Increase your revenue with the right pricing strategy
Pricing for freelancers can be a stressful and complicated affair. Bulletproof and proven pricing strategies are part of the foundation of any successful freelancer's business, and we get under the skin of the most popular ones here.
As a freelancer, you have a number of different options that can be included in the pricing mix. The most popular include: hourly rate, project rate, value-based pricing, and retainer.
When you familiarize yourself with the different strategies, it's easy to become paralyzed. After all, what should you choose to effectively price your service and grow your cash tank?
Of course, there are pros and cons to each, but whatever you choose, keep it simple.
Potential customers should be faced with few precise offers, not presented with a menu that makes a provincial pizzeria envious.
Whether you're just starting out as a freelancer or "just" looking to shift gears in your business, this guide will help you find the right strategy for your shop.
Hourly rate
What is the hourly rate?
Selling your time by the hour is probably the most popular and proven pricing strategy used by many freelancers and self-employed professionals, as well as consultancies of all sizes.
It's actually a pretty straightforward and transparent approach that allows you to charge your customers for the time you spend getting a project or task across the finish line.
Here you set an hourly rate and invoice the customer based on the number of hours worked. Easy breezy.
This approach is most often used when delivering services that can be difficult to estimate accurately, such as consulting, design work or programming.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.
What's the advantage of selling your time by the hour?
One of the biggest benefits of hourly pricing is that it provides a clear and predictable price for your customers. And customers really like it when things (especially budgets) are predictable.
There is a general understanding that hourly pricing is "fair" and that customers will pay you for the time it took to get to the finish line.
Hourly pricing also makes it easy for you as a freelancer to keep track of your time and provide an accurate invoice. And getting paid properly is something we're big believers in around here!
You can do this directly through various time tracking apps that automatically generate an invoice, or you can go handheld and keep track of your time in a simple Google sheet.
One of the other great benefits of selling your service in this way is the ability to be flexible to the different turns a project can take.
Your customer can add or remove tasks as needed, and you can easily adjust an invoice to match the number of hours you've spent.
This is an advantage for customers who may not have a completely clear scope of work from the start or who have a limited budget.
What is the downside of billing by the hour?
Probably the biggest disadvantage of an hourly rate is that it's damn hard to give a precise estimate of time spent before you've set foot in the ring.
This can both make it difficult for you as a freelancer to come up with an accurate budget and also makes it harder for the client to understand the total costs.
Customers hate being surprised, especially if that surprise is an extra bill. If you're faced with time running out, you need to be quick on your fingers and communicate clearly with your customer before you rush off.
It's been known for the inexperienced freelancer to smell a few extra billable hours here and there, which is a real concern for your client if you choose to go this route. Therefore, make a virtue of being transparent and honest about your hourly rate.
When does it make sense to use hourly rates?
For a newly hatched freelancer, an hourly pricing model is one of the fairest ways to charge for your time.
But as soon as you become more efficient, you may experience the downside of billing by the hour. Because if you deliver the same solution in 4 hours as you used to do in 8, should you also discount by 50%?
As you move up the ladder, there are also other options to keep your earnings up. For example, it could be... project price.
Project price
What is project pricing?
Project-based pricing is a strategy you can use when you want to charge for the finished result of a specific project or set of tasks - no matter how long or short it takes you.
This approach is often used for clearly defined projects. For example, the delivery of an article, report, website, graphic work or similar.
What is the benefit of using project pricing?
The big advantage of using project-based pricing is that it is based on a concrete result, and not least a fixed price for your customer.
Customers often think in terms of results - not time spent. It's a simple and easy way to be concrete about a project and stand shoulder to shoulder with your customer.
A project price can make it easier for your customer to budget, and not least helps to avoid scope creep. You know, the one where your customer comes to you and says "why don't you take a look at this thing too".
Of course we want to make things easy for your customer, but a project price also gives you some great benefits. You can plan and budget the project more easily, and if you're good at your job, you can also increase your earnings here.
By going the project price route, you as a freelancer must also be good at staying focused on the end goal. You're helping your client remove a headache, and if your client values their own time, you'll have a good argument for why you need to move fast. After all, you didn't get good at your job overnight.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.
