Freelance pricing — in search of the “double thank you”
There’s only one thing that matters: are both sides happy with the exchange?
Pricing creative services is tricky. You’re always worried you’re not charging enough because you can’t help but compare yourself to others who can command higher rates. Nobody likes leaving money on the table. But you’re also worried if you charge too much you’ll lose customers, and nothing is scarier than work drying up.
Most of us are also concerned about being fair. It feels wrong to charge exorbitant rates even if your expertise can justify it. Or, you feel you’re being unfair to yourself by undervaluing your work. If either side of the transaction has financial regrets, then that equation needs to be adjusted if you want to run a sustainable creative business.
So what’s a fair price then? How do you know if you’ve gone too high or low?
You’ll never get a straight answer in dollar figures because pricing is far too personal. It’s contextual to your industry, skills, experience, location, speed, professionalism, and countless other factors. And you won’t even find an agreement on how to price your services. Some swear by hourly pricing, while others abhor it and only strive for value-based pricing or fixed-rate project fees.
But here’s one thing that we can all agree on — and it works no matter what method of pricing you choose. It’s a foolproof way of knowing if you’re charging a price that’s fair to both yourself and your client. It’s called the double thank-you test.
A gift vs. an exchange
There are two types of transactions in a capitalist market. Sometimes the receiver says “thank you”, and the other party says “you’re welcome” or “no problem”. This is what happens when a gift is given. The receiver has gotten something of value while trading very little or no value of their own. It’s a transition where — financially — there’s a clear winner. It’s one-directional by design.
In the other type of transaction the receiver says “thank you” and the seller replies “thank you” as well. Think of the last time you bought coffee, or groceries at your supermarket, or received a great massage therapy. When you go to pay and leave, you thank them for their products or services AND they thank you for your business.
You feel like you got something worth more than the money you paid for it (otherwise you wouldn’t have bought it in the first place), and they feel like they got enough profit to match the value of their service (otherwise they wouldn't have sold it for that price). Both parties are happy with the exchange. It’s a win-win.
But there’s a third type of transaction where one party says thanks, and the other doesn’t reciprocate. They feel taken advantage of or coerced into buying because there was no good option. Or simply disappointed because the result didn’t match expectations. It’s a mostly one-sided transaction when it should have offered good value for both parties. This is the only unfair exchange.
How to find a fair price
Fair pricing is simple. Any transaction that ends in a “double thank you” is fair. It doesn't matter how high or low the cost is, if both parties feel like they received good value in the exchange, the price was right.
I’m always amazed at how people try to overcomplicate pricing. It doesn’t need a detailed calculation of living expenses or a heated debate about the best pricing method. It doesn’t even need to correlate with how much time you spent doing it. All that matters is how much value it provides to your client.
If you’re undervaluing your own time, raise your price. If your clients don’t pile on the praise and don’t return for repeat work, you’ve aimed your price above the value you offer. Lower it.
If they thank you after every project and keep coming back for more, AND you feel adequately compensated for your work, then you’re doing things right. Keep being awesome. Pricing doesn't need to be more complicated than that.
Oh, and by the way, you rarely lose clients when you increase your rates. More often than not, it attracts better clients. Most freelance pricing mistakes error on the side of undervaluing yourself and charging too little. Make sure you’re fair to yourself before you fret about being fair to your customer.
Learn more about the “double thank you”:
- The double thank-you of capitalism on Wikipedia
- What makes something valuable, The Futur podcast episode 183 with Ron Baker
- The double thank-you of the market, by Steven Horwitz for IEA
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Hi, I'm Benek Lisefski. Since 2001 I've run my own independent design business. Join me as I unfold 20 years of freelance business knowledge: honest advice and practical tips to help you take your indie career from good to great.
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