I started this conversation in last weeks blog post on Pricing Creative Services – Part 01. We talked briefly about the first step to being able to effectively price your creative services so that you can make a profit while feeling confident in your prices.
In this blog post, my intention is to help photographers, videographers, copywriters, designers, coaches, and consultants figure out what you still don’t know (and maybe don’t even know that you don’t know).
Your Biggest Block
The biggest block for you right now in pricing with confidence is that you probably don’t know what you don’t know. You probably don’t know the kinds of decisions you’re going to make, or maybe you’re overwhelmed by all of the different decisions that you CAN make.
There are so many different things to consider when we are setting our prices, not just what it costs us to deliver, what the market is going to bear, or the value that our clients think that they need or that they’re going to get from our services.
The first step is to design and build your compelling offer – get super clear on what your services are and what you are selling. The second step is deciding on your pricing model.
What is a Pricing Model?
For many of us, this might be the first time that we’ve really considered what a pricing model is, and why we need to have one.
A pricing model answers questions like “Are you going to charge by the hour or day?”, “Are you going to charge with rates?”, “Are you going to charge by the project?”, and “Are you going to calculate your prices based on cost plus a markup?”. How are you going to think about and model your pricing?
There are other decisions to make like pricing strategy or revenue collection strategy that can certainly influence your ability to market and sell. The decision that you need to make about your pricing model is really about your own confidence and how you can present your prices to best support your clients in getting the best value in exchange.
Stop Pricing By The Hour
Many creative freelancers start by thinking that we are going to charge by the hour. And if you look around in a lot of the social media groups and communities, a lot of freelancers are asking, “what is the average rate for a graphic designer for the hour? What do copywriters charge by the hour? What is the average price for coaches or consultants by the hour?”.
This is certainly great information to be able to use internally, to see whether you’re on par and on track with what the marketplace is doing to help you position in the world. But…
to bill your client by the hour, actually, does both of you a disservice.
Billing by the hour ends up setting up your client to pay more if you’re slow. And it means that if you are really good, fast and efficient, you get paid less money. That just doesn’t seem to make any sense.
Charging by the hour could mean that the client tries to squeeze extra scope inside of the project to try to make you work faster and there’s all this pressure to do the work because the client’s only paying for five hours and it’s got to get done in five hours.
If we want to price our creative services with confidence while offering our clients great value on our services, pricing by the hour does not achieve that.
Instead, charging by the project would give you no pressure in terms of time constraints. It would set you up for being able to do a much better job for the client and have a much better and more fulfilling experience as the creative service provider.
A Successful Example of Billing by the Project
For example, in my Business Accelerator Mastermind group this morning, when one of the designers said that she quoted a job to do some Photoshop work on some images, she quoted based on the whole project.
In her mind, she thought it would take her nearly four hours. But she didn’t say: “this is a four-hour project, this is what I charge per hour.” She just said: “This is what the project is for your completed images with the design work done. Here’s what the cost is.” And they agreed to that cost.
She then goes back to do the work and it doesn’t take her four hours. It only takes her an hour. Her skills, her efficiency, her creativity are on flow. All the tech works. Everything loaded and downloaded and uploaded really, really quickly. Everything was super efficient. There were no problems whatsoever.
And …she still gets paid the same amount as if it had taken her four hours. Because the agreement was on the VALUE of the project not for a set amount of her time.
Pricing By the Project
So you’re starting to see that the value to the client didn’t change. The value to the client is still the same, but the amount of time spent was three hours less than approximated. The client didn’t know or care whether it took her one hour or four hours as long as the project was complete.
The pricing decision is up to you. Your clients just care that they are getting value for the price they are paying for.
You want to choose a bang for the buck pricing model that supports your client while generating profit and growth for your business.
You’ll still need to know what your minimum price per hour is in order to calculate the project price… but in terms of a pricing model that you’re going to use in your business, I highly recommend that you avoid pricing by the hour or even a half-day or full-day rate.
Instead, choose a pricing model, particularly a project-based pricing model, that’s really going to set you and your client up for success.
To learn how to calculate your minimum price for profitability and the other pricing decisions you need to make in your freelance business, check out our Pricing For Creatives workshop.