I started doing freelance very early in my career. I was no more than a freshman year student when I got my first brand identity project.

I had a lot to learn back then.

Apart from the huge challenge of delivering quality results and learning how to deal with clients, the most difficult thing for me at the time was, as you’d expect, knowing how to do pricing. I had no clue.

Design has always been a difficult one when it comes to price. In practice it is mostly qualitative, there are no hard, quantitative results that can be easily measured up against a budget.

In the beginning, I felt almost guilty asking for a higher price. I thought: “I don’t have as much experience”, “I will charge more in the future”, “In a couple of years I will surely know how to do this”.

I continued to do freelance projects, my skills getting better every time, both hard skills and soft skills (I talk more about that here).

I asked other designers, both fellow students, and more experienced ones, but only to find myself more confused.

I have gathered up my top insights and some useful tips, hoping this will shed some light on your professional practice.

Does Hourly Pricing work?

When you start doing freelance, hourly rates are usually the way to go. It is an understandable criterion to go with, both to you and your client. However, what matters to clients, in the end, is the final result. It really doesn’t matter if it takes you 20 minutes or 20 hours.

Pricing a project only on hourly rates usually results in a lot of work for not the desired money you would expect from that amount of work. Most of the time we fall in the planning fallacy, we think very optimistically about how much we can achieve in a certain time.

Even when we do plan correctly, there are many factors that we don’t consider when our thinking is in hourly pricing. Some tasks may take the same time of work, but they are not as exhausting (for example, one hour of sketching doesn’t feel the same as one hour of coding).

This is why shifting from hourly based pricing to project-based pricing brings more benefits and is way more fulfilling for your career.

There is no correct way to do it, as freelancing is pretty subjective. Ultimately it comes to how you perceive the value of your work, but taking into account certain criteria can help.

Know your fixed and variable costs

Some costs are more evident than others. If you are a furniture designer, I am sure you know that raw materials will be part of the cost of the finished product. If you plan to buy machinery or pay for a laser-cut service, that will go into the costs list too.

Yes, that’s all alright, but what about UX, graphic, or strategic designers?

“I only need my computer to do my job, there are no costs there!”

Are you sure you only need your computer? What about the light bill you need to pay to turn on your computer? Have you thought about paying for internet service every month or so? What about design software? I am sure you will eventually need to have a call with a client, had you considered the cost of your smartphone service?

If you need to meet for a quick meeting with a client and you grab a coffee, that is also part of your costs! Every penny that comes out of your pocket related to the project is an expense, and ultimately impacts the utility of the project.

Not to mention travel expenses, whether you travel from point A to B within the same city, or if you need to catch a plane to attend an important meeting.

Whoa! Looks like the costs on your list have expanded out of thin air!

According to Investopedia, “variable costs and fixed costs are the two main costs a company has when producing goods and services”. Even if you are not a huge company that needs rigorous accountability processes, you must know clearly what your expenses are if you are ever to make some profit out of your projects.

The important thing to know about variable and fixed costs is that variable costs influence the number of products or services you produce, while fixed ones remain the same even if you produce no products or services.

Examples of variable costs for a freelance designer would be raw materials, labor hours, or maybe the amount you pay another designer to help you in certain projects. Fixed costs would be design software subscriptions, internet access, the monthly bill to pay your computer, or your cellphone.

This takes me to the next point.

Keep track of everything

Now that you know all the expenses related to you delivering a project successfully, you need to keep track of it. Again, there is no right way to do it, it can be as simple as a spreadsheet with the lists of things you need to pay and how much it costs you.

Our brains are usually very lazy, and if something is not of utmost importance or does not merit bigger attention, you will most likely forget. Write. It. Down. Bring a notebook and a pen with you.

Who is your client?

Knowing who your client is is crucial for two main reasons: 1) by knowing them you can estimate how much this client is willing and able to pay for a project and 2) you can establish best practices for the client-designer relationship.

Clients can be very different from one another, for example, a big corporation that wishes to implement a strategy for innovation and design in their key teams (more on that here) is very different from a local shop that wants to create a web page.

Knowing these differences will help you determine the optimal pricing, and also work on your interpersonal skills!

Re-invest in your business!

Yes, even if you are a freelance designer, consider yourself as your own business. For any business to thrive or survive –most times is the latter–, they need to save some part of their budget in a safe place, to have money available when a crisis hits or to invest in assets (such as machinery or computers). This is no different for freelance designers. What I mean by “re-invest” is to consider, in the budget of your project, a small percentage, let’s say 5% or 8% of the money, that you will save to create a safety net.

As you surely know, projects don’t come up continuously or conveniently, there are times in which we have a lot of work, and others in which there are no projects in sight during months.
You need to be prepared for this if you wish to grow your income. What happens when you don’t have this safety net is that you start eating on previous savings, making it more difficult to get out of the loop of the struggling freelancer.

Another reason to have this safety net is to be prepared for those projects in which you need to absorb some costs related to it before you finally see the client’s payment in your bank account.

This will give you some freedom and advantage in choosing which projects to come through with. Last but not least, maybe there is something that would propel your career, but is too expensive. For example, for me, presenting a project at Salone del Mobile in Milan is a milestone to meet more clients and get my work known. If I save for it, I might do that trip a given year and grow my business.

Be confident!

If you are delivering quality work and adding value to your client, you deserve to be paid accordingly. If you feel you are offering too much for too little, it probably is because you are indeed working for too little. A bachelor on any given field of design usually takes up to 4 years of study, even if you are a self-taught UX designer, it is no easy task. I know, however, that sometimes we need some anchor to help us feel more confident.

One thing I learned from the consulting world, is that people feel more satisfied with what they are paying for if they see a lot of work done. Design is a lot of work, but sometimes it is not evident to most people.

Something you can do to feel more confident is being transparent about all the processes you go through when doing a project. That could mean doing a simple Gantt table with all the tasks, big and small, listed and visible to the client. Doing so, you de-mystify the creative process, making it a bit more understandable, and also parading all the work us designers do.

My biggest advice for you is that ultimately, it all comes down to how much you want –and need– to earn. Starting from there, it becomes much easier to structure a pricing system that works for you.

Let me stress this, there are a lot of formulas and methods out there, but if it doesn’t cover your needs, if it doesn’t help you make a decent living, if it doesn’t work for you, you will never feel sure about what price is right

This article was originally published on medium.