(And what do to about it)
Author’s note: This article has been edited and adapted from 9 Reasons Your Pricing Isn’t Working (and What to Do About It)
The “p” word is something that’s discussed in hushed tones, secret meetings, and questionable environments in the typical web developer’s freelance world.
That’s right, pricing.
“He wants an e-commerce app integrating with his storefront that does a half-million in sales per year? Just charge $42,500.” -Said no one, ever.
Setting your freelance web developer rate is tough. Pricing isn’t something you determine once and put on autopilot, tucked away in the fine print of your business plan while the numbers do the heavy lifting. Rather, your freelance web developer rate and package pricing is one of the things you may find yourself tweaking often – especially as a newbie – trying to dial in that sweet spot.
The gurus of the industry like to say that it’s all simply a matter of supply and demand. Whatever the market will bear is what you’re able to charge.
The business side of me says, “Yes, of course.”
But the other side of me, the side with low blood sugar and one-too-many get-rich-quick schemes thrown at me says, “Thank you for that mind-blowingly intense insight into web development, bro. I’ll be sure to use it to restructure my pricing schemes on my web services ASAP.”
We know the basics of economics like supply and demand. Everybody does. In addition to the reality of things like supply and demand, we’re also faced with numerous pricing influencers. And these pricing influencers cause us to shape our prices in ways that are unique to our specific situations.
Sometimes these factors help us close the deal, sometimes they don’t. This article focuses on 3 factors – or reasons, actually – that apply to the second scenario: how they negatively affect you. For example, are your client numbers low? Are you not getting any clients at all? There’s a good chance it has to do with your pricing factors.
Those factors include:
- Cost of living
- Skill level
- Confidence level (fear of rejection)
- Desire for money
- Previous work’s perceived and actual value
Despite this list, some freelancers have the gift of pricing perfection. They’re great salespeople, they know their products and services inside and out, they’ve got a pulse on the local competition, and they have a workflow that would make Henry Ford envious. They’ve accounted for every relevant price influencer they can think of, and acted accordingly to maximize sales while minimizing costs.
The wunderkinds of self-employment are inspirational, but they’re definitely not the norm. After all, we’re humans, and as such, we live in a continuous state of change—even if the most exciting thing we do all day is order boneless wings and a 2-liter of orange Fanta from the neighborhood takeout place.
Because the things that influence our lives and the lives around us (i.e. potential clients) are always changing – things that are often beyond our control, like the economy – these changes are naturally reflected in the way we do business. Whether it’s the services we offer, our level of customer support, the way we write contracts, and most importantly in the context of this survival guide, the dollar amount we charge for our services, these things directly influence our business.
Ultimately, the goal of this article is to help you identify three common price influencers that may be negatively impacting your business, then give you real-world ideas for reducing the negative impact so that eventually, those influencers are positively shaping the way you price things.
Let’s get to it, starting with reason number one why your freelance web developer pricing isn’t working: your cost of living.
1. Cost of living
This is the thing: There is no way you can live in a place like San Francisco and charge a client $3000 for a website (assuming that site took you a month to plan, build, and deploy). Even if you were pulling in one client like that a month, you couldn’t even afford to pay rent on a basic apartment.
Just to survive in the Bay Area you’d need to find one client a month and charge $7000 or more per site. How many first-time clients of yours are willing to invest that right off the bat? Unless you’ve been in the game for awhile, the answer is probably not very many — if any at all, unfortunately.
you don’t have to live in San Francisco in order to feel the burn
of a high cost of living. Most large cities on the East and West
are expensive places to live relative to the rest of America. There
are a few workarounds
as it relates to your freelance business.
One, you could move to a smaller city or a different region of the country, such as the Midwest or South where the cost of living is significantly lower than the coasts. Now that you’re a freelancer, you don’t have the geographical restrictions an onsite employee does. The same idea applies to all cities from Minneapolis to Milan – look at places outside of them. They’re almost always cheaper. However, this is a drastic solution and many times impractical due to family or other obligations.
Two, if you currently have a full-time job, you can save up as much as you can so that you’re able to survive 10-12 months on savings while supplementing that income with freelancing, eventually easing into higher-paying clients. It might take awhile to save up this much.
Three,you can freelance part-time while holding on to your full-time job, stashing away money while slowly but surely building a good reputation and high trust factor as a freelancer—eventually to the point where people will happily pay you multiple thousands for your digital services, and with more frequency.
Four, you can offset your basic living costs by being frugal with your disposable income. That nice vehicle looks nice, but can it get from Point A to Point B more efficiently than a 2005 Toyota Corolla or even public transportation? Life changes like this are difficult and there is almost always an acclimation process. But those hundreds and even thousands of dollars you save per month may be the key to succeeding in freelance web development without needing to uproot from your location of choice.
2. Desire for Money
How hungry are you for career (and thus financial) success?
I was always too afraid to admit to myself that I was never cut out for a 9-to-5 job, so I felt so awkward freelancing. Thus I felt awkward asking people for money. I felt out of place – who was I to charge what the pros do? This started out when I was a teen doing side jobs for very little money, and followed me up to my first “official” year of part-time freelancing in 2016.
some may argue that you don’t have to be hungry for money in order
to feel motivated. That is totally true. However, in
the context of business,
are in the business of making money. Revenue is a cornerstone of any
successful freelance operation. I’m
not saying it’s mandatory you want to be a millionaire; the amount
you want to make is up to you. But remember that we’re not
a non-profit agency or working as Jesuit missionaries. We
have bills to pay,
and we want to be able to live a little.
