Setting and Negotiating Rates

If the question of how to find clients is the most popular one I receive regarding freelance writing, how much you should charge comes in close second.

Put simply, your rate defines your business. It defines how much you earn, or to put it in a more practical sense, how many hours you need to work to keep a roof over your head.

My first freelance blogging job paid $15 per hour. Before I switched from a freelancing model to a subcontracting model my hourly rate had grown to over $150 per hour. One of the main reasons I was able to charge so much was because I know how to set and negotiate rates effectively.

You can earn more than more talented writers if you know how to set and negotiate rates effectively. But fortunately, you don’t need to be a talented salesman to ensure that you’re paid what you’re worth.

This section of the course will equip you with all the knowledge and understanding required in order to approach any pricing situation with absolute confidence. In applying the lessons you learn, you will be giving yourself the best possible chance of getting the most value from each freelancing job you take on.

What You Can Expect to Earn

The rate that you charge (and the manner in which you negotiate) will evolve over time depending upon your circumstances and experience. I am not going to say that you should charge $x per word or $x per article because there is no “correct” amount to charge as a freelance blogger.

Having said that, you are probably keen to get a better handle on your earning potential as a freelance blogger and I don’t mind giving you full disclosure.

My first blogging job paid $15 per hour to begin with. The most I have been paid (in terms of an equivalent hourly rate) is ~$200. At my peak, my average rate hovered at around $150. The most I have charged per word for my blogging services is ~17 cents.

Many freelance writers will boast greater earnings, and in fairness, some of them do earn more per hour than me. But what a lot of writers neglect to mention is all the unbillable hours spent promoting themselves and sourcing clients. In reality, their equivalent hourly rate is far lower than they let on.

While you can’t expect to earn $100+ per hour straight off the bat, that is the kind of figure you can aim for. And as you can see from my own achievements, an even higher rate is possible (and realistic).

However, remember this: your hourly rate is as influenced by the speed of your work as it is by the amount you charge. Earning a great rate as a freelance blogger is not just about negotiating effectively (although that certainly plays a big role).

The Four Factors that Determine Your Rate

At the end of the day your rate will be determined by four primary factors:

1. The market
2. The quality of your work
3. Your reputation
4. Your negotiating skills

The market is completely out of your control — all you can do is assess it and react to it. The quality of your work and your reputation is something that you can directly influence on an ongoing basis. Your negotiating skills come into play as soon as you engage with a prospect and have a major role to play in determining your success as a freelance blogger.

That may seem intimidating but it needn’t be. Because you will do most (if not all) of your negotiating by email, you do not need to be experienced or quick-witted to secure good rates. And contrary to popular belief, negotiating is not really an art form. It is more a case of removing emotion from the equation, objectively analyzing the available information, and acting accordingly.

Why You Should Charge Per Project (Not Per Hour)

With the preliminaries out of the way, let’s get straight onto one of the key principles of freelance writing and one of the most important things you should learn as a freelancer: whenever possible, charge per project (or post), not per hour. There are two very good reasons for doing so.

1. You Can Maximize Your Earning Potential

If your charge per project, your ability to earn more money is limited only by the speed with which you can complete your work. Billing on a per project basis will incentivize you to work more efficiently which will lead to you earning a higher equivalent hourly rate. Furthermore, you will impress clients with your efficient style and quick turnaround.

2. You Can Charge for Value Offered Rather Than Time Taken

The method by which you price your job can have a major impact on a client’s likelihood of accepting it.

Let me explain. Say you’re presented with the opportunity to write a 1,500 word article, for which the client is prepared to pay $150. His budget is based upon the assumption that the article will take three hours to write and the belief that $50 is a reasonable hourly rate.

Consider these two different pricing approaches:

1. State that the article will cost $150 to produce
2. State that the article will take 1 1/2 hours to produce and that your hourly rate is $100

The client would happily accept option one. He would almost definitely balk at option two as the stated hourly rate is double what he expected.

Even though you are delivering the same service for the same price, the manner in which you quote for the work can make all the difference. It is simple psychology — the perception of value.

Chris Guillebeau touched upon this in The $100 Startup. He paid $50 to a locksmith for an ultra-quick turnaround in an emergency, yet he felt shortchanged by the transaction. Chris remarked upon his illogical reasoning:

…I realized that I secretly wanted him to take longer in getting to me, even though that would have delayed me further. I wanted him to struggle with unlocking my car as part of a major effort, even though that made no sense whatsoever. The locksmith met my need and provided a quick, comprehensive solution to my problem. I was unhappy about our exchange for no good reason.

Our theoretical client would feel illogically unhappy about pricing option two in the same way as Chris did about his locksmith experience. The difference is this: most people don’t have Chris’ presence of mind to understand their illogical reasoning.

