What’s a Competitive Pricing Strategy?

Written by Bethany Johnson on January 9, 2017

So, you’re ready to start a freelance business. You’ve done the research, determined you’re a niche expert and have everything you need to get started. Everything, that is, except a competitive pricing strategy. Deciding what to charge isn’t as simple as the other steps you’ve taken so far. After all, many of your previous actions were straightforward, even “administrative.” Determining your worth as a freelancer is more complicated.

Thankfully, you’ve come to the right place. Here’s a breakdown of the true costs involved in a freelance business, plus a quick how-to for determining your own competitive pricing strategy in light of the numbers.

Your Benefits

At the very least, you’ll charge clients for your time, but do you plan to charge them for corporate benefits, like health care, retirement contribution matches or paid leave? Frankly, someone should pay for these things, because they’re part of life. If you don’t work them into your quotes, then you’ll take a serious hit and eventually start wondering why life seemed so easy back in the cubicle. The reality is your previous employer incurred a significant cost by helping you with these line items. Now, you’re the employer.

Business Legalities

Plan to work into each quote a portion for your business taxes, liability insurance, government filing and registration fees for incorporation and payroll. To be safe, estimate 30 percent at first. Then, over time, you can adjust — and hopefully improve this figure considerably.

Tools and Equipment

Yes, your client should pay for your desktop computer. But no, you don’t need to say it quite like that. Instead, simply add up the office equipment you use for your freelance work (with a plan to replace it every two or three years). Divide the total amount by how many gigs you plan to get each year, and voila! You’ve only added a few dollars to your clients’ bottom line, but you’ve established a healthy boundary where your tools and equipment are paid for by the end beneficiary. Not you.

Business Services

You’ll need a few services to run your sweet new business, but you can be as resourceful (read: scrappy) as you like. In other words, get creative to diminish or eliminate the following ongoing business service costs, so your competitive pricing strategy is competitive:

  • Tax preparation and filing
  • Website hosting, email
  • Marketing, design, branding
  • Payment collection
  • Writing, editing
  • Contract law representation

The Small Business Association-backed nonprofit SCORE association blog offers a list of super smart places to find helpers on the cheap.

Start-Up Costs

Simply launching a business takes start-up capital, which shouldn’t surprise you. For example, you won’t need to build a new website every month, so it’s not included in ongoing costs, but you will likely need to invest a hefty one-time sum to institute your brand and credibility. You’ll also need a one-time professional head shot, a handful of printed business cards and a software package to do your job. Working these start-up costs into your competitive pricing strategy is optional, but it’s good to account for them early on.

Whether you plan to charge by the hour, by the project or by the package, you’ll need to get hip to exactly what your costs are, and this list can help you do just that.

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