Pick your pricing model

The number you charge is one thing, but how you charge is another thing altogether. How will you explain the work you’re doing to future customers? How will you know when you’ve upheld your end of the bargain? What timescale will you bill on?

Billing by the Hour (or day)

This is closest to the standard clock-in-clock-out workday structure. You agree on an hourly rate with a customer, track and log your hours and submit invoices at regular intervals for the total accumulated time.

Pros:

• Fewer discrepancies between how much work you feel you did and how much work your customer feels you did

• Doesn’t require any prior knowledge of the project to give pricing

Cons:

• Hard to delineate what qualifies as “working,” i.e. I had an idea in the shower? Is that billable?

• Leads to nickel-and-diming, which in turn creates poor customer relationships

• You’ll make less money as you get better at your job (the same work will take less time)

Best for:

• People who can work in extended sprints or large batches of time

• People who already keep a close eye on their time management habits

• Fields such as consulting, coding, editing

Billing by Project Scope

After taking in the size and intensity of a given project, you roughly calculate a custom price based on expectations. How long will this project take you? How much effort will it require? How much would a positive outcome benefit this customer?

Pros:

• Lets you assure prospects that they’re getting the best possible rate for their circumstances

Cons:

• Slows down your sales process, since every project needs its own pricing

• You may underestimate the work involved, meaning you’ll end up working more for less

Best for:

• People who prefer vetting prospects and being briefed on as many details as possible before signing

• People with a wide variety of offerings

• Fields such as editing, web dev, event planning, writing, design

Billing with Flat Prices

Figure out what services you’re going to provide and curate them into packages. These packages might be take it or leave it, or they may have tiers.

Pros:

• can provide upfront prices, but ensure you’re not beholden to arbitrary time expectations

• Lets customers know what their total expenditure will look like without a sales call, and establishes your price bracket in clear terms

Cons:

• Limits your business potential to your set packages

• Limits your ability to increase your prices over time for repeat customers

• Limits your prices to what you’ve published, meaning you can’t charge bigger customers more money

Best for:

• Graphic designers, web designers, photographers, illustrators

• Anyone who needs help setting and enforcing boundaries

• People who don’t want to spend too much time thinking about their billing procedure

Billing by Retainer

Imagine this as a person or company subscribing to your service. They pay you a fixed price and get a fixed set of deliverables or hours per month (think: 5 illustrations, 4 hours a week).

Pros:

• Recurring revenue means additional stability

• Customers often don’t use the full retainer every month, meaning if you’re good with time management, you can pick up extra work

Cons:

• You need to enjoy working with these customers, as a rocky on-retainer relationship can be emotionally and mentally draining

• Leads to complacency

• Can create an awkward power dynamic

• Oftentimes, you’re getting paid less for the same amount of work than you would with a fresh customer

Best for:

• People who want the freedom of being self-employed but still need monetary stability

• Customers you really, really like

CARMEN TIP for creatives:Think of your work in terms of “brain space”. For example, This project will take 20% of my work-related creative thinking for 3 months. We find it much more effective than hourly billing since so much creative work happens subconsciously.