The ultimate guide to pricing for freelancers

Hourly rate

What is the hourly rate?

At sælge sin tid på timebasis, er den vel nok mest populære og gennemtestede prisstrategi, der både bruges af mange freelancere og independents, men også konsulentvirksomheder i alle størrelser.

It's actually quite a straightforward and transparent approach that allows you to charge yours customers for the time you spend getting a project or task across the finish line.

Here you set an hourly price and invoice the customer based on the number of working hours. Easy breezy.

This approach is most often used when services are to be delivered that may well be difficult to give a precise estimate for, such as consultancy, design work or programming.

What is the upside of selling one's time on an hourly basis?

One of the biggest advantages of hourly pricing is that it provides both a clear and not least 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 you as a customer will therefore pay you for the time it has taken to reach your goal.

Hourly pricing also makes it easy for you as a freelancer to keep track of your time, and thus also provide an accurate invoice. And the thing about getting paid properly is something we are very much in favor of here in the house!

You can either do it directly through various time tracking apps that automatically generate an invoice, or you can go hand-in-hand and keep track of your time in a simple Google sheet.

One of the other big advantages of selling your service in this way is the ability to be flexible with the various turns a project can take.

Your customer can add or remove tasks as needed, and you can easily amend an invoice that corresponds to the number of hours you have put in.

This is both 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 disadvantage of hourly billing?

Probably the biggest disadvantage of an hourly price is that it can be damned difficult to give a predicted estimate of the time consumption before you have set foot in the ring. 

This can both make it difficult for you as a freelancer to come up with an accurate budget, and at the same time make it more difficult for the customer to understand the total costs. 

Customers hate to be surprised, and especially if that surprise is an extra bill. If you are faced with time running out, you must therefore be quick on the keys and communicate clearly and clearly with the customer before you just thrash out. 

It has been seen before that the inexperienced freelancer smells 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 it a virtue to be transparent and honest about your time consumption.

When does it make sense to use an hourly rate?

For a newly hatched freelancer, an hourly pricing model is one of the fairest ways to get paid for his time. 

But as soon as you become more efficient, you can experience the downside of invoicing per hour. Because if you deliver the same solution in 4 hours as you previously did in 8, do you also have to discount with 50%?

As you move up the ladder, there are also other opportunities to keep your earnings up. It could, for example, be... project price.

Project price

What is project price?

Project-based pricing is a strategy you can use when you want to take payment 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. This could, for example, be the delivery of an article, a report, website, graphic work or the like.

What is the advantage of using project pricing?

The biggest 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 most often think in terms of results – not time consumption. It is therefore a simple and easy-to-understand way of being specific about a project, and standing 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. That is, the one where your customer comes and says "can't you look at this thing too". 

Of course we have 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 are good at your work, you can also increase your earnings here. 

By going the project price route, you as a freelancer must also be good at keeping focus on the end goal. You help your customer to eliminate a headache, and if your customer values his own time, you also have a good argument for why things must go fast. After all, you didn't become good at your job overnight.

What are the disadvantages of a project-based price?

Probably the biggest disadvantage comes when, as a freelancer, you try to push down a project price for a task that is too complex and involves too many unknowns. 

If the task is not already well defined from the customer's side, it is difficult for you as a supplier to give a precise offer, which in turn can create an easily drooling customer with a question mark hanging over his head. 

If you have walked down corridors with the project price sign, and the task starts to take hold, you as a freelancer may well find yourself in a squeeze. The customer has paid to have a problem resolved. If it takes you one hour, yes, then it is you who is frothing the cream, but if it starts to go beyond your estimated hourly consumption, you can usually hang on to it yourself. 

One of the other major drawbacks of project-based pricing is that it may not be suitable for customers who need 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 that further down under cutting card/retainer. 

When does it make sense to use a project-based price?

You must give your customer the opportunity to buy into a solution when you have a clear idea of what is required of you to complete the project. A fixed project price is also easily understandable for many customers, and makes it easier for them to manage their internal budgets. 

Small to medium-sized projects are often best suited to be priced this way. Always make sure you have a bulletproof contract in place, where it is clearly defined what is part of the budget and what is beyond.

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 gives the customer, rather than the costs you have to deliver the work. 

For you as a freelancer, this means that you can price your service based on the results you help to create. If you are good at your work, value-based pricing is also a really good 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 competition. The price model is gaining more and more traction in the USA, but is not yet as popular in Northern Europe in the same way. 

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 larger clients. 

In addition, value-based pricing can help you build stronger relationships with your customers. The model here requires both a greater understanding of your customers' business and needs, and thereby also a higher degree of tailored solutions. Value-based pricing is rarely, if ever, an off-the-shelf item that is simply thrown the customer's way.

A project priced according to a value-based model will therefore be seen to a much greater extent as a partnership with the customer, where you as a freelancer also have skin in the game. No results, no money!

When we look under the hood of your business, it can also help you to increase your focus. This is not just another thing to be shipped, but a well-thought-out solution that will 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 at the same time communicate this value to potential clients. 

And of course, value-based pricing may not be suitable for all types of customers and tasks. You must therefore be prepared to adapt your pricing strategy so that it fits the needs of the 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 strongly focused on results. 

Delivery of a number of blog articles with a focus on increasing domain ranking is a difficult project to squeeze into a value-based price box. If, on the other hand, the project focuses on, for example, direct sales or the generation of leads, it is both easier to measure results and thus easier to pair with a value-based pricing model. 

We are 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 lift your own business. 

Of course, this requires a good understanding of your own value and the value of your services, and not least the ability to communicate this value effectively to your customers.

Cutting board

What is Clipboard Based Pricing?

Clipping card – or retainer as it is also known by – is a pricing strategy where you charge your client 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 clip card sale with an hourly and project price. 

As an example, it can both make sense if a customer buys for x number of counseling hours or for x number of SoMe postings per month.

What is the advantage of selling clip cards?

One of the main advantages of clip cards is that it provides a predictable and stable income. It is therefore also popular with many freelancers, as it relieves some of the pressure of having to constantly hunt for new clients. 

Since your customer pays you regularly, you can better plan your finances and it becomes easier to create a stronger financial foundation in your business. 

A cutting card is also a declaration of trust from your customer, and can help you build a closer relationship.

A clip card sale gives you a foot inside your customer. Hopefully it creates a greater understanding of your customer's business, ambitions and needs, which opens the upsell door where you can also offer a wider range of services.

What is the downside of selling clip cards?

It happens that customers buy into a retainer when they do not know exactly what is to be delivered. As a supplier, you must therefore 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. It is typically in the order of 10-20% of your usual price – regardless of whether it is an hour or a project. Unless otherwise agreed, you have therefore locked in a price during the contract period with your customer.

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 client, who can also manage the budgets in this regard.

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 discount card instead. You become part of the business in a different way when there is an awareness that the contract runs for half a year or a whole year.

If your customer has a vague idea about a project, it may make sense for you to offer a cutting board. This gives your customer the opportunity to easily complete a project, even if the need changes slightly along the way. 

When selling yourself on retainer, make sure you communicate clearly and clearly with your customer about the use of your clips. If you don't use fancy software, it can be a simple email sent weekly, monthly or every time a clip has been used: “Dear XX. I just want to inform you that 40 hours have now been used on the clip card, and there are therefore 160 hours left.”

The golden pricing model

There are quite naturally 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 is important to adapt your pricing model to both the project and the customer. It can easily become a complicated game, so always make sure to keep it simple. 

Regardless of what you choose, always be clear about what the task includes and what lies beyond and comes with an additional cost. Crystal clear communication is the basis for a solid customer relationship. Real dad advice, but it works for once.