Pricing dilemma for freelancers: hourly rate or project fee | Frederik Daneels | Skillshare

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Pricing dilemma for freelancers: hourly rate or project fee

teacher avatar Frederik Daneels, Life learner - teacher

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

11 Lessons (20m)
    • 1. Introduction

      1:45
    • 2. Class project

      0:38
    • 3. Thinking about a haircut

      0:58
    • 4. Three pieces of the puzzles

      1:57
    • 5. The project

      2:21
    • 6. The client

      1:47
    • 7. The freelancer

      1:43
    • 8. Finding balance

      3:11
    • 9. Keep it simple and transparent

      2:12
    • 10. Outro

      1:17
    • 11. BONUS - project fee - the next level

      1:44
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About This Class

"Do you go for an hourly rate or a project fee" is a question that frequently pops up, especially when a price offer has to be made for a new assignment.
How do you decide to go for one or the other or maybe even a combination of the two? This masterclass reveals the 3 most important pieces of the puzzle and how to fit them together to choose hourly rate or a project fee for your freelance work.

This class is meant for the freelancer that finds himself often in between choosing hourly rate or project fee. There are no specific skills or experience required, but it does come in handy to have a realistic situation in mind when following this class.

After this class, you will understand why hairdressers most often use a project price and not an hourly rate. You will know why in certain cases, it’s better to go for a project fee rather than an hourly rate. And lastly, you will feel more confident to make that compelling offer to your potential customer, heightening your chance of getting it!

By the end of this class, you will no longer be in doubt what to choose and how to present it. Ready for it? Let’s go!

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Meet Your Teacher

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Frederik Daneels

Life learner - teacher

Teacher

Hello, I'm Frederik. I love learning. My goal is to achieve a bigger understanding of life. Nature is one of my greatest teachers, next to a tremendous amount of books. I hope to pass on some knowledge to other seekers of life. Teaching is by far the best method to get a deeper understanding of any kind of topic. 

As a starting freelancer, we want as much customers as possible. And once we're in that situation of having enough or even too much customers, we want our freedom back, preferably without giving up our current financial income. This is what I call The Freelance Trap. And this is where I come in... 

My business 'Beyondfreelancing' evolves around helping others to design a life and craft work in such a way that it supports that lifestyle. Unfortunate... See full profile

