One of the questions I hear most whenever I join a Facebook group for freelancers or go to a conference is “What should I be charging?” Most people are afraid of undercharging (we all want to make a profit) but we’re also afraid that if we charge too much, we won’t get any business.
I want to start by saying that I struggle with that balance still all the time. We are conditioned to be pretty uncomfortable when it comes to talking about money and we want to be fair.
But a few years ago, a friend of mine, Louise Treadwell of
Let’s dive in!
Establish Your GOOBR
Have you ever heard a celebrity or influencer say something like, “Oh, I don’t get out of bed for less than $5k”? That’s how you should be approaching your pricing. You need to have a baseline and learn to say no to opportunities that aren’t going to be a profitable use for your time. (By all means, volunteer your time, but don’t sacrifice that sort of work for what will actually help you grow.)
Your Get Out of Bed Rate (
Break it Down
So if your personal expenses come out to $60,000/year and you want to work on client projects for 1560 hours per year (or 30 hours per week), you need to be charging no less than $38.46 per hour. This is your Personal GOOBR. Louise also recommends that you account for taxes by multiplying that amount by 1.2, which actually brings us to an hourly rate of $46.15.
Let’s look at the business GOOBR now. Let’s say your annual fixed business expenses, meaning the money you spend to actually keep your business running (maybe that’s office space rent, fees for the software you use, etc.) comes out to $24,000 and you want to work on 6 projects per year. Your base or minimum project cost would be $4,000. With the tax markup, that would actually be $4,800.
Some people prefer to charge on an hourly basis, some prefer to charge per project. You can use whichever pricing structure feels best to you!
Louise also suggests that you add markups for how skilled or experienced you are. If you’re an expert in your field who has been doing what you’re doing for decades, you want to be charging for that. We aren’t just service providers; clients are paying us for our consulting, our expertise, our knowledge, our insight, and our network.
Activity Based Pricing
How can you keep track of and implement all this? Louise suggests something called Activity Based Pricing. For every individual service you provide, charge. That means that you can’t just think about how much you charge for a site, but how much you charge to build a page, how much you charge to install a plugin, how much you charge to provide a revision to a design. All of this adds up.
Using Activity Based Pricing is a great way to keep scope creep under control. You are being paid for every single thing you’re done, and another thing will have a set cost that you can explain to your clients.
So think of it this way. If a client wants a 10-page site, wants WooCommerce installed and configured, and wants 6 variable products installed, you can use your hourly rate + activity-based pricing to come up with a solid quote. Say it takes you 3 hours to design and build one page. Maybe it takes you 1 hour to install and configure WooCommerce and it takes you 30 minutes to install a variable product. (Tracking your time is essential for finding these numbers!)
Let’s take that request and use the numbers we just came up with.
This charge is basic, but it adequately displays what is being asked for and how much it will cost.
Doing it this way is great because the client can see the exact value of each activity and they will understand what it is they are actually paying for. Instead of thinking of it as a website, they will understand all of the work and individual items that goes into a project. They also have the ability to figure out how the price may change if they add or remove services
Will you implement this pricing structure? Do you already use a similar formula for pricing?
Leave any questions you have in the comments below!
Curious about pricing?
Not exactly sure how to configure your pricing to work best for you? Schedule a free 30-minute consultation and let’s chat! I love connecting with new business owners and freelancers.
Allie is a WordPress designer and developer based in Miami, FL and the founder of Pixel Glow Web Design. She is a proud member of the WordPress community and is passionate advocate for education about and through the internet.