Before launching a gig economy career, you’ll want to establish a pricing model — flat rate, hourly rate or retainer.
Clients will decide whether to hire you based on what they’ve paid before or prices they expect from the competition, so you’ll want your rates to be competitive and based on the market. That being said, as you determine fee structure, you’ll also want to think about:
- The types of work you enjoy
- The working relationships you prefer
- Your desired income
Being self-employed means you are responsible for your health insurance and retirement plan, and you won’t get paid time off. Understanding what you’ll pay in taxes and for benefits will help you decide on a billable rate that ensures you can cover expenses and make a profit.
Flat rate or fixed pricing
A fixed pricing model allows you to bill a predetermined fee for a service; this is beneficial when the scope of the assignment is clear.
Clients appreciate a flat rate because it prevents surprises and allows them to easily decide if they can afford the service.
Because the price is determined before you begin the work, you are committed to that rate. The negative side of this pricing model: You won’t get paid for any additional hours you may work.
An hourly rate
If you’re not clear on the job’s parameters and if the scope might change, an hourly rate is beneficial.
Billing at an hourly rate means you get paid for the time you work, including any additional time needed for revisions or extensions.
Keep in mind that an hourly rate may not appeal to individuals or small businesses. A fixed price often sounds cheaper than paying $50 per hour for a to-be-determined number of hours. When a client agrees to a service and then owes more than expected, they may be disappointed, and it may be tough to collect payment.
Billing at an hourly rate can also create more administrative work; it may require that you bill your clients more frequently, and you may be asked to share a daily time sheet.
Working on a retainer allows both parties to feel secure — the client gets the service(s) they need, and you get steady income.
Many are willing to pay in advance because they want a steady, trusted adviser to provide their needed financial services. It can also be more economical than hiring an accountant for one-time assignments. The potential savings of having a financial planner on retainer could also appeal to a small business or nonprofit organization.
Consider offering varying commitment levels — three months, six months or one year — and draft a retainer agreement that’s as detailed as possible, such as:
- Services you will provide each month
- Number of hours you will work
- Invoicing procedures and processes
- Compensation you’ll receive each month
- Frequency of meetings and/or status updates
- Terms of the agreement, including what notification needs to be given/received if the arrangement needs to end before the term date. Specifying an “exit strategy” is helpful because no one likes to be locked into an unhealthy relationship.
To maintain a healthy long-term relationship, review the retainer agreement as time goes on. And, as with any freelance work, keep close track of your time.
A billable rate that attracts clients and produces profit
As you decide to offer a flat rate, an hourly rate or a retainer fee, consider:
- Competitive rates for your service and the market served
- The needs of clients
- How you want to invoice and bill clients
- Your definition of a viable first year
You could also consider the price floor and price ceiling of your services. It could be a competitive advantage to be willing to offer a sliding scale, based on a client’s needs and what their budget will allow.
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