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Transcripts

1. Introduction: Imagine this. You get a phone call from a customer and he wants to hire you for your services or your product. And he's asking you for your price. Of course, you tell him that you will come back to him as soon as possible. As soon as you've put down the phone, you feel this excitement. You are excited because a customer wants to hire you. And on the other hand, you feel this anxiety coming up. You don't know how to put your price on this. Do you go for an hourly rate or do you go for project fee? Whether you are starting out as a freelancer, already have some experience in the back. This pricing dilemma is something that keeps coming back until you solve it. Well, in this master class, we are going to put an end to this dilemma and solve it once and for all. There is no specific skill required in order to follow this class. But it does come in handy if you have a specific situation in mind in order to follow the class project. Hi, I'm Friedrich Daniels and I've been freelancing over 11 years and I still love every single minute of it. I am an experienced trainer and coach and have helped lots of people with this pricing dilemma. I also help freelancers designing their life instead of working around the clock and squeezing alive around that work. After this class, you will understand why hair dresses use a project fee rather than an hourly rate. You will also know how and when to choose one above the other. And above all, you will have the confidence to present your price to your potential customer. So next time a customer calls you, you will no longer feel any anxiety, only excitement, because you will know what to choose and how to present it to your customer. Are you ready for it? Let's go. 2. Class project: The class project is to make a compelling offer to your client by following a step-by-step worksheet. By filling in this worksheet, you will first of all, understand why you would choose an hourly rate above a project fee or vice versa. You will also check the most common pitfalls. Things that are often not considered before making an offer and that come up only afterwards to haunt you. Your finished project will be a simplified version of an offer that you can make towards your client. The power of this offer is in its simplicity and transparency, which will make it clear for you and for the client what kind of fantastic deal you are offering. 3. Thinking about a haircut: Some time ago, I decided it was time for a haircut. As you can see, normally, it takes about 15 minutes for the local hairdresser to cut my hair and beard. This time, however, I had a little bit more hair and it took them over an hour and even to hurt us is to finish the job was already quite remarkable. But what surprised me even more was that in the end, I paid the same price as if I would have been the job would only take 15 minutes. So I thought about it when walking home and came to the obvious conclusion that he addresses don't work with an hourly rate. We had a project fee. And then I imagined what it would be like if hair dresses would work with an hourly rate. So I want you to pause the video for a second and imagine what if the hairdresser woodwork by hourly rate, what would change? Take a piece of paper and write some things down in case you want to. And we'll start with this the next lesson. 4. Three pieces of the puzzles: Let's find out what might possibly be different in case a hairdresser decides to work by hourly rate instead of a project fee. First of all, as a client, you might feel uncomfortable when unfortunately enough, you have a slow hairdresser. You might be watching the clock all the time and becoming more nervous or annoyed by every minute that passes. Or you might not be enjoying those waiting times in between, where normally people enjoy some reading and magazines or some chatting over a coffee, or even just relaxing. And as a hairdresser, things might be a bit complicated as well. Imagine that different hourly rates apply for different tasks. Coloring your hair's might be at a different rate than cutting them. In the end, all has to be tracked and calculated to give the customer an overview of the bill. So invoicing might become increasingly more time consuming and tedious. But what about the haircuts? Even those might change. There might be more in and out jobs that do not take much time. So we might end up all looking the same. Or people might color or wash their hair themselves to save time and money. So choosing one over the other has an impact on some things. But what are those things? Well, there are actually three of them and they all play a significant role in choosing an hourly rate or a project price. These are what I call the three pieces of the puzzle. So there's the project, the client, and the freelancer. Now that you notice, please go ahead and download the worksheet for the class project. Right now, you can fill in the first step where you can describe your project. Don't fill in the next steps already, even though you might be tempted to wait until after the next lesson to proceed to step two. 5. The project: The first piece of the puzzle is the project itself. There are some projects who are more inclined towards an hourly rate and some who are better off with a project price. In general, when there's more uncertainty and hourly rate will be the better option. And the more certain you are, the better project fee will do. So if you are new in the field and have no experience, then you will be better off with an hourly rate. The problem here is that you cannot make a correct estimation of the amount of time you will need to invest to make the project happen. In this case, you want to be sure that you are getting paid for the amount of work that you do put in. So an hourly rate is a safe option. Sometimes you might have a gut feeling that there's more work involved and you would suspect that first side. For example, if you are a copywriter, you wouldn't be the first one to pull off an all nighter to get the work done because you forgot to take into account the research work you have to do first in order to write