Negotiating Your Rates

Negotiating Your Rates

Hillel Kuttler writes for – a Ms.Money partner.

As an independent, have you ever had a client ask you how much money you want for the job? It’s like a car salesman saying: “Aw sure, you can have this baby. So, what do you consider a fair price?” You’re wary of venturing an answer. This salesman is just setting you up to take the bait.

Or, it’s like being in a canoe. Stand up too tall and you’re liable to fall over the side– wet and miserable–having lost the job. Sit still and you’ll be relinquishing the oars: getting the job, but at a paltry rate.

Choose either transportation metaphor. Either way, your answer carries risk.

I found that out twice within my first two months of freelance work. I was led to believe that price was no object, so naturally I asked for more money than I ever thought I would get. I snickered to myself: “Make a living freelancing? Piece of cake.” It turned out that I cost myself both jobs. Lesson learned: Shoot high, just maybe not so high.

When asked to price your work, remember that putting a price on your services is essential. Establish a rate that takes into account your time and expertise, and be able to defend it. The rent and food bills depend on it. You and your potential client have no claims on one another. The worst thing that will happen is that you don’t land this new client. Accept his offer or move on to someone else. The “free” in freelancing means independent-it shouldn’t dictate the price of your labor.

Knowing the seller’s going rate is, to be sure, less stressful: “We’ll pay x amount for the work,” or “We pay x amount per article.” With this information, you see the yardstick rather than grasping in the dark. Even in this instance, persistence, creativity and willingness to bargain can put extra dollars in your pocket. Freelancing often demands a willingness to negotiate.

That’s what Neil Weiss did. Finding himself between jobs recently, the New York resident parlayed his experience as a contract specialist into piecemeal consulting work for engineering and construction firms. In calculating a figure, he gave great weight to the project’s duration. A one- or two-month project would merit a client’s receiving a “cut rate,” equal to what Weiss was earning as a full-time employee over a similar time frame. Weiss considered it a volume discount of sorts, knowing he’d be guaranteed work for an extended period of time.

A mere four billable hours, however, was another story. In that case, Weiss charged for the entire eight-hour day–or even a “full rate”–because he knew he’d still have to put in extra time learning the topic and seeing it through to the client’s satisfaction.

“You’ve got to keep in mind that businesses forget that as an independent, you’re being taxed at a higher rate,” says Weiss, now a marketing manager for a software company. Consequently, he explains, he would shift the terms so that a client’s offer to pay $1,000 for a week-long project yielded Weiss’ counter-offer of the $1,000 as a net (post-taxes) sum. The client agreed.

“There’s a lot of room for negotiation,” Weiss says. “You can be as creative as you want in terms of how you let them pay you. Once, we structured it (the job was to write a proposal) so they’d pay me the base rate, and if they won the contract on the basis of my proposal, then they’d pay me my (higher) rate.

“If the client is having a hard time justifying your rate, see if you can structure it differently so that he agrees to pay you more if he sees some direct, tangible benefit from the job that you’ve done. So you’re [given an incentive]. You can end up with more money by reducing your rate but showing that the work you’re doing will be of direct benefit, and that they should kick back a percentage or [higher] rate.”

Then there are those rare birds, including writers, whose rate structure seldom demands such creativity. Especially with a writer’s usually more direct approach: take it or leave it.

Ayala Hecht, a copywriter/editor, establishes the rules of her engagement early on: hourly rates only. In case the sentiment is lost, consider the name of the one-person firm she runs out of her Baltimore row house: Carpe Per Diem Services™.

If a client insists on a flat-fee for the project, Hecht usually rejects the job. Occasionally, she’ll agree, but on condition that the contract expressly limits her obligations. “If you’re smart, you’ll say, `Okay, [for the fee] you’ll get a good first draft and one set of rewrites. Anything after that will convert to an hourly rate,’ ” she says. “It’s better to have it set then, because later they–and you–will be too frazzled to negotiate.”

If the person balks, “I just won’t take them on,” she says. The only exceptions include specific nonprofit organizations with which she identifies and decides to cut some slack, or short-term job offers that come when her calendar happens to be clear anyway.

Even Hecht’s hard-line approach sometimes lends itself to flexibility. If a project runs a few weeks but encounters earlier-than-expected deadlines, Hecht will likely not charge the client a surcharge. On the other hand, if someone demands up-front that a job be completed right away, she doesn’t hesitate to bill at a higher “rush rate,” even for regular clients.

Hecht’s philosophy on setting fees is one that plays well in her field, where she primarily writes proposals for urban redevelopment plans. She’s in demand, as opposed to journalists who are often at the mercy of daily newspapers.

“I’ll charge what the market will bear,” states Hecht.

Just like the guy selling those cars.