Stay cool when determining what to charge

It’s one of the first things you thought about when you became a free agent, and it’s something you deal with every time you work with a new client. What do you charge?

Some free agents may claim that setting a fee is a rule-less guessing game. You just take a stab at a price and hope for the best.

Wrong!

A wise free agent — perhaps, made wise by pricing failures — knows the two rules for successful pricing:

Rule #1: Never quote a price on the spot. First get as much information as you can about a job. Then take time to assess the project thoroughly and calculate the best rate.

Rule #2: Before quoting a fee, determine the lowest acceptable rate — and what concessions you would like to ask for if you have to go that low. Never agree to work for less than you know a job is worth and your services merit.

What causes pricing disasters?

I base the two rules for pricing success on what free agents, myself included, have described as their worst pricing experiences. You know the kind: the job when you end up working for two cents an hour.

The tales of woe that freelances tell generally result from one of two failures:

• Making a commitment to a price before knowing enough about the job.
  
  
• Giving in too quickly during the negotiation process.

So, you are more likely to have such a disaster when you commit to a price — or even a range — too soon.

Don’t talk money until you have to

A client communicates with you about a new job. After describing the assignment, the client asks, "What will you charge for this work?"

Bite your tongue! Don’t reply just yet! Even if you have a good sense of a fair fee for the job, don’t blurt it out. Instead, tell the client you’ll get back with your price.

Asking for a little time can be difficult, especially if you sense some urgency on the client’s part or that other free agents may be bidding for the same job. Still, even a half-day or "sleeping on it" can be long enough to get a better sense of what a project is worth.

What is the project worth?

Without the client breathing in your ear or glued to the screen waiting for your reply, take time to think about what the project is really worth.

The following steps will help:

1. Make a list of everything that the client said you would have to do. Add to the list those tasks that you know from your own experience are also part of the job.
   
   
2. Determine a fair fee for all these tasks.
   
   
3. Call or email colleagues and sound them out on an appropriate fee.
   
   
4. Figure out what you would charge for different payment options: hourly rate, a flat project fee or a per diem.
   
   
5. Call or email the client to clarify any questions that have come to mind during the price-planning process thus far.
   
   
6. Reevaluate all the information you have about the job — what the client told you, what your years of experience add and what your colleagues suggest.
   
   
7. Determine what you want to ask.

After asking for time and taking these seven steps, you have complied with Rule #1.

Keep your shirt on

Now that you have a fee in mind, you’re tempted to pick up the phone or fire off an email to the client. Whoa! You still have some planning to do.

What if the client does not accept your fee? Will you agree to the client’s counteroffer, whatever it may be? Will you kiss the job bye-bye? Or will you strike a compromise that you both can live with?

You need to determine your approach before the client puts you on the hot seat. The moment when rejection is staring you in the face is not the time to decide on your bargaining tactics.

Many consultants focus only on how high they can go when talking money. It’s also wise to think about how low you can go: What is the absolute minimum you will take for the job? Have this figure firmly in mind and accept nothing less.

Negotiation should be a two-way street. If you have to accept less money than your initial offer, what do you expect from the client in return? For example, maybe the client can do part of the job that does not require your expertise. Or perhaps you can bargain for more time.

Only after you have considered your negotiating strategy are ready to contact the client.

Strike when the time (and price) is right

Rules #1 and #2 both concern timing: when to discuss fees. Both rules are also about thinking before you speak. Know what the bargaining chips are: money, time, payment schedule, perks, etc.

If you follow these rules, you are practically guaranteed a successful pricing experience. Rule #1 will keep you from committing to a fee that might be okay for another job but is too low for the one you’re about to do. Rule #2 will prevent you from saying Yes when you should say No to a penny-pinching client.

About the teacher:
Laurie is the author of What to Charge: Pricing Strategies for Freelancers and Consultants, which can be ordered via the publisher’s website or Amazon.com. Laurie has had a successful freelance medical writing and editing business for 15 years. She works from her home office in New York City.