What are the disadvantages of project-based pricing?
Perhaps the biggest drawback comes when a freelancer tries to squeeze a project price onto a task that is too complex and has too many unknowns.
If the task isn't already well-defined by the customer, it's difficult for you as a supplier to give an accurate quote, which in turn can create a drooling customer with a question mark hanging over their head.
If you've gone down the aisles with the project price sign and the task is starting to get tough, you may find yourself in a squeeze as a freelancer. The client has paid to solve a problem. If it takes you one hour, well, you're the one skimming the cream, but if it starts to go beyond your estimated hourly rate, you can often get stuck with it yourself.
One of the other major drawbacks of project-based pricing is that it may not be suitable for customers who have a need for ongoing support or maintenance after the project is completed.
If you get there, consider offering a model where customers pay a fixed monthly fee for ongoing support and maintenance. We cover this further down under punch card/retainer.
When does it make sense to use project-based pricing?
You should give your customer the opportunity to buy into a solution when you have a clear idea of what it will take for you to complete the project. A fixed project price is also easy for many customers to understand and makes it easier for them to manage their internal budgets.
Small to medium-sized projects are often best suited to being priced this way. Always have a bulletproof contract in place that clearly defines what is part of the budget and what is outside of it.
Value-based pricing
What is value-based pricing?
Value-based pricing - also known as value-based pricing - is a pricing strategy where the price of a product or service is determined by the delivered value it provides to the customer, rather than the cost you incur to deliver the work.
For you as a freelancer, this means that you can price your services based on the results you help create. If you're good at what you do, value-based pricing is also a great way to get a little more in your paycheck.
What is the benefit of using value-based pricing?
One of the great benefits of value-based pricing is how it can help differentiate you from your competitors. The pricing model is gaining momentum in the US but is not yet as popular in Northern Europe.
By focusing on the actual value of the work, you can both justify a higher price and if you play your cards right, you also have the opportunity to attract bigger customers.
In addition, value-based pricing can help you build stronger relationships with your customers. This model requires both a greater understanding of your customers' business and needs, and a higher degree of tailored solutions. Value-based pricing is rarely, if ever, an off-the-shelf product that is simply thrown at the customer.
A project priced according to a value-based model will therefore be seen much more as a partnership with the customer, where you as a freelancer also have skin in the game. If there are no results, there is no money!
Looking under the hood of your business can also help you sharpen your focus. This isn't just another thing to be shipped, but a well thought-out solution to boost your customer's business.
What are the disadvantages of value-based pricing?
One of the main challenges is that it can be difficult for you as a freelancer to accurately assess the value of your service and communicate that value to potential clients.
And of course, value-based pricing may not be suitable for all types of customers and tasks. You should therefore be prepared to adapt your pricing strategy to suit the needs of different customers.
When does it make sense to use value-based pricing?
As a rule of thumb, it makes sense to use value-based pricing when the task is highly result-focused.
Delivering a series of blog articles focused on increasing domain ranking is a difficult project to squeeze into a value-based pricing box. If, on the other hand, the project focuses on, for example, direct sales or lead generation, it is both easier to measure results and easier to pair with a value-based pricing model.
We're moving into a more advanced pricing strategy here, but overall it can be an effective approach if you have an ambition to work more closely with your customers and grow your own business.
Of course, this requires a good understanding of your self-worth and the value of your services, not to mention the ability to communicate this value effectively to your customers.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.
Clip card
What is punch card-based pricing?
A pricing strategy where you charge your customer a fixed amount on a regular basis, usually monthly, in exchange for either a certain amount of time or specific results. Depending on your customer's needs, you can therefore mix a voucher sale with both hourly and project pricing.
For example, it can make sense if a customer buys x number of consulting hours or x number of social media posts per month.
What is the benefit of selling vouchers?
One of the key benefits of punch cards is that they provide a predictable and stable income. It is therefore also popular with many freelancers as it takes some of the pressure off having to constantly chase new clients.
