How Much is Your Time Worth?
Freelancers spend an inordinate amount of time fretting over how much to charge. But there is no right or wrong answer when it comes to pricing. It’s all completely subjective and dependent on a wide variety of factors, including what the market will bear, geographic location, timing, aggravation factor (or lack thereof) and your level of desperation (hopefully low to non-existent), just to name a few.
If you are selling creative services, one of the things that can get in the way of clear pricing is the belief that what you charge is related to your value as a person. Wrong! It has nothing to do with you.
For example, a client will often ask, “How much do you charge for a web site?” or “How much do you charge for a brochure?” They ask these questions as if they are buying shoes or tomatoes.
In fact, if you were selling shoes and a customer asked, “How much do you charge for these shoes?” you wouldn’t say, “I charge $100 for these shoes.” You would say, “These shoes cost $100.”
It’s the same with freelance or creative services. It has nothing to do with what “you charge.” It’s not about you, and it never will be. You must shift your mindset to think instead about what the product and the process costs. So when someone says, “How much do you charge for a web site?” take the “you” out of it and respond with, “A web site can cost $X.”
Clear pricing is based on a clear idea of what you are really selling. Many freelancers believe that what they are selling – and what clients are buying – is time. As a result, you price by the hour.
Pricing your services by the hour is easy. It’s clean, it’s orderly and it doesn’t require much math. But when you price by the hour, you are cheating yourself, especially in the long run.
You get better at what you do—sometimes a lot better—with time. A web site might take you five hours today when, two years ago, it may have taken twenty. But if you charge by the hour, as you get better and spend less time, you will earn less instead of more. Does that make sense?
Also, yours is a creative process. Not only is there no standard for how long it should take; there is a lot of “creativity” and inspiration involved. You have no idea how long it will take for your best ideas to come. They could take several hours of doodling and thinking and whatever you do for inspiration; or they could come right away. Should you be paid based on how long it takes for your ideas to gel? Is that how you should determine how much money you earn?
The answer, of course, is no. Because you are not selling your time. What you are selling is your years of experience, the effort you’ve expended developing your skills and talents, and your resulting expertise.
What you are selling is your brain, your attention and your creative imagination applied to a client’s specific problem, and that has a value. It’s not an objective value; in fact, it’s highly subjective, which makes it challenging to quantify.
Ultimately, what you are selling is peace of mind. You see, not many clients understand what they’re buying, and they know they don’t know. So it’s your job to make them comfortable and safe in the knowledge that you do understand and will take care of everything. If you do that, the good clients will choose you, even if you’re the highest bidder.
Excerpted from the forthcoming, The Designer’s Guide to Marketing and Pricing by Ilise Benun and Peleg Top, co-founders of Marketing-Mentor.com, a coaching program that helps creative professionals grow their business and get the clients they want. Sign up for their free “Quick Tips from Marketing Mentor”.
Whether you want to learn while you work out or to make that commute useful, Freelance Radio is the place to hear all the tips, tricks and news of freelancing.
Freelance Radio
With over 100 weekly strips and counting, Freelance Freedom is an institution around here. Check out of all NC's brilliant work in the archives.
Freelance Freedom Archives
Interested in contributing to FreelanceSwitch? Write for the foremost freelance community and help share knowledge for the benefit of all!
Become a Guest Writer
Very well put.
One of the best examples I’ve read that helps place in this in context goes as follows.
- – - – - – -
Legend has it that Pablo Picasso was sketching in the park when a bold woman approached him.
“It’s you — Picasso, the great artist! Oh, you must sketch my portrait! I insist.”
So Picasso agreed to sketch her. After studying her for a moment, he used a single pencil stroke to create her portrait. He handed the women his work of art.
“It’s perfect!” she gushed. “You managed to capture my essence with one stroke, in one moment. Thank you! How much do I owe you?”
“Five thousand dollars,” the artist replied.
“B-b-but, what?” the woman sputtered. “How could you want so much money for this picture? It only took you a second to draw it!”
To which Picasso responded, “Madame, it took me my entire life.”
Amen.
You can tell the freelancers who tie their self worth to their pricing: they’re the ones charging so low they couldn’t make a living even if they did it 24 hours a day.
