How to Price Projects & Why
There are many options when it comes to pricing your services. We’ve outlined which pricing model is appropriate and what to look out for in each case.
Hourly
When it’s best to use: Projects with ill-defined scope or unclear timelines and when multiple edits/iterations are likely.
What to watch for: Clients not wanting to spend time training you or communicating because they feel like they’re paying to get you up to speed. Combat these objections by having a separate working and meeting rate.
Flat Rate
When it’s best to use: This approach requires easy access to client resources, clear deliverables and scope as well as self-discipline.
What to watch for: Dramatic shifts in scope, requests to work on site and endless meetings.
Retainer (x dollars each month for a set of services)
When it’s best to use: For long term projects (3 months or more) with repeated tasks/deliverables.
What to watch for: Scope creep can be deadly here because you have to live with the rate for a long period of time.
Sunk Costs
This is unbillable time spent selling, acquiring new clients and working on administrative tasks,such as bookkeeping, among others. Remember to include these sunk costs in your pricing structure so that you’re not losing time or money.
Avoid Project Pitfalls Up Front With This Project Checklist
The most important part of any project is making sure that there is a clear understanding between you and your client on every aspect of the project. Early discussions should define the project and it’s scope with painful amounts of detail so that each party is crystal clear on what to expect and how to manage progress.
Additionally, you should discuss contingency situations in case the project calls for extra work or if and when the project exceeds its original scope. In general the lines of communication should be open.
Laura Crandall, founder of Slate Communications describes her approach to new projects: “Defining the scope of work is like a job interview, and I ask a ton of questions. I want to ensure that I am clear as to what the client expects and that they are clear on what I can deliver. It's easy to assume that both parties understand what the other wants and can provide. Though it can feel uncomfortable to clarify points that may seem mundane ("What do you expect Report X will include and why?", "What are you hoping to accomplish with this work and why? "How does your accounting office like to be invoiced and how quickly do they typically pay invoices?", etc.) it saves a lot of time overall.”
Project Deliverables
Deliverables should be outlined and describedsin as much detail as possible, down to the file format and length. Identify whether or not you’ll need to make a formal presentation and what is expected. Also, remember to discuss who is responsible for project implementation and what they’ll need, especially if implementation is not part of your services, to ensure there is no confusion upon project completion.
Project Timelines
When developing your project timeline, make a realistic estimate and add 20% and then add another 20%. It’s better to over deliver than to miss deadlines. Also, make sure to include time for research, developing the necessary documentation and presentations as needed. Remember to include time in your projected schedule for your other projects and for time you’ll need to be selling, too.
Necessary Resources
Identify and make sure you have access to the company resources you’ll need to complete the project. Dedicate a specific time at the beginning of the project for data collection as needed. Also, think ahead and identify potential project bottlenecks(for example, a lack of resources) and address how to proceed as situations arise.
▶ Next page: The freelance evil is scope creep! How to avoid it, and keep yourself motivated...
