How To Become A Full-Time Freelancer (Part 2 of 2)

Written by Tammy Durden

If you are ready to become a full-time freelancer you will enjoy this article. It delves into pricing strategy and agency ownership. Are you ready to become a full-time freelancer? Are you tired of working the 9 to 5 job and want more freedom in your day? If you are ready to become a full-time freelancer you will enjoy this article. It delves into pricing strategy and agency ownership.

Last week we took a look at the first half of “How to Become a Full-time Freelancer”. I want to finish this topic with just two important points. We will discuss the importance of creating a good pricing strategy and the consideration of trying to develop an agency model in “How to Become a Full-Time Freelancer, Part 2”.

In the last article, I discussed four points:

  1. Consistency Not Supersonic Speed
  2. Know Your Numbers
  3. Touchpoints (as in how many it takes today)
  4. Build Up Your Clientel

See the last blog post for more details on all of these.

In the beginning, when you are starting to be a full-time freelancer, you may not know how to price your services. Many freelancers start out offering an hourly rate. This soon becomes tedious and you will probably feel like an employee to your clients.

I tell my clients all the time,

In all parts of our businesses, this is true. And it is certainly true of our pricing strategies. I thought today I would share my pricing journey with you.

As you know, I’ve been in the online service world for 16 years. So, I’ve had quite the journey and have been where you are today, I am sure. So, let me dive into some strategies I used over the years.

I started with an hourly rate pricing model. I was not fond of this because it meant that I had to keep time for every client task I performed. If I forgot to turn on the timer I might have to put in an estimate or worse yet I could forget to put it in altogether. Even if I put in an estimate I always underestimated my time.

The other problem with this pricing is that you are billing after the fact. You invoice the client AFTER you have performed the services and possibly only invoice at the end of the month.

Using this pricing strategy can mean waiting for payment to come in after you have already given the client the services they requested.

My personal experience a couple of years into my business journey I was excited to attract a client to my new higher-value pricing shift. I was finally offering my services at a higher hourly rate (although even looking back at that I know I was truly underpriced). I was, however, still only invoicing after the services were provided to my clients.

A few months into our working together I came to realize that this client was paying very slowly. Many times, after invoicing, although my terms were “due upon receipt” they would not pay for 2-4 weeks. I like working with them and got along great with the owner of the business, so I let things slide.

Then a bigger project came up for them. I excitedly added to my work schedule for them, although they still owed me money. It was a tight deadline and a lot of work but I delivered all in time. I invoiced for my services. I heard crickets.

They still had not paid the previous invoice and now were not paying this invoice. I’m sure you can see where this is going. That’s right, I was never paid and in the end, they ended up owing me nearly $2,000 (which was a lot of money for my VA Agency business when I owned it).

THAT was the end of billing hourly rate fees after services were provided and waiting for payments. I instituted my next pricing strategy.

As I reeled from the non-payment I racked my brain to figure out what pricing strategy I could use so this never happened again. That’s when I began charging a deposit fee. With this strategy, you need to know the average amount of time it will take to do a project or have the number of hours a client wants within a month of services provided.

I began charging an hourly rate plus a deposit of 50% of the monthly invoice at the beginning of each month. The deposit always went toward the final invoice at the end of the month.

For Example, If a client knew that it would take 10 hours that month for the type of services they needed, I would invoice 5 hours before starting any work. At the end of the month, they were sent an invoice for 10 hours with deducted 5 hours from it, So their final invoice each month was the 5 hours remaining.

Why would this strategy work?

This strategy tells you two things.

  1. Are they able to pay?
  2. Are they serious about working with you?

It is crucial you know these two things. When your clients pay 50% of the monthly invoice rate upfront it also helps them budget better. You may still have the slow payer or non-payment on occasion at the end of the month but it is much more unlikely.

This strategy is can also be used for project work and monthly retainer clients.

I began to look into ways I could package my services. I did not understand how to package virtual administrative tasks together for one fee. So, the next best thing in my mind was to offer blocks of hours at a set rate. The best part was that the clients paid upfront at the beginning of the month for all the hours they expected to use each month.

A few things however to consider with this pricing strategy are…

  • Have a clear contract in place that specifies the scope of work
  • Clarify in your contract what happens if they use all of their hours up before the end of the month and still need more of your services
  • Decide if you will allow ‘rollover hours’ for clients who do not use all of their monthly hours up [be careful here – it can easily become overwhelming doing this]

Finally, I learned the best pricing strategy, in my opinion. I began to price my services (digital marketing), by the value provided not by the hour. Keep in mind it does take some time-keeping in the beginning so you know how long each task in the package takes you.

Some examples of the types of service providers who use this package pricing strategy:

  • Content Creation
  • Email Marketing
  • Social Media Management
  • SEO Blogging
  • SEO Services
  • And Many Others

If you use this strategy you will need to keep time for the first couple of months so you know you are not slighting yourself or your client. After that time you will not need to use a timekeeper again if you do not want.

This was like a breath of fresh to me and my business. After years of being a slave to the clock, this gave me more flexibility and freedom!

I still had to be sure to deliver great services and keep my clients happy. They all loved this strategy also because it gave them a monthly budget requirement. They also knew the value I offered after only working with me for a month or two.

As you can imagine I highly recommend this pricing strategy to all clients I work with now.

The last thing I want to go over with you as begin your full-time freelancing business is to consider creating an agency model. I’ve owned two agencies in the past and I wish I would have started as an agency.

I wish I had started my business as an agency model business. I say this because as you begin to pick up clients and earn an income it is harder to hand over clients to a team later. In other words, if you plan to give your team client work so you have more time to work on not in your business it will mean forfeiting some of that income.

For me, this meant a dip in my income. If, however, you start with the agency model and give your team the clients from the beginning you will both earn from them. It will not seem like a cut in income for you.

If you are already at a place where you need a team and are earning from clients then it is still possible to make the most of it. What I advise my clients to do in this situation is wait until the next new client onboarding and allow their team members to begin with them. As you increase your client base you should be able to slowly hand over more and more clients with the increased revenue.

Please reach out if you need help moving to a full-time freelancer – it is possible! Do not put off your dreams, take action today!

with love from Tammy Durden of Fearless Business Boss

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