What Should I Charge for My Services?

Pricing is a major concern for all independent professionals. Whether you’re a rookie or a veteran, you’re struggling to arrive at a number you can quote. Pricing is critical because it decides your lifestyle and financial security. It can either bring in clients or drive them away.

As an independent editor and writer, I too have struggled with pricing my services. In this article, I attempt to describe a line of reasoning that helps me decide what to charge. I’ve arrived at this point of view after much analysis and experimenting.

If you’re an independent professional who offers services based on your unique, individual skills, you may find this article helpful.

Services are not products

When you think about what to charge, the first thing that comes to mind is, “What do others charge?” It is a natural line of thought, but it comes from a product mindset. You think like, say, an apple seller. You think if you price your apples higher than the next apple seller, customers will buy apples from them, not you. At the same time, you think if you price your apples lower than your competition, you’ll get customers but earn less.

You can use this logic on all kinds of products—smartphones, cars, even homes.

But services are not products. There are many flaws in product thinking for service pricing.

There is no standard service definition that all customers are seeking. Different customers have different needs from the same service. From a graphic designer, some customers need a brochure, some need web banners. Even in brochures, some want simple designs, some want elaborate. This impacts how much time you will spend creating these deliverables.

Pricing of services is also tricky because they’re intangible—you can’t package them into standard, countable physical units like soaps and laptops.

Services, unlike products, are irreplaceable. A bad haircut cannot be replaced with a good haircut. Services (usually) are not re-doable.

Services cannot be stored in a warehouse so you can sell them when the demand is higher. Unless you have an assignment, you can’t create a deliverable that you can sell later (unless you create a sellable product, like an app or a painting).

We’re all different

If there is one word that characterizes the gig economy, it is “heterogeneous”.

No two graphic designers are the same, no two content writers are the same. Their skills, qualifications, geographical locations, attitudes, communication abilities, quality of work, aspirations, needs, etc., differ, sometimes significantly. All these factors directly or indirectly determine what you can charge for your services.

This difference is a fundamental truth that we must keep in mind when thinking about pricing our services.

What is your cost structure?

Everyone knows that cost plus profit is the price. So, let’s consider your cost structure, i.e., what does it cost you to deliver a service.

All apple farmers of Himachal Pradesh would have to pay nearly the same amount for procuring land, labour, capital, seeds, fertilizer, pesticides, and transportation. So, they have a standard input cost structure. They can just add a profit margin over this and arrive at a selling price that is competitive.

But such a standardized cost structure is not available for independent professional services, which are essentially one-person businesses. There is a dearth of comprehensive service-fee databases that can be used for price discovery.

Besides purely work-related expenses, such as tools, software, computers, accreditation/certification/membership fees, legal/accounting/administrative costs, insurance, etc., your cost structure depends on where you live, your spending habits, your liabilities, and your future plans.

A person with children has an additional cost point over someone who doesn’t. A person renting a house in Delhi has higher housing costs than someone living with their parents in Bhubaneswar. A smoker automatically has an additional discretionary spend than a non-smoker.

There can be millions of such permutations and combinations.

In the absence of a standard input cost structure, how do you arrive at a competitive selling price? You cannot! Therefore, asking what other graphic designers are charging for their services may get you interesting data, but it may not help you set your own prices.

You will have to have a clear idea about your own input costs.

Here’s a simple template by Michelle Pereira that can help you estimate your input costs.

Inputs and output vary

No two gig workers are the same in terms of their personal inputs. For the same client need and the same execution timeframe, and even the same cost inputs, no two gig pros will deliver the same quality.

All other things being equal, the client’s quality experience depends on the individual gig worker’s skills, education, knowledge, comprehension, communication, efficiency, and even socio-cultural background. Tweaks in any of these input factors can change the quality of the experience delivered.

If individuals vary, their quality varies. If quality varies, how can we justify the same price for all service providers?

Time is the only common denominator

The only thing that can be called a standard input for gig workers, independent professionals, consultants, and freelancers is time.

