Last couple of weeks I blogged about freelance pricing guide for our profile rate and for hourly paid work. It’s time to also discuss the fixed price jobs angel – when and how to calculate our flat rates per project.
As usual, I will not give you do-this-do-that type of freelance pricing guide
Instead, I will share what questions I ask when determining the flat rate I am about to charge. Sometimes, it is money-wiser to work on fixed price jobs, especially if those are guaranteed with escrow.
There might be different reasons why we should prefer working on flat rate projects. To name a few:
- we are fast workers compared to the average freelancer and it is not lucrative to sell our time, rather we should sell the service
- we spend more time offline while working and for that reason we cannot track our time with online trackers like the ones oDesk and Elance have
- we work as part of a team where everyone does his own tasks for the completion of a single project – and we get paid for the project, not for the task.
Whatever the reason, the single thing that matters most is the completion of the fixed price job on time, with the agreed quality and within budget.
So, before clicking the Send button and applying to that fixed price job, ask yourself at least the following questions:
How many freelancers have applied for the flat rate project job and what’s their average rate?
This is purely for information – as we did when calculating our hourly fee, remember? The preliminary announced budget and the active candidacies will give you an idea what people have applied for the job. And the active interviews (or lack of such) will reveal what type of client you are about to deal with.
For instance, if there are few applicants and the average flat rate is above the announced budget, chances are the client has not estimated his costs well. He may have underestimated the complexity of the task, the skills and/or efforts needed to complete the fixed price job on time – hence, the expected costs should be higher than anticipated and you can apply with higher price.
If the applicants’ rates are around the estimated budget, then you will have to match the price expectations and land the job with added value like faster delivery, higher quality, proven track record, etc.
What is your unique selling proposition for the specific fixed price job?
The answer to this question will help you craft your freelance cover letter to stand out from the crowd. For instance:
- If you have proven track record in the client’s niche, you will be a preferred candidate as you will save time during the preliminary research
- If the fixed price job is about data entry and you have an incredibly fast typing speed, again – you will be a preferred candidate because you will need less time to complete the task
- If you have a wonderful voice and enunciation backed up with some radio ads, audio books or podcast recordings in your portfolio, this might be just the tip you need to convince the client to pay you the higher rate you require for your services
All in all, clients (as everyone, really!) often prefer paying a higher flat rate for the services of a well-established freelance professional than less money for the newbie freelancer’s services. This is especially valid for one time fixed price jobs
How much money would you make if you take the flat rate project as hourly work?
Something like a footnote but in context: I always recommend that we, freelancers, should sell our skills and services, and not our time. Well, with flat rate projects that’s possible. Before we reach the moment when we sell our services and not our time, we would go through some ups and downs, so freelance pricing guide for flat rate projects could come in handy, too!
So, the answer to this question should give you the absolute minimum flat rate you should charge for fixed price jobs. Let’s take an example to explain why.
If your hourly rate is $10 per hour (because it’s easy to calculate for the sake of this example ;-)) and to complete the fixed price job you need 10 hours. Then, the least bid you should place is $100 (10 hours times 10 dollars per hour).
I often overstate the flat rate per project. If I continue the above example – of my hourly rate were $10 and I needed 10 hours to complete the project, I would bid $120-$130 for a couple of main reasons:
- When I overstate the price with 20-30%, I am flexible enough to make additional edits if the client requests any, without asking for additional budget. Thanks to this little gesture, the client would see me as a freelancer on whom they can rely in a crisis or when a quick edit is required. Hence, it could potentially bring me more work and turn this client into a repeat one.
- With the mark-up of 20-30% I am flexible to make discounts if the competition for the job boils down to price. It happens rarely but sometimes a few very good freelancers compete for the same job. They all bring added value. They all have great competitive advantages. They are all so great and good and suitable for the position that the client is left with no choice but to choose the least expensive. 😉
If you are not sure which type of freelance projects is for you, check out the post where I compare fixed price jobs and hourly paid work.
Now that you know how to calculate your freelance fees, it’s time to apply to some jobs 😉 Or if you feel like commenting, tell me:
Hi Diana,
This isn’t a comment as much as it is a question. When you take on a flat rate position what do you if the client starts to make changes to the project along the way or asks for multiple corrections to the work? I’ve seen situations where a junior is put in charge of a job but near completion a more senior staff person starts to alter the playing field.
Hi, Debra! Thanks for your comment and question.
Well, it’s a good practice to always have in written confirmation what the flat rate includes.
For instance, if it’s a blogging assignment for a weekly fee, then it should be confirmed in written that the flat rate covers:
– 2 blog posts per week
– each post is 500 to 700 words long
– 1 edition per post included in the rate, if needed
– blog editorial calendar provided on weekly/monthly basis with writing briefs
– format of writing brief is [details around he writing briefs]
– delivery of first draft no later than 3 days before publishing day;
– if there is an edit request, it should be given to the writer no later than 24 hours after submitting the first draft
– additional edits or re-writing of a blog post completely – [price]
I say again, this is a sample only – but if you have similar agreements and confirmations in written, when the senior swoops in and starts asking for changes and edits and doesn’t give you writing briefs, and so on – then you can just sit him or her down and explain that this is not the process you have agreed to when starting working with the company and that you are open to further discuss any and all changes to the work process which may or may not require also re-negotiation of the budget.
How does this sound? Does it answer your question?
I like such “thinking exercises” – give me more 😀
I have never charged by the hour for a freelance job. For the many reasons you stated, I prefer to charge per the project. Your ideas for how to calculate what you will charge are great and I will definitely keep them in mind in the future.