this masterpiece. Sometimes you already know that there is a huge part of time-consuming work involved. When I used to install laminate flooring as a freelancer, I made sure to be paid by the hour when I had to install a flooring with lots of corners, angles, and difficult to reach places, vice versa, when the project was just a square floor, which I could install super fast, then I switched to a project price. When you become more experienced in your field, you become more efficient, making difficult work easy and fast for yourself. You've put in the effort to learn and to optimize processes. So you would be punishing yourself if you would keep on working at an hourly rate unless you hire that rate, of course. But you don't want to price yourself from the competition. So a project fee is a better option than when the project scope is well-defined and the client is expecting a certain result, but doesn't care how you do it, then you are good to go with a project price. This is what head dresses actually do as well. It is clear what the client expects and they know on forehand what it will cost to have it done. Knowing this, it's time to return to the worksheet and fill in the first part of step to check the boxes that apply for you and your project. So you can see on paper what would benefit you according to your project itself. 6. The client: The second piece of the puzzle is the client. Again, the more uncertainty rules, the safer it is to choose for an hourly rate when a client, for example, has no clear expectations and just assigns random tasks to you, which might happen, for example, when you are a translator, virtual assistant. When that happens, you don't know what will be coming at you. The same counts for the first cooperation, but the client might just give you an assignment to get to know you better before making the decision about working with you. In those cases, you might opt for an hourly rate because then you cover all of your invested time, even if it is a onetime thing. When a client has a defined budget, say for example, a €1000 for a certain job than a close project fee is of course more interesting to offer than an open-ended hourly rate. Another decisive factor in the decision process for a project fee or an hourly rate is the intention of the client. I often work with clients on a long-term basis. And I want them to not to over each assignment that they would outsource to me. In those cases, I offer a monthly fee taking away the recurring decision process, which makes it easier to give me the work rather than having to consider each time. The fact that in assignment will cost money when they want to outsource it. A virtual assistant can easily offer a recurrent monthly fee so that the client doesn't have the feeling he's being for every single task, he outsources to that VA. And on the long term, you can negotiate when too much work is coming in, hiring up your prices. Let's take the worksheet again. Now it should be clear and easy to check the boxes that matter when you consider your client. 7. The freelancer: The third and last part of the puzzle is the freelancer, which in this case is you. If you have a small portfolio, which means you are not that experienced yet in that field, It's probably better and easier to go for an hourly rate than to ask for a project fee. There is a reason why a starting freelancer mostly asked for an hourly rate rather than a project fee. It's just easier to ask for an hourly rate than going for a project fee where you might not be totally sure of how much time and effort you will really invest in that project. And the second reason for this is that you might not yet be comfortable to ask for a project price. As this is a different way of communicating with your client. And a lot of the decisions in their sales process are taken based upon feedings. And one of the most important feedings is trust. Trusting yourself and your ability is something that is easily sensed by the client. Whether that is consciously or unconsciously. Think of a situation or an occasion where you didn't feel that comfortable and where you knew that other people probably noticed. In the end, if you are not comfortable asking a project fee or vice versa, an hourly rate, then it will be difficult to convince your client to buy from you. But remember, practice makes perfect. And after some time you get used to it and you become more comfortable as well. Now that you have the third piece of the puzzle, it's time to fill in the worksheet again. The third part of step to check the boxes that match with you as a freelancer. And in the next lesson, we are going to put the pieces of the puzzle together. 8. Finding balance: Now that we have examined all the pieces, it's time to put them together. The worksheet might already give you a pretty good idea in choosing one option above the other, or it might not. And then it's up to you to find balance between these three. Consider these three pieces as connected vessels. So if you would change one, the others get influenced by it. It might also be the case that one of the three is so fixed that you don't have a choice anymore. A client can insist on having a project for you rather than an hourly rate. If that is in conflict with what you want, then you can already communicates that this project won't be for you. Or it can also be that the project is really not one where you can put a project fee on because there's too much uncertainty, but the client might insist on doing so. That is another conflict that shows itself ready to be handled by you. Speaking about problems, it's time to look at some common pitfalls. Things that you need to take into account before making an offer. Some pitfalls are typical for an hourly rate and others are typical for a project fee. And some of them are just always there. No matter what. If you're thinking about asking an hourly rate, think about travel expenses and how you are going to charge for those. Do you include these in your hourly rate or do you charge them separately? The same counts for five-minute tasks and random phone calls or meetings. What about different tasks which might be more energy demanding for your