The Alchemist's Lair
Thoughts on writing, language, life as a freelancer,
and what comes to mind.
and what comes to mind.
When it comes to pricing, most newly-established freelancers don't know where to start from. Some look at a proposed price and think it's a good deal, but later they find out the project takes a lot more time to complete, or maybe that they find out that the project actually comes along with smaller updates whose price hasn't been set before.
So how to deal with the pricing policy nightmare? How to define your rates as a freelancer if you're just starting out in the industry? And, above all, how to price your services so that customers won't scream away in panic?
This new mini-series within the Marketing Pills series will try to provide you with some food for thought about pricing policies for freelancers, including some free online resources that can help you through the process of defining your prices as well as some tips on how to communicate your prices effectively to your prospective customers.
SMART MONEY MANAGEMENT FOR FREELANCERS: DEFINING YOUR TARGET INCOME
The most important thing when deciding on a pricing policy is to take into account all of your annual business costs (office rent, telephone and other utilities, furniture, business travel expenses, IT equipment, manuals and books, stationery etc.). Your pricing policy should be designed to cover all of these costs plus providing you with some profits who'll feed your belly, dress you up and cater for all of your other needs.
Now you found out how much your business will actually cost you per year, you need to figure out what your personal expenses would be. Make sure to include mortgage or house rent costs, car insurance, health insurance, retirement savings, taxes, food and groceries expenses, holidays, entertainment expenses, transport costs and all of those kind of expenses you normally have on a regular day. Your pricing policy should cover all of these costs as well, plus the profits we talked about earlier.
By now you actually found out what would your minimum income be. When defining your rates, this very number represents the top bottom of your barrel. No matter what your pricing policy will be, this is the amount of money you need if you want to keep up with your annual expenses and still avoid starvation.
Now we secured survival, we need to fill our money barrel with profits. What you want to make out of your profession is really up to you but, as a minimum, you should at least go for 20% of your income. So, what you'd need to do is basically divide your minimum income in 4 parts, and one of these parts is your profits share. Just add your profit share to your minimum income and you get your target income for the year.
Still trying to figure out how to make that huge number fit your everyday business?
Stay tuned for next week's article: Defining your rates