Once you’ve been freelancing for a while, there’s a line you get used to hearing.
It goes something like this:
Can you do the work for a little bit less? I know it’s not that much, but I’ve got a lot more work for you if this project pans out....
Your potential client probably doesn’t have anything malicious in mind and may truly intend to give you more work, but here’s why you can’t afford to fall for lines like this:
#1: Your initial rate sets expectations
First off, once a client gets used to paying you less, they’re going to want to pay you less for the entire length of the time you work for them.
By going lower than your regular rate, you anchor your price below market value, which means they’re going to want you to do more work at a discounted rate.
#2: There’s no guarantee you’ll get future work
As a contractor, there’s no guarantee that you’ll get future work. The company could go out of business, the project manager could get fired, or the client simply could decide they want to work with someone else.
There are lots of different potential outcomes but absolutely no guarantee you’ll get more work if this project “works out.”
Here’s what you should do instead...
These two reasons combined mean you should never trade on future promises. Instead, bid only on the work that’s directly in front of you.
If a prospect asks for a bid on project X, then you should bid $Y based on the amount of work it’s going to take to finish project X.
It’s entirely possible you’ll get more work if you knock the project out of the park, so go ahead and work tirelessly to deliver the best possible final product. But even if you do crush it, there’s no guarantee you’ll get future work—and more than likely, if the work comes, your client will expect the discounts to continue.
This advice is based on years of freelancing and building a digital marketing agency. I’ve had countless prospects tell me, “We’ve got so much more work for you if you can just give us a little discount,” only to not get more work for one reason or another. I ended up getting burned once or twice before learning this very important freelancing lesson.
Instead of discounting your rate for promised future work, here are three things you should do to command the best price for your services.
1. Know what your rates are
The first thing you need to do is know what your rates are. Make sure you have a clear understanding of what you charge before going into any kind of contract negotiation.
It doesn’t matter if your rates are hourly or by the project (keep in mind that bidding on a project tends to be better for freelancers than hourly), but you do need to know what your rates are so you can confidently quote them to prospective clients.
2. Raise your rates over time
When you first start out, you won’t be confident bidding $100-$150 per hour, and that’s OK because your work may not be at that level yet. But, as you continue working and get better at what you do, you should raise your rates over time to match your experience and the demand for your services.
The great news is, the more work you get, the easier it is to raise your rates. Here’s how that works:
- When you first start freelancing, you don’t have any work or experience so you’re desperate to land work. This means you’re willing to bid at a lower rate to get the experience you need in order to charge more, which is totally OK.
- As you start to get more and more work and experience, you’re going to have less time and be less desperate for new work. Being less desperate is the best place to be because you can start bidding more for work, and it doesn’t matter as much if you don’t get the work. This is the sweet spot where you are in a strong position with leverage and can start raising your rates in line with the demand for your services.
3. Learn to bid based on value
One of the most important lessons to learn is to bid your services based on the value you’re providing. Here’s how that works.
- Hourly rates means you bid based on the number of hours you put into the project. More hours means more money, and fewer hours means less money. Two things that stink about hourly rates are 1) that clients start to view you as being expensive once you’re around or over the $100/hour mark, which is where you need to be in order to make 6 figures as a freelancer, and 2) you lose money when you get faster and more efficient at what you do.
- Bidding by the project means you bid based on a fixed amount of work, not the number of hours you put in. The great thing about project bidding is that businesses often don’t mind paying $5000 for 10 hours of work if they don’t know how many hours are involved and think the project is worth at least $5000. Thus, this is the fastest way to get above the $100/hour client mental block.
- Value-based pricing means you bid based on the value provided to a client with no correlation whatsoever to the number of hours involved. You may think that a logo is a logo, but actually, a logo is much more valuable to a company like T-Mobile than it is for a local coffee shop, which means you can charge T-Mobile more for a logo, even if it takes the same number of hours as a coffee shop logo. The point here is that you can earn a lot more with value-based pricing, i.e. bidding based on the value provided to a client, than you can with quoting an hourly rate that’s the same for everyone you work for or bidding on a project based on the number of hours you estimate it will take.
Over to You
There’s no way around it: When you’re starting out as a freelancer, expect to hustle for your clients. But just because you’re hustling doesn’t mean you should be devaluing your own talent or services. The more you can stand confidently in your own value, the stronger you’ll position yourself long term, and the more your business will grow.
Did you learn something helpful from this post? If so, we’d love to hear from you in the comments, especially if you have any experience getting burned from unfulfilled future promises by clients or positive experiences raising your rates over time.
Here’s to your success and continued growth and learning!