“What are your tips for pricing one’s work? I still feel so clueless about it even after freelancing for quite some time.”
Today’s post is inspired by a question I received from a podcast listener a few months back. She writes:
What are your tips for pricing one’s work? I still feel so clueless about it even after freelancing for quite some time. It’s always a major problem point for me every time I get new inquiries. When some potential clients dont get back to me, Im always left wondering if it’s because my rates are too expensive. Conversely, there are times when I feel I price my work too low whenever I asses how much [time and effort] I put into it.
First off, I totally get where you’re coming from. You see advice on the internet saying “Know your worth!” and “Don’t underestimate yourself!” — but what does that really mean? It’s meant to empowering, but it’s incredibly vague? How in the world do I know my worth in monetary terms? Is there a magic formula?
The thing is, there is no magic formula. I can’t give you one. There is no specific, cookie-cutter advice that’s one-size-fits-all. It really depends on your situation, the industry you’re in, and more importantly, your goals.
But what I can give you are 3 factors you must consider when deciding on how to price your work. Read on below.
Factor #1: Know your costs.
Question to ask yourself: How much does it cost to produce this thing I’m selling?
This is the most basic, and I think the most logical step that people defer to when it comes to computing their pricing, most especially when you’re making and selling products. Usually, you get your costs of production, decide on a markup percentage, and that gives you your selling price.
It’s a little bit trickier for freelancers who offer services, because unlike raw materials, all you have to cost out are the intangible things, like your time, effort, and creativity and brain power.
And so if you’re a freelancer, I suggest focusing on the next 2 factors:
Factor #2: Know your audience.
Question to ask yourself: Who am I selling to & how much value does this bring to them?
If your audience are small business owners, you’re going to have much different price point that if you’re peddling your services to bigger companies.
Audience is a HUGE part of your branding, and so if you’re clear on your branding, then you should know who you’re talking to, and when pricing yourself – your responsibility now is to really understand your audience’s behaviors and their needs. This will greatly help not just your pricing, but your entire marketing efforts & strategy as well.
So. The #1 thing you need to figure out first is: Who you’re selling to. That’s key. It’s also very much intertwined with the NEXT FACTOR:
Factor #3: Know your competition.
Question to ask yourself: How do I want to position myself among other players in the market? What kind of customers do I want to attract with this positioning?
The next thing you need to figure out is who are the other players on the playing field.
It’s not so much about just going with how everybody else prices themselves and then pricing yourself in a similar way. Or just copying the “industry standard”.
But what I mean by this is, lay out a map of how your competitors price themselves, maybe some people cater to a lower-end market, some people cater to a higher-end market.
Once you map that out, you ask yourself – how are YOU going to position yourself? There’s no right or wrong way to do it, but I think you can make an educated guess about how you want to position yourself against other people in your field.
REMEMBER: Positioning yourself as a “budget option” will attract a certain kind of customer, and alternatively, positioning yourself on the higher end of the spectrum will also attract another type of audience. There’s no right or wrong choice — you just need to decide what works for YOU.
Recap: 3 Factors to Consider When Deciding How To Price Your Work
- Know your costs.
- Know your audience.
- Know your competition.
While this is not a perfect formula, it helps you stop feeling clueless, and stop feeling like like you’re constantly clueless and pulling numbers out of your butt in terms of your pricing. These are the very basic 3 factors that you can jump off of.
But if you want a more big picture way of thinking about your pricing and your business goals as a whole, I dive into another technique you can try — and this is my favorite pricing technique — in Episode 5 of my podcast.
It’s a lot more in-depth of a technique, but I really, really encourage you to do this — because it allows you to think more long-term about your revenues instead of very piece-meal or very short-term and project-based.
Listen to the podcast episode #5 to learn a more in-depth pricing technique:
It’s a really good episode, I answered 5 questions from my listeners about how to start an online business. I tackle a lot of helpful topics, even beyond pricing. If that’s something interesting to you, and you want to listen to that, you can either:
- Go to this post and listen from your browser with the embedded player
- Or, if you’re on your desktop and you have iTunes, you can click this link and it’ll take you there.
- Or, if you’re on an iPhone – you can go to your Podcasts app, and search for The Purposeful Creative Episode 5
- Or, if you’re on Android – you can download any podcast app, my favorite is Stitcher, and search for The Purposeful Creative and go to Episode 5.
NOTE: What I like about podcasts is that I can listen to it anywhere, any time, whether I’m stuck in traffic, working out, or doing errands. It’s a great way to learn on-the-go without having to look at your screen.
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