How to Set Freelance Pricing: Fixed Rate, Hourly Rate, or Client-Based Pricing?

Freelancers often face challenges when deciding how to price their work. Whether you’re just starting out or have years of experience under your belt, choosing the right pricing strategy can make or break your freelance career. Should you charge an hourly rate? Should you set a fixed project fee? Or should your pricing change based on the size and budget of the client?

This comprehensive guide will explore three main pricing strategies: fixed rates, hourly rates, and client-based pricing. We’ll look at their pros and cons, and help you decide which approach works best for your business. By the end, you’ll be able to confidently set your freelance pricing, protect your time, and ensure fair compensation.

Before we start though, if you're looking for the most comprehensive documentation on the internet on everything you need to know about freelancing, then do check out - The Ultimate Freelancing Guide to Automate Your Business

Understanding Freelance Pricing Fundamentals

Pricing isn’t just about numbers—it impacts the kind of clients you attract, how you’re perceived in the market, and the quality of projects you work on. Freelance pricing also influences your reputation. Charging too little can undervalue your skills, while pricing too high can alienate potential clients, particularly if you’re new to the industry.

Factors to Consider When Setting Freelance Rates

Before diving into the different pricing models, it's essential to take several factors into account:

• Experience Level: Beginners may start with lower rates but should adjust as they gain more experience.

• Market Research: Understanding market rates in your niche and geography is crucial. Rates can vary dramatically depending on industry and location.

• Project Scope and Complexity: A small task like editing a blog post may require a different rate than creating a brand identity from scratch.

• Client’s Budget: Established companies will likely have more financial resources than small businesses or startups.

Fixed Rate vs Hourly Rate: Which Is Better for Your Freelance Business?

Most freelancers debate between charging a fixed rate or hourly rate. Let’s explore the pros and cons of each and how to determine which method works best for you.

Fixed Rate Pricing: Stability with Clear Boundaries

A fixed rate means you agree on a set fee for the entire project. This rate remains constant regardless of how long it takes to complete the work, making it ideal for well-defined projects where you have a clear understanding of the scope and deliverables.

Pros:

• Clarity for both parties: The client knows exactly what they’re paying, which builds trust.

• Reward for efficiency: If you can complete a project faster than expected, you effectively earn more per hour.

• No time-tracking hassles: Fixed rates eliminate the need to track hours meticulously, making it easier to focus on the work.

Cons:

• Risk of scope creep: If a project expands beyond the original scope, you might end up doing extra work without being paid more. This is why having a detailed contract and setting clear boundaries is crucial.

• Difficult estimation: For complex projects, it can be hard to estimate the time and resources needed accurately. If you miscalculate, you may end up undercharging.

Best for: Projects with a clear scope, such as web design, logo creation, or writing services.

Hourly Rate Pricing: Fair Compensation for Your Time

Hourly rate pricing is straightforward—you charge the client based on the time you spend on the project. This model is often preferred for ongoing projects or work with undefined or changing scopes.

Pros:

• Fair compensation for time: You’re paid for every hour worked, so you won’t risk undercharging if the project takes longer than expected.

• Flexibility for undefined projects: If the scope changes or the client makes frequent revisions, you’re still compensated for your additional time.

Cons:

• Client uncertainty: Clients may be reluctant to agree to hourly billing because they worry about escalating costs.

• Efficiency disadvantage: The faster and more skilled you are, the less you’ll earn for your time. This can make hourly pricing counterproductive for highly efficient freelancers.

Best for: Projects with ongoing work, undefined scope, or client-requested changes, such as web maintenance, consulting, and development.

Tiered Pricing Models: Pricing Based on the Client 

A more advanced pricing strategy involves adjusting your rates based on the client’s size, budget, and project goals. This approach works well for freelancers with experience working with various client tiers, from small businesses to large corporations. With tiered pricing, you offer different pricing packages based on the client’s budget, project scope, and needs. For instance, you might charge a small startup a lower rate than a well-established corporation, given their resources and expectations.

