Freelancing Rates – Six Years Later

It’s hard to believe, but it’s been almost six years since I first decided to strike out on my own! Since then, I’ve learned a lot about running a business through trial and error.

Hourly vs Fixed Rates

One of the first lessons I learned quick, was how to charge for projects. When I first started freelancing, I charged an outrageously low hourly rate of $20-30. I quickly realized that not only was I not charging enough, but the better in skill I became, meant I coded faster, but made less money.

I quickly switched to fixed rate pricing. I had done enough timed projects to know how long a site generally took me from start to finish, so I based my first prices on a total hourly. For example, if a site took me 10 hours to code, and I wanted to make $50 an hour, I turned my project price to $500. Not only did this benefit me in the long run, but I also discovered that clients actually preferred this method, because it meant they knew exactly what they were paying up front. More importantly, however, it meant that if I finished sooner than I estimated, I still got paid the full amount. So the faster I got, the more per hour I was technically making. But to the client, it all cost the same.

I eventually got to the point where I could charge $200+ an hour for my work. Of course, if I tried to tell the client that I charged $200 an hour, I’d never get any work! But if I told the client their site would cost $2,000 (which is less than most sites now), and the site only took me 10 hours to code, voila! It’s all about perception and skill. A lower skilled developer might only charge $60 an hour, but if they take 3 times longer to code than me, the price ends up the same.

The one argument I hear against charging a fixed rate is the potential for scope creep. With hourly, you can just continue to charge by the hour, even if the client keeps adding on to the project. This issue is easily fixed though. In all of my official estimates, I have a detailed outline of the scope. If the client wishes to add on a feature that isn’t covered, I simply let them know it’s out of scope and I would happy to do it for them for an additional X amount. Easy enough!

Figuring Out The Dollar Amounts

Regardless if you charge hourly or a fixed rate, it’s important that you play with your prices until you find that ultimate sweet spot, where you’re making a good profit, with projects and clients you love and you don’t have too full or empty of a schedule. If your rates are too cheap, you’ll have an over abundance of work, but it’ll most likely be crappy, unrewarding work, often for rude or undesirable clients. However, if you charge a whole lot more than the average, you’ll get less projects, but for larger clients and companies. You’ll also often end up working with a team instead of on your own.

There were weeks where I’d charge two rates, one often double of the other, just to see which rate attracted more of the work I wanted.

Discounts

I very rarely discount my prices unless it’s for a project or client I really love. Instead, if a client can’t afford my rates, I try to get them to remove some features. Discounting is usually bad for several reasons: the client comes to expect it and not take your “real” rate seriously; the projects and clients often end up being more demanding and time consuming than other projects; and they usually end up as nightmares.

Collecting

I charge 50% up front and the last 50% upon final site approval, before any files are handed over. This way, if they don’t pay, they don’t have a site. (Knock on wood) I’ve never had a client go delinquent on me. I might also invoice out early if they client takes longer than a week to review the site. I very rarely compromise on this payment schedule.

Making it work for you

I believe I finally found my sweet spot of perfect price and project. There’s no magic formula for rates or payment schedules. Just like finding clients, everyone does things differently and you’ve just got to experiment what works for you. I’ve heard some interesting discussions about invoicing weekly, 1/3 milestone payments, and other neat ways of doing things. I’d love to hear how you go about it!