Negotiation is a key business communication skill that is important for freelancers.
Without knowing how to negotiate successfully, you could be losing out on all kinds of potentially lucrative deals and prosperous business partnerships in the future, and you could be leaving money on the table regarding the prices you set at the outset of a freelance project.
Here are 3 valuable pricing negotiation tips to bear in mind:
Do your research and be prepared
Pricing can be challenging for freelancers who aren’t used to price negotiations or are just starting their freelance journey. That’s why, before you even consider setting your prices or entering into any price negotiation, it’s a good idea to study the market to get a feel for what other freelancers are charging and what the market will bear.
You can do this by asking other freelancers in your industry what they charge, keeping up to date with relevant industry pay surveys, or asking in business groups on social media. People share a wealth of experience online that is at your fingertips.
Once you have an idea of the pay range, you need to know the absolute minimum rate you’d need – and this would be individual to you, based on your outgoings and personal circumstances – and also on your skills and experience.
You also need to factor in the perceived client value of your work – what you are bringing to the table. One way of calculating a baseline rate is to work out all your expenses (business and personal) for a year and divide it by the billable hours you expect to work that year.
Once you have an idea of your minimum, you have a basis to work from. Always keep it in mind as it’s easy to get carried away, especially in a client communication situation where you have an excellent initial client rapport and want the business, but the client doesn’t want to meet your price.
In this scenario, you need to be careful as you may end up settling for less and falling for pie-in-the-sky promises about the future, i.e. accepting a lower rate now in exchange for ‘potential’ future work at a higher rate. Remember: Nobody knows what the future holds. Unless you’ve got your future increase in writing in a watertight contract clause at a specified date – it’s probably not worth the risk.
When you work for less than the value you are providing, over time, you’ll feel demotivated, and your work could suffer as a result. So, it’s of no benefit to either party.
Another point to consider is that it’s much harder to increase your fees later when you’ve already produced work at a lower rate – so start as you mean to go on.
Know what you want and what you are worth
In addition to knowing your minimum rate, you also need to consider if you want to be paid an hourly rate, a project fee, or something else that is the norm in your particular industry.
For example, few copywriters get paid by the word as it doesn’t take into account the time and research that goes into copywriting. If that were the case, advertising copywriters who spend their time crafting pithy slogans to boost brand awareness and convert customers wouldn’t get paid very much!
Most freelancers set an hourly, day or project rate. And sometimes, depending on the type of work they perform and for whom – they might offer a combination of them all.
For freelance projects, it’s often worth considering charging a project rate rather than an hourly rate. There are several reasons for this. One is because not all the hours you have are billable (i.e. in a 40-hour week, as a freelancer, not all of these will be client working hours), and there are only so many hours in a day (the max billable hours you could work a day might be 5 – thus limiting your earnings).
Also, because hourly rates are based on the amount of time a task takes you, as you become considerably quicker at a valuable task over time, you’ll, in effect, be paid less for it.
Hourly rates could have an impact on your client’s perspective of your worth (and the time it takes you to complete a task) and could make negotiating an increase more challenging.
Project pricing means your client will know in advance how much a project will cost and can budget accordingly.
A lot of freelancers use a value-based pricing strategy where the price includes how much value your project brings to the client’s business. However, it should be borne in mind that it’s the client’s perception of the value you provide – not your own, and this stems from your market positioning and your actual worth to the client.
Be polite but assertive – and be open to flexibility
Being assertive in negotiations doesn’t mean that the situation needs to become awkward or unpleasant. Professional business people accept that negotiations are inevitable – it’s part of the business conversation. Ideally, both parties should be seeking a win-win.
Presenting your prices with confidence and an open mind is key to successful negotiations. Remember, if you don’t ask for what you want, you probably won’t get it!
Although it’s generally not recommended to offer discounts in client negotiations just to secure the business, you could suggest a lower price in return for less work. So you take something away from the project that you would usually offer. Alternatively, to show you are flexible and want the business, you could offer a range of packages.
Whatever both parties agree upon, once the terms are agreed, it’s time to get it in writing, send out your deposit invoice and get paid.
With Invoice Ninja, your client can convert a quote to an invoice in just one click, making it super easy for your client to pay you promptly and get the project started.
Invoice Ninja is a leading free invoicing software for small business invoicing, online payments, tracking expenses and billable tasks.
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