Pricing strategies for freelancers and what the experts recommend

One of the most important decisions you’ll make is how to price your services. How do you decide what pricing strategy to use? Do you stick to one strategy or switch it up per project? To help you determine the best way to price your services, we asked a handful of experienced freelancers these questions.

The 4 most common pricing strategies are hourly pricing, project-based pricing, value-based pricing, and retainer-based pricing.

Hourly Pricing

With hourly pricing, you set an hourly rate, and charge your clients based on the amount of time spent working on a project. This pricing strategy is simple to understand and easy to manage.

Hourly pricing is best for projects that have an unclear scope or timeline.

“Hourly pricing is great for when a project scope is not defined. When it is defined I would rather recommend fixed or value based pricing.”
-Kyle Prinsloo, Freelance Web Designer and Developer, (@kylepdotco).

“I stick to project-based for now because it's easier for the client and me. If the scope is too broad with variability each month (strategy + execution), then I do it hourly — only because I had one client request it once. Although, I'd still recommend doing it on a per-project basis with terms stating that there's a minimum and a maximum number of deliverables each month.”
-Tanaaz Khan, Freelance B2B Writer, (@tanaazkhan_).

Hourly pricing is also a good choice for maintenance projects where there is regular but unequal work.

“When I was a freelance software developer, I often billed by the hour. My clients and I enjoyed the transparency and flexibility this model offers. However, I am well aware of the downsides, especially when a prospective client compares two developers. The only difference they can see at that point is the hourly rate, and that’s a poor comparator. Typically, my first project with a new client was at a fixed price, but once the project was in a maintenance mode, we’d quickly switch to hourly.”
-Paul Doerwald, Former freelance software developer and consultancy owner, now CEO & Founder Clockk.com Inc, (@pauldoerwald).

The downsides are that if you are a fast worker you will get paid less, or if you are slow, you may charge too much. However, in both cases, you can adjust your hourly rate to be fair. e.g. a learner might charge $80/hr where a seasoned worker might charge $150/hr. Furthermore, hourly pricing doesn’t take into consideration the value delivered to the client.

“I don’t think hourly pricing is a good method if you are someone who can finish the work very quickly. Why get paid less for being more efficient? I do think this method can be good for a consultation call. Giving time to speak and to listen.”
-Vikra Vardhan, Freelance Content and Copywriter, (@vikravardhan).

“As a senior-level freelancer, I find that when sharing my hourly rate, prospects will try to compare me to someone less expensive and less experienced. Yet that’s comparing apples to oranges. They won’t get the same quality product or the same results. Besides, because I’m so well-versed in what I do, it may take me less time to do.”
-Julie Cortés, Freelance Rockstar, (@KCCopyDiva).

Project-Based Pricing (Fixed pricing)

The project-based pricing method involves assessing the scope of work and then providing the client with a fixed price for the entire project based on how long you think it will take to complete.

When using this method, it’s important to clearly define the scope of the project before any work begins. If the scope changes beyond the original agreement, both parties should promptly amend the contract and agree to a new price.

When speaking to freelance experts, this pricing method is preferred over hourly pricing.

“I typically bill by the project for two reasons: The client and I know exactly how much needs to be paid, and it helps me have some predictability in my income.”
-Tanaaz Khan, Freelance B2B Writer, (@tanaazkhan_).

“I usually charge per project because it suits how I work. I just need to know what project I’m working on and the deadline. There’s no confusion with pricing. I know how much I’m getting paid and all my focus is on my work. If I’m okay with the pricing, and I’m okay with the work, it doesn’t matter how long it takes.”
-Vikra Vardhan, Freelance Content and Copywriter, (@vikravardhan).

Even though you aren’t billing by the hour, you should still use your hourly rate to come up with the estimate. We aren’t going to get into detail about how to calculate your hourly rate in this article. To calculate it you will need to know your monthly living costs and business expenses, an estimate of your taxes, and your total number of work days per year.

“I typically charge by the project.. Yet use my hourly rate to come up with the estimate (I just don’t tell the client that, lol). When folks hear about my hourly rate, it tends to scare them. But with 25 years’ experience, I’ve earned that. At the end of the day, aside from the quality and value of the piece, all that should matter is the final cost of the project, NOT the hourly rate..”
-Julie Cortés, Freelance Rockstar, (@KCCopyDiva).

The downside is that you could underestimate the amount of work or time that a project is going to take you when you initially set the price. Then you end up losing money by the time the project is finished. Freelance experts track their time on projects to help give better estimates on future projects.

