“So, what’s your rate?”
No matter how long you’ve been in the freelancing game, answering this question is bound to make you tense up. It’s not always easy to talk about money. In fact, it can be really awkward, especially when you’re just getting started.
At Wethos, we want to make it easier to communicate your answer to the inevitable rate question. We aim to demystify pricing in the creative industry and use a value-based pricing system that’s made for creators, by creators.
If you’re interested in shifting your business model away from hourly or project rates, let’s dive into how to have a value-based pricing conversation with your clients.
First, how does value-based pricing work?
Rather than charging an hourly rate or a fixed project rate, value-based pricing factors in several aspects of the work and also takes into account the type of client the work is for. When determining your price for each project, we recommend breaking it down into four areas:
So, for example, if you’re a website designer and you get a lead on a project for a new startup, you would consider your expertise, the complexity of the project, and the estimated time it would take to complete the website. You would also take into account any uncertainties that could potentially come up during the project, and consider the fact that the client is a startup, in order to come up with your price.
The difference between value-based pricing and the other pricing options for freelance work is that it’s a lot less limiting. An hourly rate prioritizes time which devalues the actual work you put in, while a fixed rate locks you into a set price even if the project includes more work than you originally scoped.
Simply put, value-based pricing allows freelancers and independent creatives to create their own price that’s dependent on the value they bring to the table for each client.
How to have a value-based pricing conversation with your clients
There are two scenarios where you can bring up value-based pricing conversations: with potential clients and with existing clients. Let’s go over the different ways to approach each scenario.
For potential clients
You get a new lead in your inbox — great! You get to talking about their project and then they ask you what your rates are. Instead of sharing your hourly rate or trying to come up with a number on the spot, let them know how you structure your rates by responding with something along these lines:
“I tailor my rates for each project. Based on the details you’ve shared so far, I will create a detailed project scope for you to review. The scope will outline all of the services and deliverables, along with the price of each, so you know exactly what your investment will be upfront.”
From there you can create a scope of work for them to review.
For existing clients
If you’re working with existing clients on an hourly rate and want to shift to a value-based pricing model, there are a few ways to do this.
Since you’ve already worked with these clients, you should have a good idea of the new price you want to set, based on the four areas mentioned earlier.
Assuming you’ll have these conversations with clients you still want to work with, let them know that you appreciate working with them and would love to continue the relationship. Remind them of the work you’ve done, whether you provide services on a monthly basis or do one-off projects. The key is to emphasize the value of the work you’ve already provided and position it from the client’s perspective.
Next, let them know that starting on X date, you will be restructuring your pricing. Be clear about what the new price includes or if there’s anything else that will change (i.e., an expanded service, new payment schedule, etc.).
It may be tempting to over-explain or try to justify, but just remember that this is your business. There should be mutual respect and understanding between you and your clients. If you’ve communicated your value and your client is happy with your work, then they should be on board with paying you for the value you provide.