Tips for Negotiating Rates
5 Tips To Consider in the Negotiation Process
Negotiating rates doesn’t come naturally to everyone, but it's a must-have skill as a freelancer. In many ways, time is your best friend when learning how to negotiate freelance rates. Continuous, advanced preparation will help all varieties of businesses to grow in tandem with expanding expertise and brand authority — including your own. Practice the following steps over and over again to increase your overall profit and find an agreeable rate. You'll reap rewards in the long run.
1.) Establish the Minimum Acceptable Rate That You’ll Accept
What’s your lowest price? As a freelancer, you’re an expert in your field, but you're also a marketer, an accountant, and a salesperson — unless you decide to outsource those processes. As a result, freelancers need to account for all of their time spent running their business as well as their development costs, not just specific projects. It’s essential to establish what you will need to charge in order to make a sustainable living. But, on top of that, you have to factor in your expertise when you meet at the negotiating table so as not to undersell or oversell yourself. Balance firmness with flexibility.
Most importantly, if you're using a premium-pricing strategy, you’ll need to demonstrate exactly how you're creating value for a client and why your services are worth the extra cost. Depending on the gig, you might be posed with phrases such as “that sounds a little pricey…” or “I can get the same service with Company ABC elsewhere.” Be ready to tackle any concerns clients may have and reassure them why your freelance business is the best choice.
Once you know your price, incorporate strategies to improve your rates. One way to land big projects is by changing the narrative during the negotiation process. Imagine you're designing an app for a multi-million dollar business — you can settle an agreement by saying “our normal pricing is $100,000, but in this circumstance, we can do it at $85,000.” This can be an effective way to get the attention of a potential client straight away as they consider themselves to be getting a special discount at the lowest rate.
2.) Break Down Your Quotes Into Separate Line Items
Deciding to offer your services in itemized quotes can be a neat trick to earn extra income. Firstly, establish what work needs to be done to deliver a basic service. Lock yourself in for one project first, once the client deems it acceptable. As an example, a web designer could agree to build a landing page for a client’s website at a lower rate initially. Once they can see how valuable your service is, you can walk them through the deliverables involved, referencing your itemized quotes to explain why they will need to pay the upper rate to finish the entire web design process.
Itemized quotes also provide freelancers with the opportunity to offer add-on services like fast delivery, unlimited revisions, and private consultations to name a few possibilities. Clients of varying sizes will have different needs, so by breaking down quotes into measurable items, you can serve larger customer bases. Trading these extra "wants" can also be a great way to reach a common resolution if price negotiation struggles ensue.
3.) Ask Any Prospective Client to Name Their Price
Clients will sometimes indicate their budget early on, but you’ll often need to pry a little to encourage clients to reveal their opinions. If that discussion hasn’t taken place yet, use it to work in your favor. Given that you will already have a rough estimate in mind for your projects, if the price comes way below your target, you can address your concerns much faster. Alternatively, the client could overshoot and you could land your most valuable client to date. It’s a win-win.
If you’re in a one-on-one negotiation, take advantage of that position to increase your freelance rates. Listen and ask questions to get a deep understanding of their needs. Consider your client’s objectives and make a point of how you can satisfy these conditions effectively. Including samples from your portfolio, sharing positive reviews and testimonials, and letting them know they can reach out with any further questions at any time can lead to them prioritizing you as a potential source.
On the other side of the coin, if you’re pitching yourself against others in a competitive space, it’s your job to personalize your pitch and provide an extensive list of what you can and are going to do. You’ll need to put maximum effort toward receiving a client to follow up where you can then demonstrate your abilities as outlined above.
4.) Charge Per Project
Charging per project is generally far more efficient than being paid an hourly rate. It allows freelancers to break down the actual cost required to produce their service, and some clients may even provide an advance on per-project payments.
In most cases, it’s a better solution for both the client and the freelancer, as they both know there is a defined price from the beginning. The price is set from the get-go and once all of the client’s guidelines have been delivered, both parties are more likely to walk away happy.
A pay-per-hour approach might work better for long-term projects, but beyond that, you don’t want to be penalized for efficiency. For example, it should be expected that industry veterans will be able to complete certain tasks faster and to a higher standard. This is a talent that should be rewarded rather than punished.
5.) Base Your Rate Negotiation on the Perceived Value of Your Service
At the end of the day, it’s up to you to price your services effectively. That being said, there’s going to be a big difference in what a client is willing to pay based on your experience. Are you a graphic designer selling logos fresh out of university, or are you a consultant with more than 30 years of industry experience? There won’t be an exactly-defined price range for your services, but you can do some analysis online to gauge a general benchmark.
Glassdoor or communities such as Upwork can provide freelancers with a relatively good idea of what they can expect to earn, both on a per-project and annual basis. This isn’t to say that new freelancers can’t charge above-average rates, but it’s a competitive landscape. Make sure to back up your pricing by showcasing your credentials with a strong presentation.
How To Determine the Reasonableness of Your Rate
High-price points are a good idea if you know your true value is above the industry standard. As long as you sell yourself effectively and you understand that there’s a good chance you’ll be a stand-out candidate, you leave yourself some wiggle room to move your price down.
Weigh up if it’s worth your time based on your other existing opportunities and work from there. Juggling multiple clients is a positive — not a negative — as it will always leave you with more options and the ability to demand a higher average price in the long run.
A good upper pricing limit to make is an accommodation of 10% or so. If the client doesn't challenge you, you’ve just increased your standard rate. If they do, you can meet them somewhere in between your minimum rate and what they’re willing to pay to find a fair price. Earnings will always vary from client to client, but price analysis techniques will lead to success.
Uncover the Value of What You Can Offer
Beyond negotiating contract rates, freelancers can start incorporating project management tools and social media marketing platforms to expand networks, reduce costs and encourage their own development. There are numerous online solutions that can assist you both in real-world situations as well as in the digital landscape.
Whether you’re at the start of your freelance journey or you’ve already put in the work to create a successful freelance business, Noumena understands the difficulty of finding financial support. To see how Noumena’s financial solutions can bolster the stability of your business, you can download the app on the App Store or Play Store today.