OK, so you’ve learned some new skills and decided on the direction you want to focus on. Now, how do you nicely package everything together and tie it with a bow?
Well, there are three main ways to package your services.
In this post, we’ll take a look at each of those so you can select the one that’s right for your offering. I’ll also make sure you don’t make a mistake a LOT of new freelancers do when starting out — forgetting to account for “off the clock” time.
Flat hourly rate
This is what a lot of people do when starting off. In this example, let’s say you’re a graphic designer and you charge $50/hour for your services. It’s pretty straightforward as this is what most people are used to — it’s how we typically start out as teenagers with our first job. Bagging groceries, babysitting, working as a barista, or flipping burgers, you tend to get paid a set amount per hour.
This is a flat amount paid upfront to secure your services. Let’s say you are a graphic designer and you offer your clients unlimited designs each month for $1000. In this setup, it doesn’t matter whether it takes you two hours to make these designs or 25 hours. They are going to pay you the flat rate per month. If they only use you for 2 designs, that’s their loss, they’re still paying you $1000.
(This is a pretty sweet gig if you can get it because there are definitely some months where the fee will skew in your favor. I had a client who was paying a retainer of $399/month to a graphic design agency. He’d started paying them in March but hadn’t ever sent them any work. This changed when I discovered the charges in October and brought it to his attention and we started utilizing their services. But they basically got 7 months of pay from us without lifting a finger.)
It’s important to note that you can also do this with your time, not just services.
Let’s say you’re doing consulting, but not any hands-on work for the client. You might say to them, “My retainer is $2000/month and that gives you four 1-hour meetings and unlimited email access to me. I answer all emails within 24 hours.”
Whether they use you or not, you’re just there.
Packaged services rate
This is similar to the retainer but with this route, you specify a flat rate for a specific set of services. Continuing with the graphic design example, you might offer your clients a package of 3 designs for $200. They only order what they need from you.
This is totally going to depend on what type of work you’re doing but if at all possible I highly encourage you to choose the package or retainer options. Why?
Charging per hour is the most “uncomfortable” for the client. They have to wonder what you’re up to each hour — were you really working on their stuff, were you really focused that whole time, or were you lost in la-la land half the time? They may want to see timesheet breakdowns and spend a lot of time peeking over your shoulder as best they can to make sure you were working.
It can be a lot of headache and is best avoided if possible. This is simply done by packaging yourself up in a retainer or package option. I can speak from the client perspective (having hired many freelancers over the years) when I say, “I don’t care how long it takes, I just want it done and done right.”
Clients care about the outcomes, not how you get there. And if you price yourself hourly, they might think … “Geez, I don’t know … 20 hours at $100 an hour for this new SEO strategy and implementation. That’s a lot of money. Plus how can I be sure that it’ll be done properly and then what if the freelancer tries to gouge me and it’s not done correctly and they need more hours after that … I dunno … ”
But if that same strategy is packaged up at $2000 for an entire SEO overhaul, and you lay out exactly what’s included — most importantly being, that this project will be “start to finish DONE,” and it will be completed in 10 business days, the client will likely feel a lot less stressed.
They don’t have to worry about whether they’ll shell out $2K for your hours and then you’ll continue coming back and forth with more problems and more things that need to be done. They also don’t need to know whether you’ll be working 2 hours a day for 10 business days or 8 hours a day for 10 business days. With the package, they just have to fork over $2K and rest easy knowing it’ll be done.
This comes in handy for you because you can start making some serious money here, by pricing your services based on value, not on hours.
Remember when we’ve talked about value before? Let’s say you do $2K worth of work for the client that nets them $10K in revenue. It shouldn’t matter to the client whether you spend 5 hours doing that work, or 20 hours. The result is that they gained a helluva lot of money from your work.
When you price yourself this way, you’re teaching the client to value your work, not the amount of time you spent. And if you can achieve these types of results, and do it in 5 hours, then you’re making $400/hour — which almost any client will balk at if you price yourself that way upfront.
At the end of the day, the client wants to spend the least amount they can to get the job done. That’s better for their bottom line. Now, I’m not saying there are clients who won’t pay for value. There are, there are lots of them. But if they can achieve identical outstanding results, and the only difference is the price, they’re going to take the lower price and put the difference back into their business.
My clients love me, I do great work. But if they could have gotten me for 25% cheaper, and still gotten my exact same great work, they’d do it. It’s how the world works. It’s why people wait all year to stock up on electronics on Cyber Monday. Same device, lower price.
Another reason that billing hourly isn’t fully fair to you is that it doesn’t take into account all the time that you actually spend thinking about the work.
Take coding for example. I know that we steer clear of spending too much time talking about very technical jobs on this blog — because I want you to know that you can make a lot of money in a lot of other non-technical skills — but coding is a good example for this.
When it comes to computer programming, developers are often trying to develop a solution with the least amount of code possible. If a problem can be solved with 5 lines of code, it’s typically far better than the same solution with 50 or 500 lines of code. The developer might be noodling around with an idea for hours, days, or even weeks before coming up with the final working solution. That doesn’t show in the minimal lines of code needed to complete the project.
I’ve experienced thinking about work in off-hours multiple times in my own freelancing career. While living in Lima, Peru, I was working for a client that was going through some personal stuff that was outside the business. I took on a much bigger role in his company, running the business while he was away.
This was important to me because he is an incredible person, a wonderful human being, and now after years working together, a good friend. The success of his business was important to me, not only because its success would keep me in a job, but because by then I believed in it, and took personal pride in and responsibility for its success.
In this situation, hourly billing wasn’t an accurate measure of my time because I was living and breathing the business. It kept me up at night, it occupied my mind when I was walking to the grocery store or on the beach. I’d answer emails and slack messages at dinner and deal with whatever popped up at any time. I distinctly remember pacing around Parque del Amor in Lima on my cell on a Saturday afternoon, straightening out a new hire who was already going rogue.
My stress levels were through the roof, so much so that after several months of this, I had a panic attack. It wasn’t healthy, and I’ve learned how to manage myself so it doesn’t happen again — and renegotiated bonus pay with my client — but at the time, I was putting in many off the clock hours just thinking about work.
Even with the best of work-life-balance intentions, thinking about work off the clock will happen — especially if you’re invested in, and passionate about, what you do. The best way to be compensated for this time is to structure a payment plan that isn’t based on trading your time for dollars.
For several quick and easy calculators that will help you figure out what you need to charge in order to earn your desired annual income, check out this post. No matter if you’re planning on working for an hourly rate, a retainer, or offering packaged service tiers, there’s a calculator that’ll help you set your rates.