By Tom West from accounting firm Crunch @TomAlmeidaWest
We spend all day being ripped off – whether it’s paying for that gym membership we never use, or spending £1.80 on a 99 Flake (the nerve!). If you’re running your own business, the last thing you can afford to do is rip yourself off. Of course modesty can get the better of anyone, but if your rates don’t reflect the quality of your work, you’ll be selling yourself short and hurting your business.
If you’re a freelancer or contractor, you’re always going to have speedbumps on the road to success. Working out your own rates needn’t be one of them if you take these tips into account.
Phone around competitors
You’ll probably already know who your main rivals are – but are you aware of what kind of money they’re pulling in for their services? There’s no need to construct an elaborate backstory or dodgy accent, just give them a quick call (or email from a fake account) and ask for a quote.
This won’t take long at all and will give you a better idea of how much customers expect to pay for what you’re offering.
Find day rate data
There’s plenty of industry specific help out there too – for example web agency Mud have put together a rates calculator for web designers/developers, and freelancing blog Better Working at Home have also collected some great day rate data sources for a wide range of jobs and industries.
You could also try our Day Rate Calculator to get the low down on whether you’re charging a sensible amount for the city you’re based in. It’s based on data from thousands of freelancers and contractors around the country.
Has anyone questioned your rates lately?
If you’ve been in business for a while, and haven’t had anyone try to haggle you down, it could be a sign that your audience are willing to pay a little more for what you’re offering.
You will inevitably get a better end result if you negotiate down from £100 per hour than if you go from £50 upwards – just always make sure you know the lowest amount you can sensibly accept.
By the Hour vs Fixed Rate
If you’re great at your job and get your work done quickly, it’s worth having a think about whether you’re going to be losing out on pay if you’re charging by the hour. Potential customers may often overestimate the time it will take to complete the project, and assume you’ll cost them an arm and a leg upon hearing your hourly rate.
Also, look at it from a customer’s perspective – would you prefer to pay in full for the project and establish a clear deadline, or give a stranger the opportunity to slip a cheeky couple of extra hours work onto the bill for making small-talk and slurping coffee?
Once you’ve increased your rates
A hike in your rates, no matter how small, will need to be communicated to your regular clients as far in advance as possible. An email is good practice but a phone call adds a much more personal touch. Your recipient will likely appreciate the courtesy and give you an opportunity to explain the reasons for the increase.
This is also an opportunity to gauge the response to the change. If you encounter some reservations about fronting up the rates you’re proposing, perhaps consider introducing a deposit or credit scheme to ease the pressure.
‘Nice guys’ don’t always finish last, but it pays to be a bit ruthless when it comes to how much you charge for your service. As tempting as it is to undercut the competition, there are always people out there who live by the mentality of ‘buy cheap, buy twice’.
Following these tips will help you to ensure you keep your day rates competitive yet profitable.