Never forget one of the oldest truths in the book: price = worth.
Very true!
Thanks for the article!
Creative, Thats a great example! Thanks for that.
When you hire good designers/agencies, you buy their name which has years of trust and great testimonials from big clients, thus the price is worth every penny.
Keep Rocking!
Aloke Pillai
I was reading a rant a few weeks ago by a former high profile Rails developer. Maybe you can guess who I’m talking about.
Anyway one thing he mentioned, stuck in my mind, which is not terribly reliable, but I remember the general gist of the story.
It was something about a company that was having problems that they couldn’t get past. He agreed to look at their system and attempt to fix it for them, for a set price, from memory about $500.
Anyway, apparently it took him about ten minutes to solve the problem and generate the invoice. But then the client refused to pay, because he did it too quickly. So in this case the client wasn’t buying the “$1 for the nail, $999 for knowing where to stick it” logic.
He would’ve been better off to make them wait a few days and then send the invoice.
Great Article … thanks
Your point of view is very interesting – I never thought of answering a client by “A site costs…”.
What I don’t understand, why does it make such a difference in a client’s understandings – If you say a website costs $1000 or you charge for a site $1000, in one way or another the client gets it’s $1000.
Another point: you mentioned shoes – and shoes are a product you can find in more than 1 place of the same (brand for example) – but in different prices. When it comes to whatever freelance work – the product is never the same and is unique for each freelancer. There I see the point of saying “I charge…” – because that “I” Is based on your experience, your timing, your location, etc. In shoes you don’t say that because you didn’t make them, you depend on whatever industry and/or how much you purchased the product from them…
Am I confusing?
Great article.
Great article. Pricing an is all just a mindset. I found the paragraph about cheating yourself by charging hourly a little off though. Of course you’re likely to improve with time, so if your rate stayed the same and it took you less time to do a job now than it did 2 years ago, you would be cutting yourself short. But surely if you’re improving and getting more experienced you’d be raising you hourly rate as well.
It certainly takes me less time to make a website than it used too. but I’m charing twice the hourly rate so I’m making more money.
There’s no fault in the idea of charging for your time (hourly) as long you you adjust your rate to reflect your worth.
@riki, I love your example. I’ve done something similar in the past where I finished a project much quicker than anticipated and I waited a day to notify the client so they wouldn’t suspect it. It really should be none of their business how long you take if they think the price is a good value for the service you’re offering, but most people don’t work that way.
A really important post. also it was interesting to note some new perspectives on charging.
altogether, a refreshing take on pricing creative processes
Actually, this is only half-right.
Clear pricing is based on what you are selling and who you are selling to. I have a freelance buddy who charges $250+ per hour for his time. To get that rate, he has to exclusively market to potential clients who are used to paying that rate for the types of services he provides. I have another freelance buddy who charges $45/hr for her time doing SEO. She could be charging $100+/hr for her time and she knows it, but that would exclude the mom-and-pop clients she wants to work with.
Know your worth, but also know your ideal client.
This was great and completely gave me a new way of looking at pricing. We don’t charge by the hour at all (we feel it’s unfair to both us and the client), but we do say, “Our rate…” I agree. It’s the final product that costs a certain price, and it’s not about us.
Also, this post is so chock full of insight into a writer’s life regarding the struggle of rates that I wish I could send it out to people so they have an idea of what we sometimes face. As is, linking to it and passing the word around will do just fine
Thanks, guys.
thanks, everyone, for the comments.
Actually, we were going to include that Picasso story in our book, The Designer’s Guide to Marketing and Pricing, but we didn’t have the space. So thanks, Creative, for posting it.
Dor Dan, I don’t think you’re confused. In fact, the distinctions you cite make sense. I just think you’re making it more complicated than necessary. We are trying to encourage creatives to get some distance on themselves and the work they do but changing the way they speak about it.
And I completely agree with Andy’s addition about knowing the ideal client.
Anyone who found this useful might also be interested in a webcast we did on this topic with FunctionFox.com. You can view and listen to it here: http://www.functionfox.com/events/01-HourlyRates/
It’s AMAZING! Thank you so much for this post, and all the posts in this website actually.
I’m starting in this world, and all your tips help me a lot, the are universal!!!!
Cheers from Venezuela!