As far as any prospective client is concerned, the foundation for any rate I propose is the price per word, and that is the pricing format I would recommend that you follow.

However, that is what I call the “front-facing” pricing format. In reality, you are going to want to have a very good idea in your head as to how long any job will take, and by extension, what your equivalent hourly rate will be. We’ll get onto that shortly.

Establishing the Scope of Works

It goes without saying that before you price for a job, you need to know what the job is. The true scope of works is something that you will typically have to extract from the client, who is more likely than not to start off by giving you a pretty vague idea of their requirements. In fact, they may not even have a solid grasp on what their requirements are to begin with and will rely upon you to fill in the gaps.

There is just one golden rule when it comes to the scope of work: be absolutely certain of it. I cannot stress this enough. A freelancer’s worst nightmare is a misunderstanding between them and a client regarding the scope of the works.

Here are some questions that you should consider asking when quoting for work:

• What format would you like me to present the articles in (i.e. Word, HTML, plaintext)?
• Do you need me to source images, and if so, should they be Creative Commons, stock photos, or something else?
• Will you require unique excerpts to be written in addition to the posts?
• Do you want me to have any involvement in the promotion of the posts?

The last question in particular is of vital importance, because blog post promotion can take anywhere between five seconds and 50 minutes (or longer).

Establishing Your Minimum Acceptable Rate (MAR)

The key when setting and negotiating rates is to know where your bottom line is — the equivalent hourly rate that you will not go under. I call this your Minimum Acceptable Rate (MAR). It is a concept that I will be referring to throughout this section of the course, so make sure that you fully absorb it.

The first consideration when determining your MAR is keeping a roof over your head. At a minimum, you do not want to work for less than the amount of money you need to pay the bills. This logic applies whether you are going into freelancing full time or just dipping your toes in the water on part-time basis. Either way, you want to start from a position where you could theoretically support yourself if you had no other income.

Therefore, a good initial basis for calculating your MAR is as follows:

( ( Personal Overheads + Business Overheads ) / Hours Worked ) + Tax

Let’s look at a practical example. Say your personal overheads (i.e. the total cost of keeping a roof over your head, food on your plate, and so on) are $30,000 p.a., and your business overheads are a projected $5,000 p.a. You plan on doing client work for 6 hours a day for 48 weeks of the year (1,440 hours total). Here’s the calculation for your MAR (gross of tax):

( $30,000 + $5,000 ) / 1,440 = $24.31

Your MAR (net of tax) is $24.31. Add say 20% for tax (you will of course want to take professional advice on what percentage of tax you should expect to pay), and your MAR (including tax) is $29.17.

The above calculation is far from an exact science, but as long as you err on the side of conservatism, it should serve well as a means of determining your MAR.

Please note that your MAR does not necessarily reflect your going rate. It represents your bottom line — the base point upon which you build.

If your outgoings are particularly high, your MAR may be in excess of what you can realistically expect to earn as someone who is new to the freelance blogging world. If that is the case, you may have to view your first few clients (who may only pay at or below your MAR) as stepping stones — a base from which you can built up to clients that will pay your MAR.

Things to Consider When Determining Your Rate

There are various considerations you should take into account when quoting a client for work. The manner in which you weight your considerations will depend upon the unique circumstances of the particular situation you find yourself in. That may sound complicated but once you understanding the simple principles behind my thinking the process will come naturally to you.

The Value of Your Service

When pricing for any job, it is vitally important to consider the value of your services to the client:

• How will it benefit them commercially?
• How will it positively affect their bottom line?

The answers to those questions have a major part to play in dictating the amount that you can charge.

I once negotiated a higher rate with a long-term client. Although the rate wasn’t as high as I would’ve liked, I couldn’t argue with my client’s point of view:

Writers are, I gotta be honest, insanely easily to come by for very few dollars indeed…given that my background is in writing, it’s pretty scary. I’ve got friends who are Financial Times journalists that are increasingly shitting themselves! I mean, it’s great for the company and all that, but not for quality folk…

While my client clearly engaged in hyperbole (I’m sure her FT friends will be just fine), the underlying logic was sound. That client specializes in delivering a lot of content of decent (but not exemplary) quality and there is a relatively healthy supply of writers who can deliver on that basis.

So when negotiating rates, consider the end value of your service. For instance, an article for a small business blog is likely to have a relatively limited impact. If on the other hand you are writing copy for a huge multinational corporation, the benefit of your services could be enormous. You should price accordingly.

Bear this in mind when developing your freelance blogging business. Whenever possible, position your services in what I like to call “huge client benefit areas.” For example, instead of writing blog posts for small clients (small client benefit), migrate your services to high-end blog editing for Technorati 100 blogs (huge client benefit).

