How to Draft Cost Estimates And Get Paid as a Freelancer | Monika Kanokova | Skillshare

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How to Draft Cost Estimates And Get Paid as a Freelancer

teacher avatar Monika Kanokova, Community & Content Strategist

Watch this class and thousands more

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

12 Lessons (20m)
    • 1. Introduction

      1:13
    • 2. Class Project

      0:52
    • 3. How to Calculate Your Price?

      0:43
    • 4. How to Calculate Project-Based Fees?

      1:38
    • 5. How to Calculate Your Hourly Rate?

      2:37
    • 6. Information to Include in Your Offer

      3:21
    • 7. How about Payment Conditions?

      3:47
    • 8. Get the Client to Sign Off on the Contract!

      0:22
    • 9. What if There Is Not Enough Budget?

      1:19
    • 10. How to Deal with Invoicing?

      0:51
    • 11. What if the Client Doesn’t Want to Pay?

      2:24
    • 12. Final Words

      0:36
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About This Class

A potential client contacted you and you had your first conversation about how you can work together. That’s great! 

Now you’re all excited and can’t wait to start working on the assignment. But, before you can get started, you need to estimate the value of your project.

In this class, I'll discuss how to set your price and also the different things you need to consider when drafting cost estimates for clients. 

In the last couple of years, I’ve run into difficult situations several times where the client refused to pay. But, because of how I set up my contracts and terms and conditions, I was luckily always right and got my invoices paid in full. 

While this is no legal advice, I hope this class will help you get more clarity on how to set up cost estimates for successful collaborations.

Meet Your Teacher

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Monika Kanokova

Community & Content Strategist

Top Teacher


I work as a freelance community and content strategist with clients such as Kickstarter, Virgin Money via Hanzo Studio, Veganz and many more. Learn more about my work on http://mkanokova.com. You can also find my insightful guides for creative freelancers on Amazon, or get to know what I do every day on Instagram.

 

