, and this is the price for my service”. If I see a quotation like this, I will get an impression that this freelancer knows his stuff, and there will be little room I can bargain. Furthermore, if he ended up doing extra work on the project, I would expect additional billing from him.

 

Offering discounts

Unless the prices for your services are clearly indicated somewhere people can check and provided that you have a good reason, I personally would not consider discounts are genuine in the freelancing context. Marking up your fees and then lowering it with a discount at the bottom is meaningless, but freelancers still do that because they fear once their “official rates” are lowered, they can never get them up again in the future. This is a pessimistic view and a vote of no confidence in your freelancing career. As a professional freelancer, you build up credibility and goodwill over time through your hard work and commitment, and the result is more people would want you on their project, and hence your bargaining power to ask for more.

Perhaps another reason why freelancers offer discount is comparative pricing. For example, the market standard for a web project is $10,000 but we are now offering at 30% discount at $7,000 so why not us? It make sense and sounds right, but the discount will only prompt me as a client to wonder which corners are you cutting? Are you going to pull something out of your stock and just give me off-the-shelf quality work? Furthermore, it will only lead me to think your value is only going to worth $7,000 – or even less.

 

Focus on value

If you are desperate to get the job and want some instant competitive edge, instead of giving discounts or micro-adjusting the numbers, I would suggest you to include more “value-added items” or “free perks” in the proposal.

For example, if you are a graphic designer and you are bidding a project for designing name cards, you can offer the total solution of printing and delivery of the name cards as your value-added service (printing doesn’t cost that much nowadays and you can easily absorb the cost in your design fees). Or if you are copywriting for company profiles, why not offer “one free revision within the first 6 months” as a perk?

Value can also be represented in turnaround time – can you respond and deliver faster than your competitors? If you can promise a quicker delivery in your proposal, you may even add a premium on your price (but don’t take it lightly thought, as it will become a contractual term that you will be held responsible for).

 

Conclusion

There are many different ways in how to “window-dress” the numbers in your quotation. It depends on context, industry practice, and culture. The ones I suggested here are based on my personal experience and findings. Price setting is a skill derived from market observation, business experience, and above all, how much you understand your customers.

Please share with us your suggestions and stories :)

Further Readings:

The Psychology of Pricing Your Service – by Less Accounting

5 Psychological Studies on Pricing that you Absolutely Must Read – by KISSmetrics

Join our LinkedIn Workshop next Monday on 21 July

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**  Please note the workshop will be conducted in Cantonese with English slides.  **

This coming Monday (21 July) from 7-9pm we are organizing a workshop on how to establish your professional brand on LinkedIn – and harness the full potential of this important business networking platform.

WHO SHOULD BE INTERESTED?

If you are a local business and you understand finding the right talent is more than just skimming over piles of resumes, this workshop is for you – because you will get to appreciate why social recruitment is a big and inevitable trend.

If you are a freelancer, and you are aware that more and more people are looking up your LinkedIn profile before or after meeting you, then this workshop is for you – because you don’t want a lousy profile that would compromise your professional image.

LINKEDIN MASTERCLASS

We have invited corporate solution manager Ms. Jessica Lau at LinkedIn to walk you through the secrets behind how to level up your personal profiles and company pages. Furthermore, you will learn about the insider’s view of LinkedIn’s marketing strategies in Hong Kong and how to get connected to the talents and people that matter most to your business.

Jessica K Lau - corporate solution manager at LinkedIn

Jessica K Lau – corporate solution manager at LinkedIn

This is a great opportunity to get a head start in the LinkedIn universe. There are only 30 seats available and tickets are available on a first come first serve basis. Get yours now via Eventbrite.

EVENT DETAILS

Date: 21 July 2014, Monday

Time: 19:00-21:00

Venue: Think Café, 19/F Kyoto Commercial Centre, 491 Lockhart Road, Causeway Bay. (Opposite to MTR exit C)

Language: Cantonese

Tickets: $80 (includes all drinks from menu) – can pay online via Eventbrite, or at walk-in but subject to ticket availability.

Business 101: What is Breakeven Analysis?

A Quick Guide to Break-even Analysis

Whether you are running an online shop selling hot items or you are freelancing as a graphic designer, you are engaging in a business. And every business practically comes down to whether your are making a profit or not. So how do we check if we are pricing our goods / services correctly? Or are we selling enough to cover our overheads? Shall we invest in upgrading our products / services so that we can charge higher prices? If we offer a discount, how much more we need to sell in order to justify the price cut?  Continue reading

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