Supply and Demand

Competition plays a major role in determining your rate. The greater the supply of writers of an equivalent ability, the less you are likely to earn.

The question therefore is: what are others charging?

Your first port of call should be to check out the websites of other freelancers. They may well publish their rates. You might even consider asking them — the worst they can do is refuse to tell you.

When it comes to stacking yourself up against other writers, there are two factors that can work in your favor in terms of earning more.

1. Your Ability

If you are a better writer than most you will be able to elevate yourself above the mire of low-quality, low-paid work. Although there are an enormous number of writers out there, I have found that the crowd thins out dramatically once you get above bargain basement level. The better a writer you become (and the greater your reputation), the less competition you will face.

2. Personal Demand

Generally speaking, there is a demand for writers. But over time you should be able to cultivate what I call “personal demand.” This is a situation in which prospective clients want to work with you specifically. Their desire to do so will often be reflected by a willingness to pay more than the going rate for your services.

Personal demand is generated by a combination of one or more of the following factors:

• Writing great content
• Having a highly visible blog
• Having bylines scattered around the web
• Becoming known as an authority in a particular niche

Non-Financial Considerations

Although remuneration should be your primary concern when it comes to setting and negotiating rates, there are other factors that you should take into consideration. Namely:

• Reputation: is the prospective client a blogger of repute?
• Consistency: will you get regular work?
• Security: are you likely to have issues with payment?
• Flexibility: is the client a hard taskmaster or does he/she take a more laissez faire approach?
• Potential: could the work lead to greater things?
• Referrals: could the client provide them if you perform well?
• Breakthrough: are you entering into a new market?
• Bylines: i.e. will you get one?

Going back a year or so, I had one client who paid me about $30 less than my average equivalent hourly rate. However, my posts were published on an authoritative blog (with a byline), and the work was consistent, flexible and secure. Perhaps most importantly, I enjoyed it. All of those reasons added up to me being willing to accept the lower rate.

Ultimately, you need to pay the bills. However, your rate should be about more than just the amount you get paid.

Contingency

You should always build contingency into your proposed prices for two reasons:

1. The client may attempt to negotiate your rate
2. You may underestimate the time the job takes

You do not want to be in a position where you are inadvertently working below your MAR. Not only will this present a real issue in terms of your earnings but you will also find the work stressful (quite the opposite of what we are looking for).

How much of a contingency you build into your prices is entirely up to you and typically dependent upon the type of job (i.e. some jobs are far easier to assess than others).

How to Price a Job and Negotiate

In the blogging world, a prospect will almost never reveal their budget up front. You will probably need to take the initiative in proposing a rate, which is the point at which many an aspiring freelance blogger panics.

If you belong to that camp I want you to stop for a moment and consider the potential outcomes. If you price yourself sensibly (and you will if you follow my advice) there are three potential outcomes:

1. Outright refusal
2. Negotiation
3. Acceptance

Out of those three outcomes the first is by far the least likely. Your prospective client is not looking for a writer on a whim — they do actually want to hire someone. So if you propose a remotely reasonable rate for the work at hand, they are unlikely to refuse it outright. Let this simple logic give you confidence in the way you approach setting and negotiating rates.

So put refusal out of your mind and focus instead on the key considerations for determining your rate.

A Recap of Considerations When Pricing a Job

It should be clear at this point that the various factors discussed above should all be taken into account when pricing for a job. Ask yourself the following questions:

1. What is the scope of works?
2. What is my MAR?
3. What value will my service bring the client?
4. How might market competition affect my rate?
5. Are there any non-financial considerations to take into account?
6. What is my contingency?

Although the above process may seem complicated, it is something that will come naturally to you in time. You start from a solid standpoint — your MAR. Beyond that, you are simply looking to make a proposal that strikes a balance between maximizing your earnings and actually getting the work.

At the simplest level, how far you choose to push above your MAR is ultimately down to how much you want the job. Do you have lots of work booked? Can you afford to play hardball? Or alternatively, are you in need of any and all work at or above your MAR? Consider your situation and negotiate accordingly.

Remember that as long as the equivalent hourly rate is above your MAR, the additional pay represents the potential for a boosted income. It is not the difference between life and death. If you are genuinely in need of the work, don’t try to get too cute with your negotiations.

Going Below Your MAR

If your client attempts to negotiate below your MAR you have one of three options:

1. Accept
2. Stand your ground
3. Negotiate the scope of works

Option one is only to be considered if you feel that the indirect benefits associated with the job outweigh the difference between the actual equivalent hourly rate and your MAR. For instance, you might accept it from your first client on the basis that you need to build out your portfolio before seeking out more valuable work.