Thanks for your comment, Mary! I am glad my insights and shared wisdom is helpful 😀
Thanks Diana, I have been the junior who had to argue internally for more money after a series of changes and worst still, I have been the senior who unfortunately didn’t realize that the budget was NOT being renegotiated. The freelancer was too new to the game to understand he didn’t want to set that precedent and that he would not be penalized. The junior thought she was doing the organization a favour.
ah, i see… well, having it in written is a good thing for both clients and freelancers. In this specific case, i don;t know – if the freelancer has the skills you need and integrity you’re looking for, maybe it is worth the time and efforts to “educate” them about these things and make a compromise to calm them down and keep them on board – a bonus payment for the inconvenience is always a good tactic. And make sure the junior doesn’t do any more favors like this one to the company 😉
On a larger note, it’s always helpful if the company has a somewhat “written manual” for working with freelancers – who is responsible for what, what steps should be taken when, some kind of frame in which the freelancer-client relationship should fit in at all times. This leaves little room for errors by inexperienced freelancers or juniors…. just an idea, have not thought it through 😀
That makes sense. There’s so much activity in an organization the size of mine and no way for me to track interactions, so it comes down to sharing best practices. I think I’ll start by sharing a link to your blog. 🙂
Hah, so sweet of you to say and do so, thank you, Debra, for your continuous support – and good luck to training both juniors and freelancers how to play nice with each other for mutual success 😉
Diana, I think selling is more about value than price. If what you do, regardless of what your work is, can be communicated in such a way that the buyer understands the value, then price is not an issue. You actually don’t have to equate things to hours. I can’t say I’ve mastered the value approach, but more often than not, I am able to communicate value whether it’s a coaching contract or a training gig. That’s my evidence it’s better than talking about an hourly rate.
Over from LinkedIn group BHB
Hey, Patricia! Thanks for your comment. I totally agree about the value vs hours approach. Unfortunately, it definitely isn’t always possible… When it comes to training and coaching, yes. But there are so many other services we can offer that if the client doesn’t want to measure the value but prefers to have better control over their budget AND to be sure they can rely on your availability and time when they need it – then hourly payment is the way to go. We as freelancers always can say no, o course – but sometimes it’s worth it.
I think i have said it before but it isn’t one size fits all kind of situation. I really believe some work is better done by the hour and other – on flat rates. It’s a matter of preference and ability to negotiate. Thanks for your insights, Patricia! 😀
Most of the freelancers we interviewed said they wanted an hourly rate as a flat rate could run over what is expected. Of course it could work the other way. With my business, you can work on one thing, then it leads to something else. I thought I would only need my web developer to work to maintain the site. It has basically worked out to be a full time job for him.
The best advise for me is to see unique selling proposition. What makes you worth while to hire. What do you bring to the table that is unique. Good Article
Thanks for your comment and feedback, Arleen! I am glad you liked the article.
Your comment actually reminded me of something else – somewhat relevant. A few years ago when i was just starting as a freelancer, i didn’t have enough knowledge to benchmark and price flat rates. I mean, working in an office tends to keep you focused on the work but not really paying attention to details like how much a certain task takes. So, i had no idea how long it would take me to write a marketing plan, or to do a research and write a press release, etc. So, when a newbie freelancer doesn’t have that knowledge, it is hard for them to form their flat rates. Once they know what tasks takes how much time, only then they can move away from hourly payment to flat rates because they can focus then on the value, and not so much on the time they spend to provide the client with that value 😉
As a freelancer myself, I always try to charge on the value of the work versus the time it takes to complete it. I do not like to charge hourly as it says you are charging for your time and not your value. 🙂
Thanks for your comment, Susan! While it certainly is a personal preference and it is always great to charge for the value and not for your time, i must say… you can still charge for the value you provide even if charging by the hour.
For instance, if both you and i are writers and i charge $10 per hour for writing and you charge $100 per hour for writing – your hourly rate is 10 times higher exactly because the value you bring is higher than the value i bring… so, you still charge by the hour and are flexible (the client can give you more workload without negotiating the flat rate as there is none) but you still charge based on your extraordinary skills and value as your hourly rate is pretty high. See what i mean?
Thanks again for joining the conversation, Susan!
I’m a recovering lawyer, so I am accustomed to having to bill for my time. Implicit in that is that I will be spending the time I bill for using my expertise. As a relatively newbie blogger; however, I bill per job, doing a rough calculation in my head as to how long I expect something to take and what hourly rate that will yield. I will sometimes accept a lower rate for a project than I would like to try to start a relationship with a potential client. As a lawyer, I concur 100% with the commenters who urged reducing to writing what the expectations are on both sides. Something that starts like, “Dear So and So: This is to confirm our agreement….” and then set out the points—preferably as numbered bullet points for easy reference later.
(Found you on BHB).
Thanks for your comment, Suzanne! Accepting lower rates to try out a potential client is a good tactic – as long as you are careful not to fall into the trap of having a long term low paying relationship.
Unfortunately, there are many clients who promise heavy workload and long term assignments if you lower you rate a bit – and then don;t live up to their promise. Or, there are also clients who agree to try you out as a freelancer (like you are trying them as a client) for a lower rate with the promise to raise the pay rate once the quality is confirmed – and then, disappear when it’s time to renegotiate the rate. 😀
Oh, yeeeaaah! …Gotta love the ‘trial trap’ – I’ve found that if the lead focuses mainly on price, the sale probably isn’t for me ;).
Same here, Sean – I too grow very wary of clients who think that a trial justifies their demands for lower rates. While it may be a good tactic for starting freelancers in some cases, if you are an experienced freelancer and you *know* the value you bring, no trial is good enough of a reason to lower your rates.
Thanks for reading,
Diana