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Transcripts

1. Introduction: A potential client contacted you and you had your first conversation about how you can work together. That's great. Now, if you're anything like me, you're probably all excited and conveyed to start working on the assignment. But before you can get started, you need to estimate the value of your project. Hi, I'm Monica. I've been freelancing for six years and before that, I was lucky to have worked as a project manager at an agency, drafting proposals and cost estimates for various projects. In that job, I learned how to draft cost estimates and send invoices that get paid. I decided to create this class because in the last couple of years I've run into difficult situations. They had declined refused to pay and it happened several times but because of how I set up my contracts and terms and conditions, I was likely always right and got my invoices paid in full, which after a couple of conversations with friends I realized it's actually not that common. That's why today I would like to discuss cost estimates, how to invoice, how to eventually get paid once you've delivered your work and even if the situation got a little bit out of hand. Let's get started. 2. Class Project: Because pricing and invoicing is a very private subject. Instead of asking you to share a student project, I think you should just take notes. However, I would still like to ask you to share a student project by introducing yourself. Skillshare is a community full of wonderful people and we should all use every opportunity to tell others what we do and what we would like to get hired for. So please share your name, where your based, what you do for a living, what's your website. If you don't have one watch my class on here on Skillshare, what professionals do you usually collaborate with. Five questions. This way, people can reach out to you or you can reach out to others if you like their work. So let's connect while we are talking business. 3. How to Calculate Your Price? : How many times have you heard someone say they need a logo, copy for a website or a concept for social media and ask you how much it costs. You don't need to answer this immediately. First and foremost, you should always assess how much time you'll actually need and what you'll need to consider in order to deliver. You can always send an e-mail. Generally speaking, there are two approaches to setting your price: project-based pricing and time-based pricing. There are people who say, never charge by the hour, always by project. From my experience you can also charge by the amount of time that you reserve for a client but you have to consider and note these periods and cancellation remunerations in such cases, which we'll get to in the next few videos. 4. How to Calculate Project-Based Fees? : For my line of work, which is my campaign, I start my estimation for project-based pricing with the amount of time I'll most likely spent on it. I will then add a percentage for project management, which at an agency is that about 15-20 percent. You also need to include time for feedback. I usually include two runs of feedback because it's important to make the number of changes you accept clear that clients who coder moms or sisters to get her opinion. Because they don't like something, the moms and the sisters, the feedback might change multiple times and you simply wants to be able to charge for that extra time. Since this is a class for everyone and most likely people from all corners of the earth are watching here on Skillshare, hi. I'll give you some general advice on setting a project-based fee, which might be a bit unsatisfying, but generally, Google what's normal in your industry and in your or your client's region. Then talk to people in your industry and ask them how much they charge. We all do this. The other approach to project-based fees is to calculate the future benefit your work will have for your client, especially with, for example, art. It's hard to assess industry prices. you might need to ask people in the industry what a suitable fee could be. Additionally, and in some countries and for some industries, there are specific flat rates for usage rights that ought to be paid in addition to the project fee. Which again, an unsatisfying answer is something you'll have to Google for your own situation. 5. How to Calculate Your Hourly Rate? : Depending on your industry, your region, and your level of experience, different hourly rates are standard. Years ago, when I first started freelancing, I decided to write a book about it and learn from successful freelancers how they did it. Coming from my full-time job and being used to 40 hours a week, I was shocked to hear in those interviews that freelancers says only have about 20 billable hours per week. I would say it can be up to maybe 24, but if we are talking about deep focused work, it's definitely not much more than that. Also, as a solo entrepreneur, you're responsible for everything in your business. You need to do your accounting, you need to find new clients and do your own marketing. You even need to clean your own workspace, even if it's just your bedroom. Everyone has to do that. Now you know you have about 20 hours a week to work, let's say you have 80 billable hours each month. This is how much you would earn in a month if you're fully booked, which as a successful freelancer, I can say is not always the case. What does this mean for your annual income? I guess your natural instinct right now is to probably multiply this number by 12. But before you do that, you need to remember that you also need to consider vacation and sick leave. It's probably just about 10 months. Everything else is a bonus. Let's reverse this whole calculation. How much do want to earn per year? First question. Then divide this number by 10, then divide this number by 80, and that would be to hourly array you need in order to cover your spending. However, you are a freelancer, so you also need to consider putting money aside for dry months, when you don't have any plan to work and for retirement. Now you have landed on how much you should charge per hour. Given the nature of my work, I usually work with people for an agreed upon time frame and charge accordingly. Instead of charging by the hour, I usually have a weekly or a monthly rate, which is always an option but should definitely be calculated similarly to how you figure out your hourly rate. I would love to know what you're thinking right now. You can also send me a private message if you would like to discuss this. 6. Information to Include in Your Offer: So far, I've come across two types of offers, very beautifully designed ones and simple PDFs that just states the price and terms and conditions. If you would like to have a beautifully crafted template for your cost estimates, you can buy them on sites like Creative Market. As a marketing consultant, my clients have been just fine with simple PDFs, so it's not mandatory to have it look super fancy but I did want to mention it here. Now, let's get to the more technical side of things. In my cost estimates, I always include my client's address and their tax number, my business address, and my tax number, and the date. So far so good. No surprises there. I then right a subject line to explain what's the collaboration, what the offer is about. Then I include a short description to contextualize why this project is important and what the client wants to achieve with our collaboration. I usually take parts of the briefing of the client and then just add some of my thoughts and that's the short description. In the project scope, I list what activities and deliverables are expected. I add the dates to make it clear, when those deliverables are due. Not just my deliverables, but also any information the client is responsible for providing to me. If I'm supposed to collaborate with or manage a team as part of the project. I always make sure to state how many people and also include their availability to make sure I can deliver on what's being discussed. Also, if there are assets you are being promised that are supposed to help you make sure you include all the information you have about those into contract too. Always state in your contract that any changes of scope after the approval will have to be renegotiated and will require additional time and budget. You can't do more work in the same amount of time and there is no something small and extra that we haven't thought of before. You need to look after yourself and make sure you get paid for the extra work you are asked to do. Unless you're happy to do it for free, which might be the case sometimes but should definitely not beat a rule. I do things for free on top, but I like to be thanked for it and not just see it as part of the whole thing. Also, never forget to include when the work is supposed to start and when it's supposed to finish, or at least include the number of rounds of feedback in your estimate. I personally like to include two rounds of feedback and say that all additional feedback will be extra and billed by the hour. Always make sure to include payment conditions, the date your invoice is valid until, and your payment details. I'll explain what they are in the next video but to round this whole thing up, last but not least. Don't forget to set the date when your offer is valid until to make sure no one comes back a year later and expects you to do the work for the same price. This state also creates a sense of urgency for the clients to sign up faster. 