Option two should be taken if you are comfortable that your MAR should not be breached for the job in question — a straightforward decision if there are no indirect benefits.

Option three typically represents a compromise in service delivery and I am not keen on it. It can often lead to client dissatisfaction and a fractured relationship down the line.

These days I stick with option two. After all, if a client is not willing to pay you what you’re worth, why on earth would you want to work for them?

Finally, if a prospect plays hardball and you find yourself saying “I might be willing to work for a little less…,” it may be time to reassess your MAR.

Why You Shouldn’t Request a Retainer

In my opinion you should never request a retainer (unless the job is particularly large and will require a lot of upfront investment).

Nothing screams “I don’t trust you” more than requesting a retainer. It is not a good way to start what would hopefully be a profitable long-term relationship.

Instead, vet your clients appropriately. If you are uncomfortable with the proposed payment terms then suggest regular payments over a probation period followed by a permanent long-term agreement (if applicable to the scope of works).

I have yet to have a single non-paying client. Perhaps I have been lucky, but you make your own luck when choosing your clients.

Finally, understand that you will encounter the occasional non-paying client. It’s is a cost of business. The sooner you accept that, the better.

Rates Are Not Permanent!

Budding freelancers are often paralyzed into inaction when it comes to setting rates. But remember this: each client is only one client and rates are never permanent. In negotiating a rate with a prospective client, the worst outcome is that you lose that prospect. It’s not the end of the world.

I’ve said the following to new clients on more than one occasion:

Let’s start with this and take stock after a few articles to see how expectations match reality in terms of the scope of works.

I have never had a client react negatively to this. The response has always been something along the lines of “that seems fair.”

If you act towards your client in a manner that demonstrates your trust in them, they are far more likely to want to work with you than try to rip you off. Furthermore, if you are totally transparent in the way you do business they will want to work with you in the long term. Believe me, they will have worked with enough flakey and untrustworthy contractors to recognize the real deal when it comes along.

Negotiating with Existing Clients

There will be times where you feel that you are worth more than what you are being paid by an existing client. Negotiating a higher rate with a client is often seen as taboo, but it is something I actively encourage.

If you are a good writer and have been working with a regular client for an extended period of time, they will not want to lose you. Writers are a dime a dozen but good writers are not. Even if your client feels that they will be able to find a writer with an equivalent skillset, they still have to go through the process of finding that writer, getting them familiar with the work, and so on. All of this costs time and money.

Here’s what James Farmer, owner of hugely popular WordPress blog WPMU (and hirer of many a freelance blogger) had to say on the topic:

These days we don’t even have to advertise — just sending out an email to our user base will easily pull in 200+ applications, all of which (it being a writing task) we have to wade through.

And then there are the people who do know how to write, but haven’t quite grasped that doing so, on a daily basis, for a demanding audience (and boss!) can be about as much fun as whittling…possibly less so.

So, once you’ve set up at least a dozen trialists (you need a dozen, because at least half of them will fall into the whittling class) the only way to really find out if people are up to the job is to pay them, as well as possible, to work with you for some time, and see how that goes.

Needless to say, unless they are some sort of freak (and/or you are paying them $100+ hr, and even then) you are going to have to do a fair bit of editorial work, encouragement and advising, sort out a bunch of contributor-based approaches and then deal with it when they completely ignore you or start taking backhanders on the side.

Simply reading the process of finding good-quality writers is enough to give you a headache.

I am not suggesting that you hold the client to ransom, but I am suggesting that you do not hesitate in asking for what you think you are worth. I have yet to approach a client for an increase in my rate and not come out with a positive result.

The disastrous outcome is that they fire you just for asking for a raise. If they do this, I’ll be frank — they were probably going to let you go anyway. So in reality, the worst thing that can happen as a direct result of you proposing a rate increase is for them to say no. Nothing gained, nothing lost.

In terms of the actual negotiation, all of the principles detailed above apply. You should be in a position where you can justify your increase (it shouldn’t just be a case of, “Give me more money because I want more”). If you can’t, then you may want to rethink why you are considering asking for a raise in the first place.

Conclusion

If you have taken the time to read this section of the course carefully, you will already have a well-formed understanding of how setting and negotiating rates should be done.

My advice now is to put what you have learned into practice. Each pricing and negotiating situation is unique, which is the very reason why I have not given you specifically actionable tips above. Instead I have laid down the principles that you should follow. Those same principles apply to every single situation you’re likely to find yourself in.

So if you haven’t already, take some time to establish what your MAR is. You can then use that as a base point for every pricing situation you find yourself in. Everything else you’ll need can be found in the guidance above. Good luck!