Presented by James Dalman on 03/05/2018 2:00pm
Being broke as a freelancer is a common problem and it happens to the best of us. The problem is not what you might think it is. It is not because of a lack of skill or knowledge.
You can have all the talent in the world and never make a dime. At the same time, there are many people out there that suck at stuff and still make plenty of money.
Why is that?
In this webinar, James lays it all out for us, because let's face it – we know that even if we suck at whatever, at least we'd have the money to improve ourselves, right?
The reason so many freelancers struggle with their business is that of a lack of ability to run their business and turn a profit.
The two biggest problems keeping freelancers from being able to turn a profit are mindset and inexperience.
Let’s Talk About Money
90% of freelancers are NOT charging enough – or worse yet, not charging at all.
Working for free is only good for gaining experience, as a charity donation, or for a non-profit.
Bottom line is that you are in business to make money!
Running your own business can be fun and should be filled with passion to do what you do… however, you MUST make money and profit to STAY in business.
Changing Your Mindset
Learn to say and mean this…
I am in business to MAKE MONEY and I AM going to make money!
Change Your Pricing Model
How you approach your pricing, and the pricing model you choose can have one of the greatest impacts on your ability to start turning a profit.
If you are currently charging an hourly rate, change your pricing model away from hourly and toward value pricing or project pricing.
You might think that hourly pricing sounds ideal because it is so simple. And it is, however, charging an hourly fee can never allow for the growth needed to make a profit as a freelancer.
Hourly fees amount to nothing except a direct trade of time for dollars. And this direct trade is NOT scalable. Everyone only has the same amount of time in any day. We cannot make any more of it.
More Reasons to NOT Use an Hourly Pricing Model
- It causes client anxiety if you are slow, inefficient, or bad at estimating your time.
- Clients don’t care about your time or your expenses. They care about the value of what they are receiving and how it will benefit them.
- It will kill your profits when you ARE efficient and have the ability to sell on value.
Always sell on the value or by the project. Clients are not going to be paying you for the time you spend but rather, will be paying you for the value you deliver.
Value is some tangible or emotional benefit that you can deliver.
Here is an example of selling based on value.
“This little black dress will make you look thinner and feel sexier when you’re out on the town with friends.”
- looking thinner is a tangible benefit
- feeling sexier is an emotional benefit
Here are some examples freelancers in a web agency might use.
- This design will make your brand look sexier and better than your competitors.
- This layout will improve click=through rates by 100% and get more signups for your eBook.
- This website will bring better SEO results and increase the interaction with your website visitors.
OK, so let’s take a closer look at what these two pricing methods might look like in a real-life scenario using some common processes. Let’s create a custom logo and stationery for a small business.
A Closer Look Using The Hourly Mindset
- A 30-minute phone call to answer questions
- time spent explaining great design and features
- wrap up with telling them you’ll email them a quote.
- Quote on an hourly rate of $50/hour and estimate of time spent…
- Concepts: 5 hours
- Design Comps: 5 hours
- Creating Approved Comp: 2 hours
- Design Comps for Stationery: 2 hours
- Finalizing Stationary Set: 1 hour
- 20% profit markup – Add your profit
- TOTAL COST = $900
The total invoice would be $900 ($50 X 15 hours = $750 = 20% profit of $150)
Next, let’s take a look at the same project, same specs but this time, with a different approach.
A Closer Look Using The Value Mindset
- A 30-minute call to focus on clients goals and vision for the business.
- Do more listening than talking
- Listen to the CLIENTS values and what they need – it makes them feel like you really do care about THEIR needs (because you do!)
- Recap discussion emphasizing the key points and how you can provide that value by partnering with them on this project.
- For example: promoting the brand in the best way, a logo that will stand the test of time, memorable, will work across all forms of media, and digital files for every need, etc.
- QUOTE $3000 before the end of the meeting
Followup with the written proposal, hitting on key points and value you will deliver. Wrap up with an investment price (vs.cost) because it sounds positive, unlike the hourly cost – which implies a negative connotation.
For demonstration purposes, let’s say each of these processes resulted in closing the deal. Which is the better deal? Hourly or Value? Well, the value of course! Interestingly, the client feels like they are getting a better deal too because they have that tangible or emotional benefit that you are going to be able to deliver.
So… What Should I be Charging?
Ability, confidence and your experience can help you determine what price to charge for your value. There is no right answer here simply because it depends on YOUR situation.
The one thing you do need to figure out is how much money you really need to make a living AND a profit.
Ironically, this is the one time you do need to do the math and determine an hourly rate.
Add up all your expenses:
- rent or mortgage
- salary (yes, you need to pay yourself)
- business equipment
- marketing materials
- taxes (yep, you gotta pay those too)
Take the total expenses and divide it by 1000.
1000 is representative of hours. 1000 hours is a typical, realistic number of hours for a freelancer to be paid for – real billable hours.
The answer to your equation is your hourly rate. But… you still need to add a profit. Add an additional 15-20% for your profit and now you have an amount that is the minimum per hour you need to earn to make a living AND profit.
This amount is NOT to provide you with an hourly rate to charge but rather to enlighten you on the amount you MUST make just to survive.
Where Do I Go From Here?
Whatever you do, don’t copy others. Use others knowledge to learn and evaluate for your own use but do what works for YOU! The circumstances for every freelancer differs.
They may have more expenses or closer relationships with their clients. Maybe they don’t even work on the same type of projects that you do or they have a different target market.
Be sure that you know (or learn) who your ideal client really is so that you can provide them the value they need.
Presenter Bio: James Dalman
James Dalman, a long-time entrepreneur, has been in the marketing and design industry for 28 years. He's coached hundreds of entrepreneurs on building their businesses and spoken at events across the United States on entrepreneurship, freelancing, and branding. James is a US military veteran, having served in the U.S. Army Reserves and National Guard as an 11 Bravo Infantryman for six years. He is founder and CEO of Happy Joe, a medical cannabis education and products company postured perfectly to focus on changing the negative stories surrounding the military community and investing in veteran-owned businesses.