A Splendid Story
If you think about it, an hour of your time, at your hourly rate covers the time it takes you to work through a problem plus what it costs you to run your teeny little business, right? So, for our sake, let's say your hourly rate as a freelancer is $100 per hour and $10 of that goes towards costs for running your business, and $90 is time working directly on a project. To contrast, if an agency charges the same $100, it gets divided differently because they are structured differently. For our example, let's say that $80 of that $100 hourly rate goes straight to overhead costs such as salaries, office space, benefits, etc. and $20 is time working directly on a project. That means, for the same $100, a client can choose to spend it with you and get 90% of your attention, or with an agency and get 20% of their attention.
So for a client to get the same level of expertise from an agency that they get from a freelancer, they need to spend 10 times as much money.
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Knowing this, most freelancers will price their services way too low, assuming their customers can't afford rates similar to an agency, and if they could, they would just rather go to an agency. This way of thinking could be keeping you from finding better qualified, and more enjoyable projects. While larger agencies have their place in the market, they're not meant to be seen as the "premium" in creative services. Rather, they have more capacity and broader specialties, making them a better fit for some clients, not just clients with big budgets.
By pricing your services based on your expertise instead of what you think your clients can afford, you'll probably find that your clients can still manage to afford you. Why? When you attract your clients based on your experience, portfolio, reputation, and years of experience, your price becomes less of an issue. When you win business based on price, you're in a losing battle and you'll find yourself with unfulfilling projects that aren't well-suited for you because you've given the client all of the control.
It's time to stop thinking of your freelance business as being a cheaper alternative to big agencies, and start thinking of it being a different option with it's own, unique set of benefits. Once you can wrap your head around this concept, you'll begin to wonder how you could be charging anything but what your expertise is truly worth.
Freelancers, what do you have to say about this?
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Posted in Business Service Post Date 12/20/2015