As minutes and hours, time is what we can most easily quantify as an input unit for our work. From a graphic designer to a lawyer, proofreader to a management consultant, all combine their physical presence with time to deliver value to their clients.

Why time? Because time is the same for everyone. Because it is the only input that can be counted in the same way for all independent professionals—in hours and minutes—so it is standard/uniform.

Further, every independent professional must input time to generate deliverable output for their clients, that is, they have to spend time to create the value the client wants.

How fast do you work?

So, here’s the backdrop: heterogeneous customer needs, heterogenous personal inputs, heterogeneous input costs, and time as the standard input. Given this scenario, the first thing that a gig pro must do is gauge how much work—for that particular assignment—they can accomplish per unit of time. That is, how fast can you work.

For example, an editor could copyedit 500 words per hour for a particular manuscript. So, they would copyedit 10,000 words in 20 hours. Or a content writer could research and write tech blogs at 200 words an hour. So, they would take 5 hours to write a 1,000-word piece.

Here, one would ask: “How can I arrive at these rates for myself?” As of now, there is no scientific method to do that. But one can arrive at these rates based on one’s experience of previous projects and/or creating a sample output.

The final piece of the price puzzle

You know that your charges will be unique to you because you, your client, and your quality are unique. You also know that time is what is common for everyone. And you’ve calculated how much time you’ll need to execute a specific project. So, now what remains is the actual price per unit.

Here comes in the final piece of this price puzzle, which is also unique to you: What do you need/want to earn (per month/annum)?

You could define your price based on per unit of time or per unit of the deliverable. So, for instance, you could say that you will charge ₹1,000 per hour or ₹200 per panel or ₹10 per word. What is that number? You know that it can’t be what another freelancer is charging. You know it can’t be what another client paid you for another assignment.

Here’s what I suggest

First, find out how much income you wish to have per month (use Michelle’s template). Second, find out how much you wish to work (days per month and hours per day). Third, use these three figures to arrive at a per hour rate for your services. Multiply this per hour rate with the estimated number of hours you’ll spend on an assignment to arrive at your total charges for that assignment.

Here’s a helpful Gig Rate Calculator that I’ve created to do these calculations. (This calculator is primarily aimed at editors and proofreaders. But even if you’re from another industry or function, you could suitably tweak your figures and give it a try.)

Act smart, be flexible

Your desired monthly income is going to have a bearing on what you charge for your services. But just because you wish for a certain monthly income doesn’t mean clients will be willing to pay your calculated rate. Nevertheless, I would suggest that you test the market.

Ask for a rate that you’re happy with (the calculated rate, for instance). See how the market/client reacts. Be open to negotiating down. Factor in a negotiating premium within the rate you quote (ask for more than what you want so you can offer to climb down without compromising your profit margin).

But also keep pushing the rate up over time with the same and different clients. Some clients will in fact surprise you by happily accepting the rate that you thought was too high! Clients are not all the same! Keep that in mind.

Market yourself better so that you have a wider choice of clients to pitch to. Improve your work quality so that your rates are justified. Get certifications and training to make your rate look well deserved. Offer value-added and bundled services as a way to increase per-hour fees.

Most importantly, be flexible. There will be times when you will have very little or no work. At such times, in the interest of capacity utilization, it would be wise to not turn away a client who cannot afford your desired rates. Be flexible and reduce your rates. Even 1% capacity utilization is better than 0%.

In conclusion, your charges depend more on what you want to make than what others are making. You have to use that figure as a benchmark to build your pricing strategy. And remember that your pricing strategy is a dynamic game plan that you must keep tweaking throughout your working life. Your circumstances and needs will change, so should your value-add and prices.

I hope you found this article useful. If you have any questions or comments, please email me at anupam.choudhury@gmail.com. Please connect with me on LinkedIn.

If you found this article useful, you might also want to read this: Thinking About Rates: The Five Senses Approach