What Are You Worth? 🤑

Hello friends!

I hope you're enjoying this Serial Maker newsletter! If you missed any of the past editions, make sure to check them out. And if you know someone who might benefit from this newsletter, please forward this email to a friend. 😀

Pricing the things you produce is one of the hardest things to do as a maker. How can you put a price tag on something you made? On yourself? On your time? There's never a simple answer, but over the course of my own career I've come up with a few tactics to assign a price to my work.

This issue is all about pricing 🤑
 

TLDR

• Determine an hourly rate that reflects how you value your time

• Not everything should be based on hours

• Constantly test, analyze, and adjust your prices

• Never work for free

• In the end, go with what you're comfortable with

Pricing Your Time

What's your hourly rate? How do you establish this and win jobs while earning a comfortable wage? How much is your time worth to you?

The Market Will Decide
First, check out established salaries for similar positions. Divide those annual salaries by 2,000, and then add 10%. That's the market hourly rate. The 10% is for overhead that salaried positions cover like insurance and equipment. Then test the market. If you're not winning jobs because of price, consider lowering your rate. If you're burning out and there's no lack of work in sight, consider raising your rates. With a higher rate you'll get to choose the jobs you really care about. Find a balance that works for you.

Competing With Cut-Rate Resources
If you're a freelancer in a major market, how can you compete with the absurdly low offshore pricing rates or crowdsourced resources like Fiverr and crowdSPRING? The answer is simple: you can't. Don't even try to compete with those prices! Unless you're incredibly hungry and just starting out, you should be pricing competitively within your own environment, and ignoring others. Make it clear to your clients how working with you is an entirely different experience from working with those other makers. And live up to those expectations.

A Note About Offshore Development
When offshore development started growing in popularity, I initially lost a lot of work to those groups because I wouldn't compete with offshore rates. Virtually all of those clients eventually came back and hired me to bail them out of the situation they ended up in because of the quality of work. Based on what I hear from others in the industry, this isn't a unique experience. Trust in your own abilities and value your time.
 

Pricing Deliverables

Your client wants a flat fee for something. How do you price it? Estimating is hard. This is where experience becomes increasingly important. Make sure you're tracking your time — on everything you do. This gives you an idea of how long it takes you to perform certain tasks. Be as detailed as possible, and refer to those records when pricing new projects. Estimate the time involved, multiple by your hourly rate, and add 10% to cover incidentals like scope creep.

It's not Always Based on Hours
Once you have an estimate of the time involved, adjust the fee according to the client. What industry is the client in? Some industries have higher tolerance for cost than others. How interested are you in the project? If you really want to win it, maybe lower the cost to ensure you get the work. If it's something you're not that interested in, consider raising your price significantly because you won't be upset if you lose the job, but if you get it you'll be rewarded. 

The popular simple equation for pricing can be broken down into this rule:
There are 3 aspects to any project: Price, Time, and Quality. But you can only choose 2. For example: if you want something cheap, you're going to have to sacrifice either time or quality. A cheap project can be done quickly, but it won't be good. A cheap project can be done well, but it will take a long time. Want something fast and good? It will cost you.

Unique Pricing
I often use logo design as an example of unique pricing. Why do some designers charge significantly high prices for a single logo, that they might produce in a day's work? It works out to an absurdly high hourly rate. In this case, the client isn't just paying for hours. They're paying for the years of experience honing logo design skills, the unique talents of that designer, and the professionalism of someone who can claim those rates. 
 

Pricing Software

The only way to determine the price of software is to test the market. If you're pricing something before it's released, setup a mechanism for customers to pre-pay. If you're seeing a lot of payments, your pricing may be too low. If you're not seeing enough, lower the cost. A/B testing is the preferred method of testing software pricing. Constantly test different price structures. Make sure you have solid tracking in place and see how your sales react. This is a perpetually moving bar, and you'll be monitoring and adjusting pricing for the lifetime of your product.
 

Pricing Art

This is the most subjective of all the pricing strategies as a maker. How can you possibly assign a price to something that's intended to exist purely for artistic merit (whatever that is). Well, in the end, it's up to you. Here's a simple formula that can work for any artist:

1. Calculate the cost of materials used

2. Assign an hourly rate to the time involved and add that

3. Double it

4. Adjust based on your own feelings about the work

One More Thing

Never, never, never work for free. Pro-bono or charity work has its place, but it should be on your terms. Don't ever take work-for-hire on spec. Value your time!


Keep making, and thanks for reading! 🙌

Hit reply to tell me what you're making. I'm looking for anyone interested in talking about their own side-projects and maker journey, so speak up if you'd like to appear in Serial Maker. I'd also love to know what you thought of this issue, and what you want to hear about in the future.

Until next week,

Craig