How Freelancers Can Avoid the Perils of Underpriced Projects

_{Featured image by}  Tim Gouw

It’s a common issue for freelancers: you want more work, so you charge an “okay” rate. Then you realize how much work you have to put into a project and realize that you grossly undercharged for it. You can’t very well go back and ask the client for more, can you?

You’re a professional, and you deserve to be paid accordingly. That said, let’s look at a few situations you might find yourself in so that you can ensure that next time you get paid what you’re worth.

1. You underbid to get experience

Certainly there’s nothing wrong with this strategy. It’s a great way to build your portfolio and add recognizable brand names to your roster. But over time, you may struggle to pay your bills if you continually charge far less than the competition.

Here’s our suggestion: make a plan to raise your rates slightly every 6 months. If you charge $10 per hour now, up that to $13 in 6 months, and then to $20 in a year. The increment shouldn’t be so large that people won’t hire you, but enough that you pad your profits increasingly more. You’ll also have the experience and portfolio behind you, giving you and your clients the confidence that the increase in rates is well-earned.

You could also offer the low rate to first-time clients as a sort of promotion, but if you do, be sure to mention that in your initial negotiations. You can tell your client that you’ll be charging $X for certain type of work for the first 3 months, but will increase your rates to $Y afterwards. If they like the work, they won’t mind paying a bit more.

2. You underestimate the efforts required

Some projects are harder than others to estimate time for, especially if you’re new to freelancing. You may have thought that a project would take 10 hours and you’re now closer to spending 20 on it. Asking the client for more money—especially when the fault is on you for underestimating the efforts required—is not a good idea (with one exception: see #3). 

However, the next time you have a similar project, refer back to how long this one took you. It can be helpful to take notes during a project to remind yourself of what kind of time you spent in research, work, and revisions. Next time, always budget more time than you think it will take. Should you spend less time than estimated, you can either pocket the difference if you charge a flat fee or give the client the good news that they don’t owe you as much as they budgeted. They’ll love that!

Many freelancers are now shifting to charging hourly fees rather than flat fees, with the idea that it better reflects the work invested. If you’re charging an hourly fee, give the client an estimate up front for hours required; note in writing that this is an estimate, and that any additional hours will incur additional fees (and if it takes less time, you’ll note that too). You can suggest using time-tracking software, so that your client can see exactly how your time is distributed and understand the efforts on your end.

3. The project is creeping in scope

Here’s another example of a project becoming larger than you anticipated. But this time, it’s not you: it’s the client. You may have created a statement of work together up front that outlined the client’s expectations of you in the project, but over time, you’ve noticed them adding more tasks to your long list, without adjusting the price.

In this case, there’s nothing wrong with going to them and reminding them of what you initially agreed to. Let them know that anything beyond that original list will incur extra fees, and have those fees ready to present. They can do one of two things: agree to pay extra for the extra work, or pull back and honor the original agreement.

4. Your clients are grandfathered in at low rates

What happens when you start out at rock bottom prices with a client and end up working with them for years? Do you continue to honor that rate even when you are charging much more to new clients?

It’s a gesture of goodwill to not raise prices for clients who have been with you since the beginning, but you’ll have to make the decision of when you can no longer afford to do so. If you’re losing money on the work you do for a client in an effort to not ask for more money, are you really helping yourself by doing so?

If you do decide to raise prices, do so slowly and minutely. Give the client several months’ notice of the increase so they have time to either update their budget or find another service provider. And realize that may happen. Ask yourself whether it’s worth it to you to keep the client if they pay so little. Maybe not, unless they open the door to other business opportunities, or are so easy to work with that you don’t mind earning so little with them. If they do decide to find another provider, part on good terms. They very well could come back to you, dissatisfied with what other freelancers offer.

5. You charge what you’re comfortable with

“No one would ever pay me X to do Y!” you say.
And so you never charge more than you’re comfortable asking clients to pay. You’ve created your own reality: by not believing you’re worth more, you will never earn more. It does require changing your mindset, but if you do, you’ll quickly discover that clients are willing to pay a lot more for your services than you ever thought possible.

When you are working up a quote, write the amount you think you should charge. Step away from your desk. Give yourself a pep talk. Then sit back down and add 25% to that number. Send off the estimate email before you have a chance to change your mind.

The worst that can happen is a client says they don’t have the budget for you. You can then negotiate or just walk away. The best thing that can happen is that they accept that rate, no questions asked. Your profitability and your confidence instantly skyrocket, and you’ll find it easier to ask for more with the next new project.

It can be challenging to know what to charge when you first start freelancing. Do some research. See what the competition is charging and use that as your barometer. After quoting a few clients the same rate, if they’re all too eager to snap you up, you probably aren’t charging enough. If they continually decline your bid, you’re charging too much. Keep working at it until you find a happy medium.

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