How Much Should I Charge for My Services?
Legend has it, Picasso was sketching in a park when a woman walked by and recognized him.
“Wow, you’re Pablo Picasso!” she probably said, “Please won’t you draw my portrait? I insist!”
Picasso hesitated but agreed and after a few minutes of careful consideration, and with a single pencil stroke, he finished the sketch and handed it to the lady. She was ecstatic, it captures the very essence of her being, her character now immortalized forever.
“This is beautiful,” she says before asking how much she owes him.
“Five-thousand francs” he replies.
The woman is incredulous, furious, outraged!
“How could you charge so much money for this picture – it only took you a second to draw it!”
“No, madame,” replied Picasso, “It took me my entire life.”
What Picasso was saying was that when it comes to realizing your worth you have to factor in more than just the job spec in front of you. For Picasso, it didn’t just take a few seconds but rather a lifetime of experience, of trial and error, of learning from failure; not to mention the sheer number of supplies, practice and learning that went into making him one of the most prestigious painters on the planet. So what can startups, freelancers and employers learn from Picasso?
When it comes to many professions, it’s almost expected that workers will continue to learn and further their skills for free outside of company time. Industries move so quickly that standing still is simply not an option in order to stay relevant and rather than lag behind the only option is to do this in your own time.
“If you don’t value your time, neither will others. Stop giving away your time and talents. Value what you know and start charging for it.” – Kim Garst
When you are just starting off it is tempting – and sometimes necessary – to do a few jobs at a lower cost than you would normally charge or possibly for free. This is for many reasons but more often than not it is to build up a portfolio of work, a client base and a reputation for delivering the goods but this isn’t sustainable forever and you soon need to look at the real costs.
“But how do you work out how much you and your team are worth?” I hear you cry. When you worked for ‘Big Company Ltd’, you enjoyed a regular salary, perks, a paid holiday allowance. That’s now been thrown out and you need to consider what you need to earn that allows you to have enough to pay the bills as well as manage your business and, ideally, to be able to save for the future and allow for growth too.
There’s no easy formula to work out what to charge but on top of the time it takes to physically complete the work you also need to consider about many other elements that make the work possible: experience, industry knowledge, knowledge of your product, relationship building, management (both project and of staff) as well as direct overheads such as rent, equipment, bills, etc.
Hourly Rate vs Flat Rate
When you bill people for your services you have to make the decision about whether you want to charge an hourly rate or an overall fee for a project. The Picasso analogy above eulogizes the idea of charging per project rather than per hour, but sometimes smaller pieces of work seem more palatable when broken down per hour than per project. For example, 10 designs at $100 each is easier to swallow than $1,000 for some design work.
Many freelancers and startups begin by charging an hourly rate for the time they spend working on a project. The amount of time is usually provided by the client and can often vary greatly between being close to correct and wildly inaccurate. A better way to get a more consistent reading for how long a project takes is to time yourself using an app like Toggl. Activate it while you are working on a project and it will track the amount of time you’ve spent completing it. Do this for a couple of projects and you will build up an accurate reflection of just how long something takes from start to finish and this allows you to be way more accurate with your clients and customers.
Expertise and Experience
Another factor to consider is your level of experience. If you are just starting out on your career path you won’t have as much experience as someone who has been in the game much longer, that’s fairly obvious. But what about your experience with a particular technology or application? If you have something that sets you apart from the competition, say specializing in a niche area, that can make you more authoritative in that industry. Focus on your strengths and what you do have to offer.
You can also have a look at your competition and see how your experience and expertise stacks up in comparison and then cater your asking price based on this information. If you feel like your previous experience and your skills and services are better than the majority of your competitors, don’t be afraid to ask for money – as long as you can back those claims up!
What is the competition offering?
One avenue that is quick and easy for employers and workers to see if they are paying or earning what they are worth is to keep an eye out for industry salary surveys, such as this one which looks at web and software developers. These reports are normally published or updated once a year and track the current trends in a variety of different industries. While the salaries are interesting if you are considering a new hire, look at the contractor fees and see where you fit into that niche.
For workers as well it provides a strong starting point for salary negotiations and for employers these surveys allow you to stay abreast of industry changes and allows you to forecast for changes such as if your developer starts looking for a senior developer salary.
If you are underpaying your team, what other benefits could you offer? The above survey lists additional benefits such as company laptops, remote working, flexible hours, gym memberships and meal vouchers as viable alternatives.
Judging how much to offer is a balancing act and is something that is difficult to get right first time. After six months you might decide to up your asking price or you might have priced yourself out of the picture and need to readjust. Don’t be put off and remember it’s a process and part of success is learning from mistakes both big and small.