If there is one subject guaranteed to leave people squirming in uncomfortable silence, it is money! You have heard about the unwritten rule that you should never ask someone what they earn – well if you are a freelancer you need to get that out of your system and become more comfortable with money.
I am always being asked, ‘how do you make money as a freelancer?’ Questions like that are usually born out of curiosity by those working in paid employment, who struggle to understand how freelancing works. But the fact of the matter is that if you are a freelancer, then you can’t afford to be shy around the topic of figures anymore!
Don’t Be Shy . . .
As part of your journey as a freelancer, you will likely become comfortable discussing your earnings pretty quickly, after all, it is probably the most important part of what you do!
Gone are the days where you get paid from the moment you step through the office door to the minute you leave. As a manager of your own work, income, taxes, and overheads, you can’t afford to be ignorant about your finances!
Amongst the curiosity of friends and ex-colleagues, you are going to face prospective clients that want to know what you are going to be charging them, and how they can get the most out of their money!
This is where things can sometimes get messy for a freelancer; particularly those who are new to freelancing. The apprehension of knowing what to charge and how to charge can be daunting for some. It all comes down to knowing the best way to bill your client so that you are both getting the most out of the relationship!
Why bother with different payment methods?
Like most things in the freelancing industry, it is a case of trial and error! When I first started out I was charging by the hour for my services and found myself counting hours as opposed to focusing on what really mattered; the work! It took some time and money before I twigged that hourly rates didn’t suit my business at all!
However, that is not to say that being paid by the hour isn’t a great way of earning money – and that really is the take-home lesson here! Some freelancers may try to talk you around to one way of earning money, however it is important to do your research and choose the option that fits you best! What really determines which is best for you depends on the business and service you are providing, as well as your needs.
To those who are not in the industry, it may seem bonkers that someone could be receiving payment three different ways! However, in order to get the most out of your earnings, it is important that you consider all your options before committing to one specific payment method!
Okay, so being paid by the hour is probably the most well-known and simple way to get money rolling in! Work 5 hours a day for a client? Get paid 5 hours’ worth of work!
It is great for motivation, it’s instant money coming in, and it is a favourite with many clients as they can see exactly where their money is going (by the hour)!
As I said, hourly payments didn’t work for me, and that will be the case for many other freelancers out there as we all have our preferences and individual circumstances! It really does come down to the service you offer. For example: When I complete client training days I tend to bill by the hour as it really does depend on how long the training lasts.
For month on month regular client work, however, being paid by the hour made me feel that I couldn’t reach my earning potential! There are only so many hours in a day and eventually, there comes a time when work would have to stop and I would need to take a break. The problem I found was that I was constantly chasing the hours to get work done so that I could earn money.
Vs. Fixed Cost Billing
That leads me on to fixed cost payments, which is an easier way to structure your workload so that you can plan your working week/month, and know exactly what you will be earning by the end of it!
What I love about fixed cost payments is that they are brilliant when working on small projects as well as new clients! If you have got your first ever client, it can often be a relief to know exactly what is being asked of you and how much you will be getting paid for your time! It removes the panic that comes with setting an hourly rate, and often the price is a good reflection on the level of work needed.
However, the downside here is that it can be very easy to slip into a position where you have agreed to a fixed price with a client, only to realise later down the line that the scope of the project is way bigger than originally suggested!
I prefer to work with fixed price terms for certain parts of my work, for example, if I am working on a technical SEO audits I will scope the project beforehand and charge a fixed price. I tend to know exactly what is involved and the time it will take me, so a fixed price is perfectly fine! I am unlikely to come across any hidden demands that will result in unprecedented hours of my day at no extra cost to my client.
It is important to consider the scope of your project before you determine the most appropriate payment method because this can really have an impact on how much you will come away with vs. the hours spent on the job!
Vs. Retainer Billing
I find this to be the most beneficial method of payment not only for me as a freelancer, but also for the client. It is important to remember that whilst your goal is to provide a living for yourself, it is just as important to keep your client happy, or they will simply look elsewhere!
With a retainer you can get the best of both worlds – your client is able to get a commitment from you that the work they have paid for is going to get done. And you are guaranteed an income of money and regular work with your client – happy days! As a word of advice It makes sense to always set clear goals for the project when using a retainer. It can be easy for a retainer to get out of hand as a client leans on you for extra work outside of the scope of the project. I tend to have ‘loose’ working days too where I let the client know they will get approximately xx working days for their monthly payment.
There are of course some drawbacks to retainer billing, as with all these payment methods. With retainer billing you have got to be on the ball with your time management, you have made an agreement and commitment that must be adhered to if you want to keep a good reputation. This can be no issue if you are well-organised or just starting out and only have a few clients. For seasoned freelancers, however, with a large portfolio of clients, it is imperative that time is managed well to allow you to spend the necessary hours required to reach the agreed goals of the campaign, without letting your other clients fall by the wayside!
So, Which Is Best?
It can really be a lot to take in, hourly rates, fixed rate, retainer prices – and that is before you factor in everything else you have to think of as a freelancer!
The benefits of doing your research will really help you make the best decision for the services you offer as a freelancer and for the specific project at hand. Take it from someone who has perhaps lost money through making easy payment mistakes that could have been avoided had I had the confidence from the beginning of what to charge for each and every project.
There is no right or wrong answer to which payment method is best for you. If like me you offer a variety of services, there is a strong chance that you will end up using more than one method depending on the type of work you are doing!
My advice would be to always do your research, and always arrange the terms of your payment before the project starts and get these terms within a contract. This way you will have a good idea of the scope of the work, and can decide accordingly how best to get paid!