Updated: a day ago
Written by Lucy Green, Founder of Lucy Green Coaching!
When you work for yourself, especially as a freelancer, its really typical to charge clients by the day (or even hour) for your time. If you do this currently, here’s 3 reasons why I think you should seriously consider moving to a model where you charge a package rate, or by a set of agreed deliverables, INSTEAD of simply for your time:
REASON 1: Day Rates Cap Your Earning Potential
The problem with a day rate, is you’re creating your very own glass ceiling. You’re swopping time for money, just as you did in a day job - and eventually, you run out of time! When you’re just starting out, or not yet fully booked up, that can seem like a problem you're more than happy to have. But believe me, future you will thank you profoundly for setting yourself up with a more scalable business model from the start! When you're busy working hard for lots of clients, but stuck in a time-for-money model, that success is what starts to scupper you - as you no longer have the time or headspace to figure your way out of the situation. Result: lots of freelancers stay stuck here, frustrated and busy, but with seriously limited earning potential and no easy way out once you're entrenched in the model, with a client roster who are used to this way of working.
The answer? Charge by the result you’re promising; not the time you're spending.
REASON 2: Day Rates Encourage Unhelpful (And Untrue!) Comparisons To Salaries
Having a day rate often encourages unhelpful comparisons to PAYE earnings. It’s pretty commonplace for someone in an employed role to look at a £500 day rate, and draw the conclusion that charging those rates means you're on the equivalent of a £100k+ salary. Whereas in reality, that’s NOT how self employment works! For every day ‘paid’ there are many (many!) more unpaid, that support your ability to show up and work directly on that project as a freelancer. The days spent on marketing, sales, admin and finances, all need to be factored in to how you price your services somewhere along the line.
So although charging clients for only the time spent directly on their projects may seem like a fair arrangement, the reality is that the income to fund the behind-the-scenes days it takes to show up for that client as a contractor has to come from somewhere… and unfortunately, that somewhere is typically your bottom line!
The solution is to price your services to more accurately reflect everything that goes into you delivering that work, not just the time you spend on the project itself.
REASON 3: Day Rates Mean You Earn Less, The Better You Get
As you gain experience and get quicker and better at what you do (which you will, naturally, over time - no matter how good you are when you start!) charging by the day or hour means you will sadly end up delivering MORE work… for the same money!
As you invest time, energy and money into your skills and getting more efficient, surely YOU should benefit from that too - not just your client? They get better quality, and more quantity, delivered quicker…. and you should benefit from that, too. The only way to do that is to price by result or deliverables, rather than by time spent. That way, when you get better - you get to spend less time on each project, and make more money for the same workload.
To make a start on charging by the Package or Project, rather than by the day or hour, give my Package Pricing Calculator freebie a whirl - it will give you a rough guide as to what you should be charging to hit your income goals, within the capacity you have available. Try it for yourself here: https://coach.lucygreen.net/pricing-calculator/
Where to find Lucy:
Watch Tommy & Lucy's Business for Creatives - pricing with Lucy Green IGTV here: https://www.instagram.com/tv/CRWMFisoqRf/