Getting started in the world of entrepreneurship involves setting your own prices. It is generally hourly or daily, but can sometimes take the form of a fixed price for a service. But what prices should you apply? What should you consider when setting your prices? We’ve included all the information you need to know to set your rates as a freelancer.
Do a market study
Before considering the prices you want to set for your services, it is important to conduct a market study. It will allow you to know which sector you want to start in, and thus get an initial idea of the rates applicable to similar services.
First of all, consider identifying your direct competitors, consider in detail what services they provide, but also where they are located. You should monitor their rates only after you have identified the people who are closest to you (geographically and in terms of services provided). Please note that these are only indicators to help you get an idea of the generally applicable prices in the market. Don’t limit yourself to this if you feel that your services are special and require a lower or higher price.
Calculate the expenses to be covered
There are a number of recurring expenses that should be anticipated as an independent factor. You should select these, to take them into account in your pricing. In fact, if you forget to record some recurring expenses, you risk not being billed enough, and consequently losing money.
The main expenses that you should specify are as follows: taxes, social contributions, insurance, Internet, telephone, potential rent, equipment purchase, training, travel, accommodation … the services you provide. Once you make an accurate list, identify these expenses, to get an idea of the costs you will have to pay before receiving the money that will go into your pocket.
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Factors to consider when setting prices
Once you have completed your market study and expense calculation, you still have to determine the added value and customer references to set your prices. So you will have to judge your own experience, to know where to put yourself in market prices. Customer references (if you have any) lend credibility to your services, and thus can allow you to increase your reputation and pricing. Remember to put them first, they can justify the prices which are sometimes above average.
Feel free to enhance the elements that make you unique, what makes your originality. All these differentiation criteria will allow you to set higher prices, but also to impress potential customers.
Daily rate, hourly or fixed rate?
To bill your services, there are 3 different ways: hourly rate, daily rate, and flat rate.
This method allows you to calculate the price of the service based on the number of hours required to perform it. Recommended for freelancers who can easily estimate the number of hours needed to complete a task. You can simply calculate hourly wages thanks to these steps:
- Select the net monthly salary you wish to receive,
- Add the amount of expenses you calculated earlier,
- Divide this amount by the number of hours worked during the month.
The result obtained corresponds to your hourly rate. However, there are a few items to keep in mind, the paid time off scheme does not exist for the self-employed, consider adding a small percentage to your wages to compensate.
The daily rate specifies the rate you want to charge for a business day, without mentioning a specific number of hours. It is thus more suitable for complex projects to be sized by the hour, or for daily repetitive tasks. If you need flexibility in your daily life, and the majority of your projects are large and take up 100% of your time when you are working on them, then prefer the daily rate to set your rates.
It is also possible to use a fixed pricing system for some deliverables. You will be able to select one amount for a specific service, no matter how many hours or days you spend on the project. Please note that to use this type of pricing, it is still desirable to have a fairly accurate idea of the number of hours required, because if you need twice the expected time, you run the risk of not being found financially there.