part? Do you charge the same hourly rate? And what have you noticed that the amount of hours is way more than communicated or estimated on forehand. And last but definitely not least, what about urgent tasks which might disrupt your whole planning? When you consider a project fee, take into account that project fees are more negotiated. So you might include a negotiation buffer. Makes sure that there's a well-defined scope so that you can actually finish a project and make that final invoice. Too many times. A project doesn't get finished and also that final invoice doesn't come. So make sure that there is a deadline and a clearly defined timeline. Be transparent about what to enforcement. When working with a project fee, make sure that there's enough communication so that you can regularly check with your customer that you are still on track with your work. It would be a pity to find out that the client doesn't agree with your result. And once you to do it all over again, these pitfalls are mostly obstacles that one finds out when the project is already ongoing. So take your time to go through this list and think about it before you make an offer. If necessary, include some conditions on your offer, and make sure that your client knows about these. The worksheet for the class project has the complete list. Check the boxes of those items that need special attention for your situation. 9. Keep it simple and transparent: The most important thing to make a compelling offer to your client is to keep it simple and to be transparent. If it makes sense to you why you would choose one option over another, then you can explain it so it can make sense for your client as well. And this is the biggest key for success, where communication is clear and open from all sides. As a freelancer, it is your job to gather all the information that you need to make a compelling offer, find out exactly what the project is. In most cases, clients are looking for a solution, but do not know exactly what that solution is. You are the expert and you know best what he or she needs in order to improve the client's situation. Find out who the client is. Does he have a preference for a project fee or an hourly rate? How did he work in the past? How does he see it to work together? How easy will it be to communicate with the client or the one in charge? How easy will it be to get your well-deserved money? When you've gathered all the information, then it's up to you to put the puzzle together and do the hard work. A compelling offer is one that is clear on first glance. Too many offers require a calculator and quite sometime to figure out how much it might actually caused when the project would be finished. And last but not least, explain why you make the offer in such a way. Explain why you have chosen to charge an hourly rate or a project fee. Not only from your perspective, but also communicate what the impact is for the client viewed from his perspective. In other words, what Senate for the client. Take the worksheet again and fill in step 4 and step 5. This is your offer, strip naked to the bone. And as simple as it can be, this is your basis to build a nice and attractive offer while still being clear and transparent towards the potential client. And remember, if it makes sense to you, then explain it to the client so that it can make sense to him as well. 10. Outro: Congratulations on completing this class. You now know that choosing an hourly rate or a project fee depends on three important puzzle pieces. There's the project, the client and the freelancer being you. You now understand that they all have an impact on one another. And that you need to look at them altogether to find what is the right choice for your specific situation. So next time a customer calls you and it's asking for your price, you will know how to tackle this dilemma. Please share your class project and I will be happy to give some constructive feedback on it. If you liked this class and you feel that others can benefit from it as well, then hit the share button underneath this video. Too often I see freelancers working hard and trying to squeeze a life around work, neglecting other fields in life like family, friends, sports, or hobbies. I help fellow freelancers with keeping things simple. Do you want to know more about the freelancing life and how it can be done in an easy way. Then I kindly invite you to connect with me on LinkedIn or check out my website for more resources and other courses. And I would be happy to hear from you. Let's connect and discuss the freelancing life. 11. BONUS - project fee - the next level: Hi, in this bonus video, I want to explain you the next level of project fee. If you look at the worksheet, you'll see there's a question, I would like to earn amount of money at the end of this project. And I've put it there for a specific reason. A few understand that you can always calculate from project fee to hourly rate and vice versa. Those two are actually the same thing. But if you go for a project price without calculating your hours, without taking them into account, you get a whole different level of freedom. What do I mean by that? Well, imagine that you have a project and you put a price on it. Like say, I would like to earn €1000 when I finished this project. Now, if you don't keep track of your hours, but you just know that at the end of your project you will receive that amount of money. You will feel some extra kind of freedom. And it will allow you to do your work and to really enjoy the process of doing your work without really thinking, am I earning enough money for this? What is my hourly rate? Mit expensive and Y2, cheap. All those questions fall away whenever you say, Okay, I will look at this project and I would like to have a fixed amount of money no matter what. And I will be sure that by the end of the deadline I will have finished this project. I would like you to think about a project or to actually propose an offer like this without calculating back and forth, but just saying, okay, for this project, this amount of money will do and just go for it and realize and feel the sense of freedom when you go at it like this.