As your customer pays you regularly, you can better plan your finances and it becomes easier to create a stronger financial foundation for your business.
A voucher is also a vote of confidence from your customer and can help you build a closer relationship.
A punch card sale gives you a foot in the door with your customer. Hopefully, it creates a greater understanding of your customer's business, ambitions and needs, opening the upsell door where you can also offer a wider range of services.
What is the downside of selling vouchers?
Sometimes customers buy into retainers when they don't know exactly what needs to be delivered. As a supplier, you need to be good at pushing back. Even if 300 hours have been purchased over a 6-month period, you still need to plan your work and they can't all fall on one day's notice.
If you sell on retainer, customers expect to receive a discount. This is typically in the range of 10-20% of your usual price - whether it's hourly or project. Unless otherwise agreed, you have a fixed price during the contract period with your customer.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.
When does it make sense to sell on retainer?
Retainer-based pricing is ideal for those who provide ongoing services to clients, such as marketing, design or consulting services. It allows you to offer a stable and predictable output to your customer, who can also manage budgets accordingly.
If you have sold more or less the same service to your customer over a period of time, it may also make sense to offer them to buy into a voucher instead. You become part of the business in a different way when there is an awareness that the contract runs for six months or a year.
If your customer has a vague idea for a project, it may make sense for you to offer a punch card. This allows your customer to easily complete a project, even if their needs change slightly along the way.
When selling yourself on retainer, make sure you communicate clearly with your customer about the usage of your clips. If you don't use fancy software, it can be a simple email sent weekly, monthly or every time clips have been used: "Dear XX. I just wanted to inform you that 40 hours have now been used on the voucher and therefore there are 160 hours left."
The golden pricing model
Naturally, there are a number of different strategies you can use when you choose to offer your expertise to customers.
There is no one-size fits all, so it's important to adapt your pricing model to both project and customer. It can easily get complicated, so always keep it simple.
Whatever you choose, always be clear about what the job entails and what is above and beyond and comes at an additional cost. Crystal clear communication is the foundation of a solid customer relationship. It's real dad advice, but it works.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.
Increase your revenue with the right pricing strategy
Pricing for freelancers can be a stressful and complicated affair. Bulletproof and proven pricing strategies are part of the foundation of any successful freelancer's business, and we get under the skin of the most popular ones here.
As a freelancer, you have a number of different options that can be included in the pricing mix. The most popular include: hourly rate, project rate, value-based pricing, and retainer.
When you familiarize yourself with the different strategies, it's easy to become paralyzed. After all, what should you choose to effectively price your service and grow your cash tank?
Of course, there are pros and cons to each, but whatever you choose, keep it simple.
Potential customers should be faced with few precise offers, not presented with a menu that makes a provincial pizzeria envious.
Whether you're just starting out as a freelancer or "just" looking to shift gears in your business, this guide will help you find the right strategy for your shop.
Hourly rate
What is the hourly rate?
Selling your time by the hour is probably the most popular and proven pricing strategy used by many freelancers and self-employed professionals, as well as consultancies of all sizes.
It's actually a pretty straightforward and transparent approach that allows you to charge your customers for the time you spend getting a project or task across the finish line.
Here you set an hourly rate and invoice the customer based on the number of hours worked. Easy breezy.
This approach is most often used when delivering services that can be difficult to estimate accurately, such as consulting, design work or programming.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.
What's the advantage of selling your time by the hour?
One of the biggest benefits of hourly pricing is that it provides a clear and predictable price for your customers. And customers really like it when things (especially budgets) are predictable.
There is a general understanding that hourly pricing is "fair" and that customers will pay you for the time it took to get to the finish line.
Hourly pricing also makes it easy for you as a freelancer to keep track of your time and provide an accurate invoice. And getting paid properly is something we're big believers in around here!
You can do this directly through various time tracking apps that automatically generate an invoice, or you can go handheld and keep track of your time in a simple Google sheet.
One of the other great benefits of selling your service in this way is the ability to be flexible to the different turns a project can take.
Your customer can add or remove tasks as needed, and you can easily adjust an invoice to match the number of hours you've spent.