This is good advice; though I never really thought of it in these terms. I still charge based on hours–and will likely continue to, at least for the jobs on which I’m comfortable doing so–because my hourly rates reflect my experience and expertise at the particular task.
Then I compare that against what I feel like the job is worth overall–regardless of hours–and I make adjustments. But starting off by estimating time usually gives me a good basis to work from–at the very least, to provide a solid “ballpark range” to potential clients.
By the way, that’s also one way I’ve learned to deal with the question “How much would you charge for…?” Because giving a RANGE–whatever it’s based on–is a lot safer than allowing yourself to be put on the spot to quote an EXACT amount without yet knowing all the specs and requirements of the job. (Never quote ‘off the cuff’–it’ll bite you everytime.)
Great post, this will help me a in pricing future projects. Being better and more efficient should not have an adverse effect on pricing. I think this is especially true with web developers, who create a large code repository from years of client work. I will definitely check out the webcast. Thanks.
Great post. I find myself charging depending what I believe the client can afford in certain instances.
I almost always want to meet with the client at THEIR business to get an idea not just about the project but also how to price my services to them.
While I try to work with all types of budgets (within reason), I think underpricing yourself for certain cleints is just as bad as overpricing for others. You an lose them either way if you charge the wrong rate.
That quote about Picasso is very true. I see my skill as a web designer as a skill I’ve learned and not a job that i need. Many freelancers undercut the market by thousands a week, and yes I’ve felt the impact it’s had on the local web design market. Where I’m working at the moment, i was sat drinking tea at a cafe when i gazed across the road at a print shop, in the window there was a big sign advertising a 10 page website at £399.95 a year. I couldn’t believe my eyes
Great post.
I would like to bow down for PSDTuts team and the great articles they give to us.
)
Thank you guys.
I can know say that including “you(me)” will never be a problem for me.
Awesome post, Thanks again!
Hello,
We have made an xls file that calculates a Freelancer’s or company’s time. It is free for download on our website and specifically at http://www.x2interactive.co.uk/product.php?section=39&product=7
Hope it helps
Another Superb article. Very helpful indeed – to be honest I always considered the amount I charged to be a reflection of me… But I guess I am wrong – in fact it is a reflection of the services I offer!
Very Nice! have been thinking of this matter for a long time and you provided a great word of advice. Thanks!
There was a time when I realized I could complete the same amount of work in a third of the time (on web projects) – just based on the experience I had. My hourly rate became completely irrelevant and I began quoting flat rates based upon the features etc the client wanted. Over the years, I have developed a large amount of code and basic framework type templates that are rock solid across all browsers. They give me a huge head-start when beginning a project. But, as you said in the article, I’ve paid my dues and spent the time to build this library. It’s part of the reason client’s get referred to me and why they can trust what I will deliver.
Every day you work and learn something new is advancing your trade-skills.
The best skill I ever learned though was to ask this question before committing to a price: “Do you have a budget for this project?” If I can make more money that I thought I would, save the client money, and over-deliver on the project, all is good!
I’m using a small but nifty tool called FEAT to calculate my hourly rates and estimates … http://blog.hexagonstar.com/downloads/feat/ … saved me a lot of time calculating rates indeed!
While charging what a service is worth is great, there will always be (an ungodly number of) clients who have no idea what good or great writing looks like. They go with the lowest bidder, get crappy work and then wonder why they aren’t seeing results. I refuse to get into bidding wars and my rates are my rates. I’d rather bartend for extra money than whore out my services for a bargain basement price. Unfortunately, there are still plenty of writers willing to offer total crap press releases and articles for .0001 a word.
Nice example…..
In short, you cannot bill for knowledge by the hour. Billing by the hour is immoral, unethical and suboptimal. It is based on Karl Marx’ labor theory of value. Customer buy results not efforts.
For more extensive treatment of this subject visit http://www.verasage.com. We are non-profit think tank dedicated to the elimination of the billable hour in all professions.
@Ed – I can see why you’d end up being non-profit. LOL! Too funny. Immoral and suboptimal in the same list…..