Pros:

• Maximizing profit from larger clients: Established companies with bigger budgets are willing to pay higher rates for premium service.

• Customized solutions: Tailoring your services and pricing to a client’s needs helps build strong relationships.

Cons:

• Complex negotiation: This approach requires more time spent negotiating and adjusting your offers.

• Inconsistent pricing: Be mindful of clients discussing their rates and noticing discrepancies.

Best for: Freelancers working with a range of client sizes and those who want to charge higher rates for larger clients.

How to Set Freelance Pricing: A Step-by-Step Guide

I teach about this and so much more in my course but if you want sneak peek, check out this Pricing Guide book for free to learn a lot more tactics in detail before you price your services -

For the sake of a quick run-through though, let’s break down how to set your rates in a way that’s fair to both you and your client using these models -

1. Research Market Rates

Understanding the average rates in your industry is key. Platforms like Upwork, Fiverr, and Freelancer.com can give you insights into what other freelancers are charging.

2. Calculate Your Baseline Rate

Your baseline rate should cover your time, skills, and operating costs (e.g., software, taxes, marketing). A simple way to calculate this is:

• (Annual salary target + overhead expenses) ÷ billable hours = baseline rate

Make sure this rate reflects your experience and the complexity of the project.

3. Offer Packages and Add-ons

Offering clients different pricing packages—such as basic, standard, and premium—gives them flexibility and allows you to upsell additional services. For example, you might offer three tiers for a web design project:

• Basic: A 5-page website without additional features.

• Standard: Includes a 10-page website and basic SEO services.

• Premium: Full-scale website with e-commerce integration and SEO optimization.

If you do this however, make sure to clearly call it out in the contract if there are multiple phases attached to the project. Check out this extensive article on how to draft contracts if you need some help on this front - How to Create Freelance Contracts That Protect Your Rights

4. Be Transparent About Costs

When providing a quote, be upfront about what’s included and outline additional costs (like revisions or out-of-scope requests). Transparency builds trust and avoids miscommunication later on.

5. Review and Adjust Regularly

Freelance pricing isn’t static. As your portfolio grows and you gain more experience, you should periodically increase your rates. Clients expect that skilled freelancers will charge more over time.

Pricing Mistakes to Avoid

Pricing your services as a freelancer can be a learning curve. Here are some common mistakes to avoid:

1. Undervaluing Your Work

One of the most common mistakes is underpricing out of fear that you’ll lose potential clients. While this might help you land a few gigs initially, it can lead to burnout and dissatisfaction in the long run. Always remember to charge based on the value you provide, not just the hours worked.

2. Not Factoring in All Costs

Many freelancers forget to account for overheads such as software subscriptions, taxes, health insurance, and marketing expenses. These costs can quickly add up, so make sure your pricing covers them.

3. Not Raising Your Rates

As you gain experience, raise your rates accordingly. Staying stagnant with your pricing can give clients the wrong impression—that your work hasn’t evolved or improved.

Tools and Resources to Simplify Freelance Pricing

Having the right tools can streamline your pricing strategy and help you manage clients more effectively. Here are a few tools to consider:

Freelance Rate Calculators

• Bonsai’s Rate Calculator: Helps you calculate an appropriate rate based on your field, location, and experience.

• Freelancer’s Union Pricing Tool: Offers insights into what freelancers are earning in various industries and regions.

Contract Management Tools

• HelloBonsai: Helps you create contracts, manage invoices, and track project milestones.

• And.Co by Fiverr: A free tool that offers contract templates and invoicing software for freelancers.

Conclusion: Choose the Right Pricing Strategy for Your Freelance Business

Freelance pricing can feel overwhelming, but once you understand the different strategies available—whether it's fixed rates, hourly rates, or client-based pricing—you’ll be better equipped to make informed decisions. Remember that there’s no one-size-fits-all approach to freelance pricing, and what works best will depend on your skills, clients, and the scope of each project.

If you need some help drafting your quotation once you've identified your pricing, then do check out this guide - A Comprehensive Guide to Freelance Quotations and Invoices