How To Negotiate A Freelance Contract
Freelancing

How To Negotiate A Freelance Contract

By
Derek Abram
|
CEO of Prio
|
7 min read

Freelancing has become hugely popular as a source of income around the world, understandably so. After all, who doesn’t like being able to dictate when to work, how much work to do, and with whom to work? 

However, freelancing is anything but easy.

Achieving stability as a freelancer could take as long as a whole year, and even then, there’s no guaranteeing a constant income. 

If you’re planning on becoming a freelancer, it would serve you well to remember that how much money you make at the end of every month depends on only two factors: how much you charge per hour and how many hours of work you’ve done.

While a lot of us may be able to land freelance jobs, not all of us are cut to haggle over hourly rates. We’ve compiled some helpful tips to show you how you ought to negotiate your freelance contract to ensure you get paid top dollar for your efforts. 

Negotiating as a freelancer

When you negotiate as a freelancer, you cannot pull a number out of your hat and expect to be paid that amount. 

There ought to be a method to the madness, and that method is what we are going to discuss.

Set your minimum rate

Before you start negotiating freelance rates, you need to be aware of the minimum hourly rate below which you ought to not work. Remember, we’re not talking about what rate you’re going to quote to your client, but about the rock-bottom price you can afford to work at.

There is a simple formula you could use to arrive at this minimum rate. Consider your average personal yearly living expenditure and add it to your annual business expenses. Divide that by the number of hours of work you put in annually. The number you get will be an indicator of the minimum hourly rate you ought to charge. 

However, you’re still not done yet. You will need to add income tax and other state or county taxes applicable to your earnings to arrive at the net minimum rate you ought to charge.

Charge per project

In a lot of cases, charging your clients an hourly rate can be detrimental to your earning potential. Instead, charge your clients a per-project cost irrespective of the number of hours you put in to complete the project. 

Let’s break it down to help you understand the concept better. Let’s assume your hourly rate is $50, and you take three hours to complete a project. That means you will earn $150 from the project if you get paid by the hour.

However, if you work efficiently and could finish the project in one hour, you’d earn only $50. On the other hand, if you charged the same client $150 as a project cost instead of an hourly rate, you could finish it in an hour and use the rest of your time to generate more income for yourself.

At the end of the day, the quality of your work is what ought to matter to your clients rather than the number of hours you take to finish the job. 

Negotiate based on value to the client

An important factor that ought to influence how much you charge a client is the value of your work to that particular client. 

For example, if you are a freelance content writer, a regular blog post is likely to have less value to a client than a fresh copy for their website evangelizing their latest product release will have.

You ought to keep this in mind when negotiating rates. The more value your contribution adds to your client’s business, the higher your charges ought to be. 

Ask for a quote

A great way to judge if the client you’re negotiating with can afford to pay for your services is to ask them what budget they had in mind. 

Of course, most clients will be too savvy to actually divulge their actual budgets, and most will also try to lowball you to judge your reaction, but you may still be able to get an idea of what numbers they have in mind. 

Knowing this will give you a starting point to begin negotiating with them. 

Start with a high figure

In most cases, negotiating how much you will get paid is unavoidable. However, get the ball rolling in your favor by starting off negotiating with a quote that is marginally higher than what you’d like to get paid.

There are two advantages to using this tactic while negotiating. One is that it gives the client an opportunity to talk to you down to an acceptable rate, giving them the satisfaction of having won the negotiations. 

The other is that if the client rejects your quote outright instead of negotiating with you, it may mean that they may not be good for you to work with in any case, since it indicates that they really need to push their budgets to afford your services.

Give yourself wiggle room

Sometimes, a client may ask you to quote your rates before you fully understand the nature and scope of the project they’re considering you for. 

In these cases, give them a ballpark figure to give them an idea of what you normally charge, but be sure to give yourself wiggle room to negotiate by mentioning that your actual rates will vary depending on the scope of work. 

Find a mutually beneficial outcome

While negotiating hard for what you deserve to get paid as a freelancer is definitely important, it is equally important to remember that the outcome of every negotiation ought to be mutually beneficial to both parties.

If you force your clients into a corner to get paid top dollar, you may find that they will choose to never work with you again. This is detrimental to any freelancer’s career, considering how important goodwill, word of mouth, and repeat business are to having work consistently. 

This means you ought to approach every negotiation with the intention of walking away with a decent paycheck as well as a long and fruitful relationship with your clients. 

What to keep in mind when negotiating your freelance contract

Here are some additional tips for you to keep in mind while negotiating your freelance contract.

Make it personal

Connecting on a personal level with your clients will go a long way in ensuring that you get work from them consistently. And there’s no better time to start building this rapport with them than while negotiating your first job. 

There is a tried and tested approach that you could use to start building your relationship with your clients. When you start negotiating, begin by getting into how your passions tie in with the project your clients have in mind.

Next, build trust with your clients by impressing upon them how your work experience and skills make you the ideal resource for what they have in mind. Get into the details of projects you have worked on in the past, and the results your clients have enjoyed. Don’t forget to tie all that back to the needs your prospective clients came to you with.

Another thing to do is to look out for mentions of any common interests you may have on a personal level with your clients. It could be sports, music, or an activity like camping or fishing. 

All of this is important because when you build a personal connection with your clients, they not only become easier to work with, but you can also be sure of work coming to you more often. 

Offer no discounts

We often see large organizations slashing their prices to land projects. That is an approach that does not really work well for freelancers.

While reducing your rate to below your minimum acceptable rate in order to land a project may actually get you the job, it also sets a precedent for what your work is worth. This is especially true if you’re looking for work on platforms like Fiverr and Upwork. 

Once you get put into a price bracket, it may well be impossible for you to convince clients that you deserve to get paid, specially when how much you’ve charged in the past is visible for them to see. 

Of course, there are some situations that warrant special rates, such as when you’re doing work for a personal contact, or the first project with a client that you know will be beneficial to your career in the long run. 

However, it would be prudent for you to limit these situations to be as rare as possible, and not lower your prices beyond a reasonable point.

Don’t waste time negotiating with the wrong clients

As a freelancer, it is important for you to recognize what kind of clients you need to walk away from. Here are some red flags for you to look out for while negotiating with clients.

  • Any client that does not agree to even your minimum acceptable rate is not worth negotiating with.

  • If you find a client consistently falls back on payment schedules, walk away from that relationship.

  • A client that gives you vague briefs and wants never-ending revisions is probably not the best client for you to hold on to.

  • We often find clients that are generous with praise, but stingy about how much they will pay you. While this may be alright for a certain amount of time while both of you progress, you may need to walk away from them unless they’re willing to pay you your full rate.

Get visibility into payments with Prio’s invoice generator

As a freelancer, it can often get difficult to keep a track of what payments have come in and what payments are still outstanding. However, staying on top of payment statuses is critical to freelancers because, unlike an employee, you are responsible for paying all your taxes yourself

By using Prio’s invoice generator, you can automate the process of creating invoices for your regular customers. The tool will allow you to make templates and depending on your schedule, will send you these invoices for approval. 

These invoices will not only help you keep track of outstanding and incoming payments, but you will also be able to easily calculate taxes based on how much you have been paid.

Prio’s invoice builder has an easily navigable user interface and is free irrespective of how many invoices you generate. Visit our website to discover this and other tools designed specifically to help freelancers.

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