As businesspeople, we’re in the business of making money, period.
Thankfully, I eventually reconciled with myself and realized that I’m not an NGO in charge of setting up water wells in the Sahara, or a middle-schooler who shovels sidewalks three times a year for fifteen bucks, but rather a for-profit, results-driven professional operation.
I got motivated as a businessperson: I stopped undercharging and became very selective about whom I work with. I also reassessed the value of my time. These days, I simply don’t have time for people who aren’t serious about paying me what I charge, because there are people in line who are damn near begging to pay me what I charge.
Feeling unmotivated can stifle your experimentation with price points, bring your price research to a grinding halt, and worst of all, totally take you out of the running as a viable freelance web developer. If you find yourself feeling unmotivated, or are drawn to freelancers who live luxurious lifestyles but somehow always seem to be playing beach blanket bingo instead of doing web development, do your mind a favor and study businesspeople who are hard, efficient workers. Read their books, watch their speeches. They can be developers themselves, or go far beyond the reaches of the freelance web development world. Some of my go-to people are Zig Ziglar, Chris Do from The Futur, the guys from Income School, and Seth Godin.
In addition, consider going to local Meetups and other get-togethers that focus on business. I was a member of a few of them when I lived in the city – being around like-minded people who are on fire to succeed is really motivating. The groups can also help keep you accountable when you don’t feel like working or are having a bad month.
I used to do contract work for a gas station. But not just any gas station – this place was the highest-grossing C-store in the Midwest. The main reason for that was because the owner priced his gas at a penny below his competition. Thus, he was the cheapest gas station in the city. The station was featured a few times on nightly newscasts, ramping up business even more. People saw the action on TV and would come from one state over to fill up. They wasted more gas and money driving there to “save” twenty-five cents. Figure that one out!
I probably was there a dozen times while fulfilling my contract, and without fail, there would be some sort of ridiculous mini-road-rage incident where people drove on curbs to quickly get to the pump, nearly knocking employees and patrons over, or pull petty behavior while in line to prepay (“I was here first!”), or get passive-aggressive when they had to wait in line for a pump to open up, all but grazing the bumper in front of them.
I’ve never seen anything like it, and honestly it was pretty depressing to see. These hordes of people were disrupting so many things, all to save literally a few cents on gasoline.
Even though I lived nearby and had provided them services with my contract work, I made a point not to gas up there. I wouldn’t even stop to go check out their interesting inventory anymore…They had lost a loyal customer due to the change.
Now imagine that gas station is a freelance web developer – your competition. This person has what clients need, and offers the same things you do, all at the same general quality and in the same geographical area. The only thing notably different from the average customer’s standpoint is that she’s the lowest-priced option in town; her freelance web developer rates are the cheapest. As a result, swarms of clients are headed her way, blowing up her phone and inbox.
Given this information, how do you adjust your pricing?
Do you drop your own rates, hoping to siphon off some of that traffic towards you? That’s good strategic thinking, but here’s the reality: price-matching (or going even lower) to the lowest possible price to engage your competition is a death trap. You’re going to get calls and emails, and that’s validating – it feels like you’re getting somewhere when strangers call you asking about your web work.
What’s not validating is that people who seek out the lowest possible price in any industry are often “tire kickers” – people who aren’t really interested in closing a deal and tend to waste a lot of time. There are others who demand excessive extras for free, don’t respect the development process, want to dictate your freelance web developer rate, or think they know your job better than you do. None of that behavior feels good, and it makes you question why you’re in the business in the first place.
When you price-match to the bottom or go lower, you’re no longer a highly-trained and skilled specialist with a valuable process, but reduced to a transactional middleman – a person whose job is to bring your client the cheapest services possible. As you can imagine, this doesn’t fare well with your reputation, either. The gas station I worked with was doing a very high volume of transactions, but the employees were burnt out and the profit margins were razor thin. Yes, the company was making money, but at a very high cost.
The online reviews also kept taking a hit because the place went from a nice neighborhood fuel-up spot with good coffee (no, it’s true…I don’t know how, but it was really good) and organic snacks to a petroleum-based zoo in a matter of weeks. Many locals weren’t impressed (the traffic also clogged up the streets) and lots of people stopped going there are a result. These negative effects can also very easily apply to your business once you “go cheap” – many potential clients don’t want the cheap solution.
You never want to “turn off” reliable clients with bottom-of-the-barrel prices inspired by your competition. Let the other freelancers scape the barrel while you tally up your competitive advantages and attract a higher-quality client base; barrel scraping is a totally different business model than what will sustain you as a capable, high-quality web developer.
Your Freelance Web Developer Rate – To Sum it Up:
This article gave you numerous actionable ideas for improving your pricing schemes to attract quality clients who want to pay you what you’re worth. You will notice there aren’t any “hard” prices mentioned in this guide – as I note in Freelance Newbie, I can’t tell you what to price your services at – nobody can. What I can do is give you insights and techniques to help you make better pricing decisions. And hopefully, you were able to get some ideas you can start implementing in your own freelance business.