When you’re just starting out with your business, you likely have no idea how much to charge for your services. You don’t know how long a project will take you or what an “appropriate” price tag (or rates) look like.
So you charge by the hour.
“It’s easier this way,” you decide. You even take the plunge to charge $50/hour for your services, which feels like you’re really valuing your time! And clients accept that hourly rate. You start getting offered more and more projects… and then something funny happens.
You realize that you’re making less money for doing the same work.
Here’s the thing: as we continue to work in our field and get more experience, we inevitably begin to work faster and more efficiently… which means that a project which used to take us eight hours to complete might now only take us five hours to complete.
Instead of earning $400 for your project, you’re making $250.
You wonder if you should try to slow down the process, so you can earn the same amount… but that’s not fair to your clients, and it’s not helping your business if you reduce your efficiencies.
At this point, you could increase your rates—but it would be a hefty amount to jump your rates from $50 to $80 per hour, just in order to split the difference! And what are you going to do when you get even faster at your work?
Clients who you had a great relationship with tell you they aren’t able to fit your new prices into their budget, and you start panicking, wondering how you’re going to earn a decent income without sacrificing that time you’ve started saving.
The answer is to stop charging by the hour.
Your value, and the value of the services you offer, shouldn’t reflect the amount of time spent on a project. After all, a beginner in your industry will take significantly longer to complete a project compared to an expert—but there’s a very high probability that the expert will produce the higher-quality product.
Instead of doing hourly rates, it’s time to switch to flat fees (or project-based rates)!
What matters isn’t how much time you spend working on a project. Instead, the important thing is the quality of the work you produce.
Your clients don’t need to know if it takes you 2 hours or 20 hours to complete a project. What they really care about is that you do the job they want you to do, and you do it well and in a timely fashion.
Now you know that a flat rate is the way to go… but it can be tricky to figure out how to price your services and set a flat rate!
With that in mind, here are 5 questions to ask yourself when determining a flat rate for your work…
- What specific type of service is it? Editing, writing, and social media management all have different amounts of approximate time/energy that it might take you to complete a project, for example.
- How fast can I complete that task? In other words, how much can I theoretically do in the space of, let’s say, 1 hour? Give yourself a range for this and assume it’ll be on the higher end. Let’s say you can generally edit approx. 1,000 words over the course of 30 minutes to 1 hour, depending on the quality of the writing and how many rounds of edits you do. Base this number on your past work.
- What am I working with here? For example, it’s easier to edit someone’s book if they are a good writer, compared to if they are a poor writer.
- What’s my gut feeling about this client? Based on your communications to date with them, do you think they’ll let you do your own thing… or will they probably micromanage or have you do numerous edits every step along the way? You can write these into your online contract to an extent, but it’s good practice to charge a little higher for clients if you get the sense they might be more difficult.
- How much work do they say they’re going to need? Use your rough estimate of an hourly rate and add about .5. So if it sounds like you’ll have about 10 hours of work, anticipate for closer to 12 – 15 hours. They’ll probably have additional work for you, and if not, you’ll still be compensated well.
Factors to determine your flat rate
How much you charge depends on your unique situation. Factor in your experience level, your skillset, the demand for your services, your educational background, how many hours you want to work each week, how much your monthly bills are, what you’d like as a yearly salary, etc.
You can learn more about exactly how to create a pricing strategy for your services when you grab the Pricing Strategy Worksheet.
Remember, it’s okay to end up with a flat rate that gives a corresponding hourly wage which is higher than you would “normally” charge. Don’t feel bad about that! The important thing for your client is that you’re doing a quality job (which, at the end of the day, fits their budget), NOT how much they’re paying you per hour.
From one client to the next, project-based rates might work out anywhere from to $200/hour and $25/hour. That’s okay! They’re paying you for the end product, not for how much time you put in.
When presenting a flat rate to a client with ongoing project work, you might want to tell them that, based on the information they’ve given you, you anticipate it will cost $X/month… and after the first 3 months, you’ll reassess and let them know if there have been any changes. That gives you an “out” if you’ve grossly miscalculated. Another option is giving a range, with the assumption on your end that you’ll charge them the middle amount, but again it gives you that “out” in case you’ve miscalculated.
At the end of the day, you’ll probably miscalculate a few times… but you’ll learn something each time.
How to Determine Flat Rates for Your Services
Action step: Look at your current projects which use an hourly rate, and convert it to a flat rate. What does that look like? What could it enable you to do? How could it empower you to make more money (and be paid what you’re actually worth)? Take the plunge and reach out to a client to discuss your new pricing method!
Want more help? Grab the (free) pricing strategies worksheet so you can STOP agonizing over your rates, and start feeling confident about the fees you set.
Ready to reframe your thoughts on money? Get our Money Mindset Guide here.