Charging by the hour is the most popular pricing model among new freelancers because it’s safe and straightforward. There’s no asking “How much should I charge for this project?” because the hourly freelance rate has no surprises. You get paid exactly what you’ve worked for. But what happens if you’re offered your first freelance job and it’s contract-based?
When a client suggests a freelance job with a monthly contract, the prospect of a steady income sounds refreshing. Before rushing into accepting your first freelance job, you must decide on your fee first.
We know it can be tricky and more complicated than simply weighing your expenses against your income, so we thought we might give you a hand! But before you even get to that, here’s what you should decide on first.
1. Is a monthly contract the best option for me?
As a freelancer, there are certain things you need to learn about freelancing to do it right. Things like how to negotiate or avoid catches and how to deal with difficult clients. You want to challenge yourself and explore your potential.
To that end, dedicating a lot of time to a few clients might not be the best move for new freelancers, and a monthly contract is not the ideal pricing model. It’s better to start with more clients and smaller, diverse projects. You get to see more of how freelancing works and how to deal with several types of clients before settling into monthly contracts.
If you have been working as a freelancer for a while, then it’s worth taking this opportunity. Without further delay, these are the 5 questions you should ask before deciding what to charge for your first monthly contract freelance job.
2. What is the prospect of this collaboration?
Every decision you make as a freelancer must be carefully thought-out and based on the impact it will have on your career in the long term. The value of a project and the prospect of a long-term collaboration should be the two most decisive factors as you ask yourself, “How much should I charge?”.
Say, for instance, that this client offers an innovative product or service with high chances of winning over the market. Except they’re just starting their business, so they’re a bit short on money.
In this case, set your monetary expectations focusing on the potential of this collaboration and be more flexible about how much you’re charging.
With every project that comes along, never forget to keep your eyes on the prize. For a new freelancer, the prize is a rich portfolio and solid expertise, which can only be built by undertaking high-potential projects.
3. Is the client knowledgeable?
A client that is “new in the business” and doesn’t know how freelancing or their own business works can be a problem. A monthly contract may get them the idea that you must be at their disposal 24/7. It’s not uncommon, either, for clients to keep adding to your workload every month because – hurray, it’s all included! Plus, a client that is not knowledgeable about their business is likely to change their mind about a million details throughout the project.
If you know the client is demanding or new to this, you’ll probably be spending more time on their project than you normally would. Therefore, you should not only charge a bit higher but also include in your freelance contract the total hours, your per-month rate covers, and the charges that apply when you exceed these hours.
4. How big is the project?
Your first monthly contract freelance job is a double-faceted situation for new freelancers.
On one side, you know you’ll have a steady flow of income for a few months. On the other side, a monthly contract is more of a “package deal” in favor of the client, meaning that the total amount you’ll receive will be lower compared to what you would have earned with your hourly rate. At least this is the case for inexperienced freelancers who have yet to improve their working speed. The longer it will take to complete the project, the bigger the loss.
Your best bet is to stay as close to the equivalent of your hourly rate as possible. Use a time tracking tool to figure out how much of your time similar projects take and adjust your rate accordingly to mitigate the difference.
5. How much time do I devote to this client at the moment?
Time is another important factor when determining your monthly freelance rate. In this equation, you must take into consideration how much time you devote to this client. Also, how much time is left available for other clients, and the amount of money you want to receive at the end of the month.
When a client takes up too much of your time, that leaves less time available for other clients. Or else, other sources of income. You should also keep in mind that the project might be more time-consuming than you originally thought – talk about the notorious scope creep!
This means that your freelance rate should be high enough to make up for the lack of other income. This wise decision will keep you on the safe, financially speaking, side.
6. What is the financial situation of the client?
It’s only fair that the client’s financial situation plays a role in your decision to adjust a high or low rate. Of course, this comes after the client has passed your screening with flying colors.
You can’t expect a startup company to go large with money, for example. On the flip side, a large business can add to your monthly income.
And what about clients that live in a different country? The average income and cost of living might be very different from what you thought. Find out what that is so that you offer them a contract that’s fair to both parties.
Apart from all the tips we’ve shared with you, there’s a very simple rule of thumb to use as a guide to set your monthly rate: As your free time is getting less, your fees should go up. And if you reach the point where you have nearly no free time at all, then you know you’ve made it. It’s finally time to start hiring people and create your own agency!