This is an advantage for customers who may not have a completely clear scope of work from the start or who have a limited budget.
What is the downside of billing by the hour?
Probably the biggest disadvantage of an hourly rate is that it's damn hard to give a precise estimate of time spent before you've set foot in the ring.
This can both make it difficult for you as a freelancer to come up with an accurate budget and also makes it harder for the client to understand the total costs.
Customers hate being surprised, especially if that surprise is an extra bill. If you're faced with time running out, you need to be quick on your fingers and communicate clearly with your customer before you rush off.
It's been known for the inexperienced freelancer to smell a few extra billable hours here and there, which is a real concern for your client if you choose to go this route. Therefore, make a virtue of being transparent and honest about your hourly rate.
When does it make sense to use hourly rates?
For a newly hatched freelancer, an hourly pricing model is one of the fairest ways to charge for your time.
But as soon as you become more efficient, you may experience the downside of billing by the hour. Because if you deliver the same solution in 4 hours as you used to do in 8, should you also discount by 50%?
As you move up the ladder, there are also other options to keep your earnings up. For example, it could be... project price.
Project price
What is project pricing?
Project-based pricing is a strategy you can use when you want to charge for the finished result of a specific project or set of tasks - no matter how long or short it takes you.
This approach is often used for clearly defined projects. For example, the delivery of an article, report, website, graphic work or similar.
What is the benefit of using project pricing?
The big advantage of using project-based pricing is that it is based on a concrete result, and not least a fixed price for your customer.
Customers often think in terms of results - not time spent. It's a simple and easy way to be concrete about a project and stand shoulder to shoulder with your customer.
A project price can make it easier for your customer to budget, and not least helps to avoid scope creep. You know, the one where your customer comes to you and says "why don't you take a look at this thing too".
Of course we want to make things easy for your customer, but a project price also gives you some great benefits. You can plan and budget the project more easily, and if you're good at your job, you can also increase your earnings here.
By going the project price route, you as a freelancer must also be good at staying focused on the end goal. You're helping your client remove a headache, and if your client values their own time, you'll have a good argument for why you need to move fast. After all, you didn't get good at your job overnight.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.
What are the disadvantages of project-based pricing?
Perhaps the biggest drawback comes when a freelancer tries to squeeze a project price onto a task that is too complex and has too many unknowns.
If the task isn't already well-defined by the customer, it's difficult for you as a supplier to give an accurate quote, which in turn can create a drooling customer with a question mark hanging over their head.
If you've gone down the aisles with the project price sign and the task is starting to get tough, you may find yourself in a squeeze as a freelancer. The client has paid to solve a problem. If it takes you one hour, well, you're the one skimming the cream, but if it starts to go beyond your estimated hourly rate, you can often get stuck with it yourself.
One of the other major drawbacks of project-based pricing is that it may not be suitable for customers who have a need for ongoing support or maintenance after the project is completed.
If you get there, consider offering a model where customers pay a fixed monthly fee for ongoing support and maintenance. We cover this further down under punch card/retainer.
When does it make sense to use project-based pricing?
You should give your customer the opportunity to buy into a solution when you have a clear idea of what it will take for you to complete the project. A fixed project price is also easy for many customers to understand and makes it easier for them to manage their internal budgets.
Small to medium-sized projects are often best suited to being priced this way. Always have a bulletproof contract in place that clearly defines what is part of the budget and what is outside of it.
Value-based pricing
What is value-based pricing?
Value-based pricing - also known as value-based pricing - is a pricing strategy where the price of a product or service is determined by the delivered value it provides to the customer, rather than the cost you incur to deliver the work.
For you as a freelancer, this means that you can price your services based on the results you help create. If you're good at what you do, value-based pricing is also a great way to get a little more in your paycheck.
What is the benefit of using value-based pricing?
One of the great benefits of value-based pricing is how it can help differentiate you from your competitors. The pricing model is gaining momentum in the US but is not yet as popular in Northern Europe.
By focusing on the actual value of the work, you can both justify a higher price and if you play your cards right, you also have the opportunity to attract bigger customers.