7. How about Payment Conditions? : So whenever the invoice is higher than 1,000, I always ask for 50 percent down payment before I start working on a project. I've never had a problem with anyone paying this. If they have an issue with down payment I'd see this is a red flag. If you're not in a European Union country, then you might say $1,000, £1000, whatever the equivalent is. If the project is more complex and there are different deliverables at different times or if the project happens in phases, I like to set up a payment plan. For a payment plan, I create the breakdown divided by calendar weeks to outline when a phase starts and ends and when the client would expect an invoice for me or us if I collaborate with someone else. Even when working in phases, I still charge 50 percent upfront. Between two phases. I will then invoice the final payment for a phase and simultaneously ask for a down payment for the next phase of our collaboration. If it's a success based project, make sure you add a note that the payment is due regardless of whether you have achieved the estimated goal or not. If there's any liability, makes sure you clarify that in your contract too. Always make sure you add a sentence that all travel and accommodation costs are excluded from your offer. In case you need to make a trip, makes sure there are no questions as to who pays for it? Your payment conditions should also include how fast you expect your clients to pay. The business standard in Europe is 30 days. Some corporate companies pay six weeks later. As a freelancer, it's most common to ask your client to pay within two weeks. If you are a creative professional and your deliverable is of creative nature, you might also want to charge for usage rights separately. IP transfers should also only happen after you've been paid in full. That way you ensure that your work is yours until you've gotten paid accordingly. If they use your work before they pay you, you can frighten them with a lawsuit or as Mike Mullen would say in his famous play the morning star. You can sue the hell out of them. You should watch his talk if you haven't already. I just don't want to mention the title because it would be explicit language. Also make sure to include the required tax or in case there is no tax that applies add a sentence that explains why not and mentioned the bill that a client can look it up. For example, business to business transactions between European Union countries have no VAT because of the adverse charge claim. Two more conditions you might want to consider adding to your cost estimates. So a late fee. You can say something like this. A late fee of 1 percent will be added if each invoice is not paid within 15 days. An additional 1% will be added every 15 days until the invoice is paid in full. Second is a termination fee in case of project-based work or a notice period in the case of time-based work. A termination fee is an amount the client will have to pay if they step away from the project mid way. This is important because as a solo proprietor, you've reserved your valuable time to work with this company, and you've most likely not had any time to look for other [inaudible] other projects. If you reserve several months for a client, you must ensure you have a kill fee in your terms and conditions and now rewind this video and watch this part again, because it's really important. 8. Get the Client to Sign Off on the Contract! : Depending on the size of your clients, they might have a Legal Department and contracts in place. Always make sure the contract includes all the things I've discussed before. Usually it's enough to get your cost estimates signed or to email approved as a binding contract. I'm not only go in vises, so if you're not sure, please check with a lawyer. I've created this class to give you a checklist of things to think about that keep you safe. 9. What if There Is Not Enough Budget? : This is a tricky one. Sometimes the client gets back to you and say they can't afford to collaborate with you. One of the things I've learned working in an agency is that if someone can't pay you the full price, never just lower the price, always adapt to what you offer. That's why it's a good idea to offer two runs of feedback. That way you can, for example, cut around the feedback and offer to charge per hour if the client needs more. Sometimes you just really want to work with a client and are happy to offer a lower price, nevertheless we've all been there. If you don't see a way to make the price work, that's also fine. Just make sure to tell them the price is exclusive to them and you charge others more to make sure they don't refer you because you are cheap. Second, never idealize that a client will eventually pay you more once they have a larger budget. Usually once a client can afford more, they'll go to a person that charges more. People naturally want to be able to afford something that seems more valuable to them. It's an interpretation of value and you should not have any false illusions about this, because once they put you in a price bracket, that's it's were you will remain and it's unlikely that it will change in the future. I just wanted to put it out there. 10. How to Deal with Invoicing? : Okay. Here we are it's time to invoice. I don't know your organizational level, but I myself know that if I didn't get the accounting software from day one, my business would probably no longer exist. Some people are happy to keep track of their receipts in folders and via Excel and also use Excel, or Google Docs, or Microsoft Word, even to send invoices. I decided a long time ago that paying for FreshBooks every month totally makes sense because it keeps me organized. My editor, for example, uses the Solder to manage her entire business. If you are a creative spirit, having software to keep you organized is most likely a very good idea. What he used to run your business is completely up to you. I don't want to spend too much time on this subject, but I just wanted to add this so you're aware of your options. 11. What if the Client Doesn’t Want to Pay? : I wish we live in a beautiful world. There are never any issues and everyone always pays on time. However, that's unfortunately not the case. In my field of work, marketing, clients always have certain expectations and sometimes uncover issues that needs to be fixed before a product can be successful. That's not always a smooth process, so I've run into issues with clients not willing to pay multiple times. If your client doesn't want us to pay and you don't have a detailed contract, you might be on the losing end of things. If there is a contract, even if it's assigned cost estimate e-mailed you and it clarifies your rights, then you're right. It's wise to remember the most important details of your contract by heart. If the client calls you on the phone to terminate your agreement, you should remember your cancellation policy. As a client's decides they want us to pay you less because they changed their mind for some reason and that happens, you should remember what you agreed on or be fast enough to look it up and have it in front of you, why are they talking to you. If you don't ask to call back. If someone changes their mind for some irrelevant reason, you can always simply advice them to follow what's being stated in your contract. Sometimes clients will want to lower the fee and you should assess the situation, so you can make a judgment whether they are request is fair or not. If not, don't make it personal, simply tell them to follow what's been agreed on in the contract. For my experience they might tried to push back a couple of times, and you can be sure they will. But a contract is a binding agreement and you have the right to get paid for the work you've done. The time of spend and a risk you've put yourself in. AKA, you should also get your cancellation fee if a cancellation fee applies. You're worth it and don't let anyone and any difficult client make you doubt that. I'm still okay. I know that this is a difficult topic for most of us and it's also difficult for me to talk about it. I just feel we ought to need to talk about it. 12. Final Words: I hope this class was helpful and that you've learned some new things. I've published a number of classes, your own Skillshare and have also written three books for creative freelancers. I would really appreciate a review from you. Also, I published regular updates on my blog and have a secret mailing list for freelancers you can sign up for via the article's page on my website. I have a second mailing list under homepage, so don't mix them up. I hope to see you there very soon and also here in Skillshare in one of my other classes. For now, I wish you the best of luck with your projects and yeah. Bye.