Andy Strote (@StroteBook), agency founder and author of “How to Start a Successful Creative Agency" recommends keeping track of your hours for your own analysis. When we asked him the benefits of hourly pricing he said there is only one - it forces you to develop a good time tracking habit.

“Only one—it forces you to track how long it takes you to do types of projects.

Once you know, bill by the project. How long it takes you is nobody’s business.

Client is paying for deliverable.

But you should keep tracking hours for your own analysis. Good discipline.”
-Andy Strote (@StroteBook)

Value-Based Pricing

With value-based pricing, you bill based on the value delivered to the client, rather than the time it takes to complete a project. The key to success with this billing strategy is to accurately estimate the value you will deliver to the client before beginning work. This works best for freelancers who have many years of experience and know their industry very well.

The biggest benefit of this pricing method is that it’s the most profitable. The more valuable your solutions are to the businesses you work with, the more money you’ll earn.

Example 1: you are a copywriter in the healthcare space. You already know the customer, pains, competitors, jargon, compliance laws, etc. Where you don’t know these details, you know where to look. Your research and writing time could be ¼ of the time it would take a non-expert, but you can charge the same as they would.

Example 2: you are a software developer in the ad tech space. You have pre-written libraries to connect with existing social media and ad platforms. You have UI components for necessary workflows. Your competition has to write all these things, but you can charge the same.

Example 3: your deep experience in a niche has allowed you to create fixed-price productized services such as wireframing sessions, brand reviews, ad buy reviews, etc. where you can charge all customers a fixed fee, but you can leverage your experience to do the work quickly.

“I use and advocate for the value-based pricing structure. It’s the most flexible and profitable”
-Alvalyn Lundgren, Freelance Designer, (@alvalyn).

When using this method, you still need to factor in the amount of time it will take you to complete the project.

“Value based pricing is a very good long term pricing method when you have experience. It is important to factor in time to compare fixed based pricing and value based pricing. Make sure it’s more than a “fixed price” alternative.”
-Kyle Prinsloo, Freelance Web Designer and Developer, (@kylepdotco).

Retainer-Based Pricing (Package pricing)

Under retainer-based pricing, you agree to provide a certain number of hours or days of service per month. The client pays a set fee for those services, whether they use the services or not. The fee is usually discounted, relative to normal pricing, because the client is buying in bulk, up front.

Retainers are a good option when a client has an ongoing need for your creative services. For the freelancer, it provides a predictable stream of income and allows them to plan their workload in advance. For the client, it provides certainty about the cost of their project. It also ensures they will have access to the freelancer’s services when they need them.

The downside is that you have to leave room in your schedule for the client even if they don’t need your services that month. This time could have been spent on other clients. Or you could turn down a project because you thought your schedule would be too full.

Retainer agreements often get quite complicated with hours that roll over from one month to the next if unused, but subject to certain limits. Tread carefully with rollover arrangements, as you could find yourself without enough time.

It is tempting to use retainer pricing as a way to get paid without necessarily doing work. For example, a client buys a set number of software development hours every month, but doesn’t necessarily use them, turning it into free money for you. Try to use retainer pricing when you know the client is going to use all or most of those hours every month, or when there’s a service you offer (such as SEO) where a monthly review is a necessary step.

“Package pricing is my favorite pricing method. The pros of using this pricing method are that you get more consistent monthly income, it’s easier to scale and outsource, and it’s simple pricing for clients”
-Kyle Prinsloo, Freelance Web Designer and Developer, (@kylepdotco).

Should you stick to one strategy?

We hope that after reading this you have a better understanding of the pricing strategies and when to use each one. Freelance experts recommend switching up your pricing strategy depending on the project and needs of the client. As you get more experience with the different strategies you will find your preferred method.

“I switch it up depending on the needs of the project and the type of client I’m working with.”
-Kyle Prinsloo, Freelance Web Designer and Developer, (@kylepdotco).

“I tend to switch it up depending on the client and the project.”
-Julie Cortés, Freelance Rockstar, (@KCCopyDiva).

Keeping track of time

Regardless of the pricing strategy you use, you should always keep track of how much time it takes you to complete a project. If you’re billing by the hour you need an accurate record to invoice your clients. If you’re billing by project or by value, knowing how many hours you have put in on projects will help you determine if that project was profitable and help you give better estimates on future projects.

Clockk is an automatic time tracking tool that shows you a visualization of the work you’ve done, separated by project. With Clockk’s accurate data, you can feel confident that you're sending clients accurate invoices, giving more accurate time estimates on projects, and are more prepared to make important business decisions!

Sign up for Clockk’s today.