3 Strategies for Determining a Project Budget for Clients
Pricing is often the final factor that determines if a client you are pursuing will hire your freelance services.
When it comes time to pricing your services, how do you put together a package that provides your client with an accurate projected budget?
Too low a price won’t win everyone over necessarily (realistic, savvy clients are looking for value for their money, not simply the cheapest provider). In fact, many clients might perceive a low price as signal about quality and will walk the other way if they think you are over-promising or cutting corners on your services.
Budgets you propose for clients are the product of several factors: your labor rate, the effort that will be expended to provide the services for a project, and a variety of client indicators, such as the client’s experience with businesses like yours, his reaction to your portfolio, how “big” the client is, and if working with them is also a professional networking opportunity that may pay dividends later on.
Try setting a proper project budget in the following ways:
1. Determine what your clients are really after.
Always find out what the client’s overall objective is. For example, a client may be ordering research reports from you to showcase his expertise in a certain area. The reports you will provide are the deliverables, but what are the objectives?
Is the goal to increase user traffic? Build a brand? Introduce new products and services?
If that information isn’t already built into the specs the client gives you, you’ll need to dig further in another meeting or conversation. What all this investigation does is let you figure out the overall goals of your clients so that you not only meet but exceed their expectations for the project. It also puts you in an ideal position to offer the client upsell options.
2. Explore and expand on the project scope.
Always give your client several options, at least two: a no-frills, basic approach and one that’s more comprehensive and delivers maximum impact.
What you’re essentially doing when you break down your client’s requirements is figuring out what the client really wants.
The first option is the minimum to meet your client’s project requirements and the latter provides a bigger package that gives your client more bang for the buck. You may include bonus services or add-ons to sweeten the deal, but in doing so, you also can justify raising your prices. The goal: motivate your client to opt for the expanded services, which is a win-win: better services and quality for them and higher rates for you.
What you’re essentially doing when you break down your client’s requirements is figuring out what the client really wants. From experience, most clients, especially first-timers hiring creative services, don’t really understand what a particular service entails. They don’t know their options.
Remember the adage that good businesses always give customers what they want? Well, that actually might not be the best strategy. Steve Jobs, Apple founder and tech visionary, was quoted as saying, “You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”
As a freelancer, you set yourself apart from the competition by learning how to pick apart client requirements. Freelance mantra: “I’m the expert.” You’ve done several projects like this. It’s not to say that your client’s opinions don’t matter (they do), but it’s also not the case that you can’t inject your own creative thinking into projects. Make suggestions. Give clients alternatives. They will appreciate you for it.
3. Ask your clients how they calculate their cost estimates.
If a client you’re negotiating with gives you a budget that’s way off-course, and he or she does it out of lack of information, rather than a hardball way of haggling with your quoted rates, try asking the client to break down the figure.
I get this all the time when I take on freelance writing projects. Clients often think whipping up a 50 page report or 100 page e-book is as easy as typing out words. “Oh, it shouldn’t take you more than a few weeks. I think it should only cost X amount of money.”
Or, sometimes a prospective client will quote another freelancer’s rate (usually some unrealistic, rock-bottom price) to try to stir up a bidding up war. I find it useful to find out how clients arrive at their budget, so that I can then counter with why they are off-base.
I tell clients that they should look at the budget not in simple dollar terms but in how much each dollar will bring in terms of value to them.
I provide the industry standard rates for professionals in my field; describe past projects and show samples of work done at the reasonable budget; go into detail about how long it takes to do a similar project; and emphasize that the budget is an investment not just an expense.
I tell clients that they should look at the budget not in simple dollar terms but in how much each dollar will bring in terms of value to them. Sure, clients can always go with the rock-bottom rates of a competitor, but do they know what they are buying with their money? I’ve heard editing clients gripe to me about how they saved money hiring cheap editors for their book projects, only to end up hiring more editing services to re-do or salvage shoddy, botched manuscripts. It saves your clients money to get it right the first time.
Finally, always stand firm on your budget once you’ve done your research and presented your case to a prospective client. Freelancers tend to start doubting their proposals when clients balk at their budgets.
Explain again how you arrived at your rates, walk them through previous projects, outline how long it takes, and always stress what kind of value you’re bringing to their project. Don’t lower your rates under pressure. Freelancers aren’t wimps.
Remember that bargaining can also be a tactic to test your convictions and business acumen. Don’t take on a project that you would be working on at a loss. The opportunity costs are high (you could be working on better projects), and you’ll risk becoming a frustrated freelancer.