Since what I do doesn’t deliver a consistent product, I am not sure how to charge for my services… I’m a freelance chef. I use the analogy that charge “like a plumber”, that is to say, “parts and labor”. I charge an hourly rate, (although i do have a minimum fee). I get reimbursed for groceries, of course, and I charge for shopping for the groceries, (my clients seem to like seeing that i pull out the receipts in front of them and total up that number and add it straight to my invoice. Doing it this way can mean that a dinner for two can be $400, but a dinner for 10 can be only* $1000, including groceries. Does anyone have a suggestion as to how i might adjust or improve my pricing strategy? *only is relative
A lovely post indeed. However I do find the claim that if you charge hourly, the better you get – the less you make, a bit problematic in 2 ways:
The first one was mentioned in a previous comment: as one gets better, one can simply charge more per hour – and this is totally acceptable by the clients, and working for all the freelancers I know.
The second is the fact that if you’re working faster – you achieve more in the same amount of time.
Example: Say I used to build a site in 5 hours for 20$/hr. Now I do it in 2 hours and charge 40$/hr (the client is already happy!). BUT, in the remaining 3 hours I simply take on more work. Before I did 100$ in 5 hours, now I do 200$. Calling this “making less” is not exactly correct…
Obviously this is how I work. I like working by the hour, getting paid exactly for the time I’ve put in – no more, no less. And when I feel I’m worth more – I charge more. Very simple.
The argument in the article seems logically inconsistent. It starts out by asserting that the value of the service being quoted should be viewed objectively (like that price of a pair of shoes), and that, “…It has nothing to do with you”
But a few paragraphs later, the author says, “What you are selling is your brain, your attention and your creative imagination applied to a client’s specific problem, and that has a value. It’s not an objective value;” Well if what I’m selling is my brain, it has a LOT to do with me.
One can’t have it both ways. Either the service being sold should be viewed objectively, and the price of a web site (say) is the price of a web site. Or what’s being sold is not objective at all, but rather the creative applicatoin of the supplier’s brain, which should be evaluated on the quality of the creative ideas said brain produces. Which is it?
I always get nervous when I employ a freelancer on an hourly basis. It leaves too much up in the air, and is just plain risky on my side of the equation. While you can alter this by writing a max number of hours into a contract, I think the better solution is to just price by the project. That way the employer knows the set fees, and if you get it done faster, it’s a bonus for both parties. You can always have a clause that states the number of revisions, etc. before going into an hourly rate. Plus, as a freelancer, you can always base the project estimation on your hourly rate without outright stating that is what you’re doing. I do, and it works great for me.
This article contained some great advice. I have similar techniques I apply to my Freelancing every now and then to keep the money flowing.
I think the reason so many Freelancers charge so little is the fact they want the work, they want to beat everyone else to the project and they’ll charge low to prove a point. The ones that charge the lowest are usually the cheapest / quickest and nastiest Freelancers you will ever deal with.
- Dwayne Charrington.
http://www.dwaynecharrington.com
I once heard a joke about pricing programming jobs:
“Find out what your client’s psychologist charges and charge a little less than that. Then the project will be a bargain for them”
Excellent, excellent point. When I started my self-employed career, I promised myself to use these principles (my favorite writing is Alan Weiss’s “Value based fees”). You *will* get pushback, though, so be prepared. As you say, charging for time is very accepted and expected – you have to get creative, firm, and stick to your approach. And be willing to walk away from work. This takes self-esteem and a rock-solid belief in your value; it’s probably the biggest issue blocking taking this direction.
An example: I have a good client who returned and asked for me on retainer. She wanted a very standard approach like she has with her lawyers: $/hr. I considered it, then decided to counter-propose the kind of unlimited access arrangement Weiss recommends. I haven’t heard back, but I’m sure she’ll reject it. Which is fine. My time is potentially *much* more valuable than even $300/hr. One hour with a client could pay off in the thousands (time saved, improved focus, mind freed for new product and sales ideas, etc.) Is this risky? Sure. Does this bolster my opinion of myself? Yes. Does it send this CEO a message? Maybe.
Thanks!
Thanks for the very timely reminder. Regarding Piccaso; When being challenged about the price of his work. The punter had asked how Picasso could justify thousands of dollars for one of his works when the canvas, oils brushes and frame only cost 100 dollars. Picasso replied “heres a hundred bucks- you do it”.
The Baldchemist