In addition, value-based pricing can help you build stronger relationships with your customers. This model requires both a greater understanding of your customers' business and needs, and a higher degree of tailored solutions. Value-based pricing is rarely, if ever, an off-the-shelf product that is simply thrown at the customer.
A project priced according to a value-based model will therefore be seen much more as a partnership with the customer, where you as a freelancer also have skin in the game. If there are no results, there is no money!
Looking under the hood of your business can also help you sharpen your focus. This isn't just another thing to be shipped, but a well thought-out solution to boost your customer's business.
What are the disadvantages of value-based pricing?
One of the main challenges is that it can be difficult for you as a freelancer to accurately assess the value of your service and communicate that value to potential clients.
And of course, value-based pricing may not be suitable for all types of customers and tasks. You should therefore be prepared to adapt your pricing strategy to suit the needs of different customers.
When does it make sense to use value-based pricing?
As a rule of thumb, it makes sense to use value-based pricing when the task is highly result-focused.
Delivering a series of blog articles focused on increasing domain ranking is a difficult project to squeeze into a value-based pricing box. If, on the other hand, the project focuses on, for example, direct sales or lead generation, it is both easier to measure results and easier to pair with a value-based pricing model.
We're moving into a more advanced pricing strategy here, but overall it can be an effective approach if you have an ambition to work more closely with your customers and grow your own business.
Of course, this requires a good understanding of your self-worth and the value of your services, not to mention the ability to communicate this value effectively to your customers.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.
Clip card
What is punch card-based pricing?
A pricing strategy where you charge your customer a fixed amount on a regular basis, usually monthly, in exchange for either a certain amount of time or specific results. Depending on your customer's needs, you can therefore mix a voucher sale with both hourly and project pricing.
For example, it can make sense if a customer buys x number of consulting hours or x number of social media posts per month.
What is the benefit of selling vouchers?
One of the key benefits of punch cards is that they provide a predictable and stable income. It is therefore also popular with many freelancers as it takes some of the pressure off having to constantly chase new clients.
As your customer pays you regularly, you can better plan your finances and it becomes easier to create a stronger financial foundation for your business.
A voucher is also a vote of confidence from your customer and can help you build a closer relationship.
A punch card sale gives you a foot in the door with your customer. Hopefully, it creates a greater understanding of your customer's business, ambitions and needs, opening the upsell door where you can also offer a wider range of services.
What is the downside of selling vouchers?
Sometimes customers buy into retainers when they don't know exactly what needs to be delivered. As a supplier, you need to be good at pushing back. Even if 300 hours have been purchased over a 6-month period, you still need to plan your work and they can't all fall on one day's notice.
If you sell on retainer, customers expect to receive a discount. This is typically in the range of 10-20% of your usual price - whether it's hourly or project. Unless otherwise agreed, you have a fixed price during the contract period with your customer.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.
When does it make sense to sell on retainer?
Retainer-based pricing is ideal for those who provide ongoing services to clients, such as marketing, design or consulting services. It allows you to offer a stable and predictable output to your customer, who can also manage budgets accordingly.
If you have sold more or less the same service to your customer over a period of time, it may also make sense to offer them to buy into a voucher instead. You become part of the business in a different way when there is an awareness that the contract runs for six months or a year.
If your customer has a vague idea for a project, it may make sense for you to offer a punch card. This allows your customer to easily complete a project, even if their needs change slightly along the way.
When selling yourself on retainer, make sure you communicate clearly with your customer about the usage of your clips. If you don't use fancy software, it can be a simple email sent weekly, monthly or every time clips have been used: "Dear XX. I just wanted to inform you that 40 hours have now been used on the voucher and therefore there are 160 hours left."
The golden pricing model
Naturally, there are a number of different strategies you can use when you choose to offer your expertise to customers.
There is no one-size fits all, so it's important to adapt your pricing model to both project and customer. It can easily get complicated, so always keep it simple.
Whatever you choose, always be clear about what the job entails and what is above and beyond and comes at an additional cost. Crystal clear communication is the foundation of a solid customer relationship. It's real dad advice, but it works.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 3,000 others with an everyday life without administration.