One of the most challenging issues for any business has to do with setting prices. How much should you charge? It’s difficult to know these days. Scout any of the free online advertising sites for work, and you’ll find offers ranging from vague to laughable — $25 to write an in-depth government grant application, $50 for a complete website design overhaul, et cetera. And news that the formidable U.S. blog the Huffington Post failed to pay contributors for their freelance articles could make you wonder: is it even possible to be a freelancer and make enough money to live?
But at the same time, many freelancers and small companies are thriving. So how do you go about setting prices to keep the business in business? And does it ever make sense to work for free?
For many entrepreneurs, it all comes down to a few questions.
What do other people charge for similar services?
It’s important to know how much others charge in your area of expertise. Some industry-specific organizations publish ballpark rates. The Professional Writers Association of Canada (PWAC), for instance, has an excellent webpage on freelance writing rates. Beyond organizational advice, consider canvassing your social network. What are your former college classmates getting for website overhauls? How much are your writer friends charging per word? It’s the sort of conversation perhaps best conducted informally – over a pint of beer or a coffee – because, let’s face it, many people aren’t comfortable discussing income. Still, it’s good information to have, for two reasons. First, it helps you figure out the gap (if any) between your likely income level and your desired income level. Second, it helps protect you from accepting unreasonably low offers from clients, because you’ll know that others in your shoes won’t accept them either. You may also want to check out FreshBooks report cards.
How much does the business need to bring in?
Once you know how much others charge, get a handle on how much you need to make. What’s your baseline? Is $20,000 a year enough to start? Are six figures your bottom entry point? When you set the income benchmark it’s easier to see if the rates you’ll likely charge are in line with revenue expectations. Many freelancers have a benchmark in mind for their businesses – and as long as they’re meeting it, they know they’re running viable companies.
How much experience does the business have?
The more experience you bring to the table, the more money you’ll command from customers. If you’re new to the industry – a recent university graduate, for example – you might have to settle for lower rates in the beginning. But if you’re experienced, with a number of years in business and multiple satisfied clients, charge more. And if you’ve specialized in a particular niche – website design for educational institutions, for instance – you’re well situated to charge an even greater premium.
Does it ever make sense to work for free?
Yes; but it’s important to know where you draw the line. For some, working for free occasionally is just a cost of business. They feel it’s worthwhile to provide a free sample of their capabilities to prospective clients. Others say they’ll work for free if the project at hand involves a good cause, or something that interests them personally. Set your criteria for free work, so you don’t end up working on a project that satisfies neither your financial nor your personal growth.