Recently, a bunch of people asked me how to set hourly rates as a freelancer. I responded with a lengthy, detailed blog post on the topic and it quickly became one of the most popular posts on this site.
Which made me think: Perhaps I should share a bit more about the nitty gritty of freelancing? If there are so many people interested in knowing how to set rates, perhaps there are a few of you who’d also like to know how I set up my contracts and work estimates.
In case that’s you, today I’m going to break down how I do my work authorizations (contracts) for client work.
Let’s dive in, shall we?
First, don’t work without a contract
It’s tempting to just dive in after an honest handshake, but there are a couple reasons I almost never work without a contract of some kind:
1) They keep you safe. If the client demands twice as much work, you can point to the detailed work statement with their signature on it. If the client claims ignorance about your billing policies, again you can point to the contract with their signature. If, heaven forbid, they fail to pay and you have to go to court, you can point to the contract with their signature.
2) They get everybody on the same page. You’re a lot less likely to have a miscommunication about how many rounds of revisions you’ll do, how many logos you’ll provide, how many pages on a website you’re developing, what kind of billing policies you have, etc. if all those things are spelled out in black and white and signed before you start.
So definitely don’t skip the contract/work authorization.
Specifying project scope
Now, what does a contract look like? For me, it starts here – with a detailed look at what I’ll be delivering to the client.
This is typically called the project scope. Which just means what the project does (and does not) include. How many pages will you develop/design/write? How many meetings does your estimate include? What exactly will you be doing?
For example, for a copywriting project, the scope section of my contract will look something like this:
This estimate includes content for up to ten (10) web pages of up to 1,000 words each. This estimate assumes up to two (2) rounds of revisions. This estimate does not include sourcing photos. Site content will be optimized for SEO, but this estimate does not include identifying key phrases to optimize for. These can either be provided by the client or a separate contractor. Content will be provided in Word documents.
Personally, I break my project scope up into phases whenever possible. If I’m doing strategy and copywriting work, I’ll have two different headers and sections like the above. Both will have their own scope spelled out and will have separate pricing so the client can see the full breakdown of everything they’ve requested.
I do this for a few reasons, but particularly because it allows me to offer clients cheaper and more expensive options (cheaper with smaller scope and more expensive when the client wants more help – photo sourcing, more revisions, etc.) while also showing why an option is cheaper or more expensive.
Which brings me to the next part of my contracts.
Under each line item in the project scope, I include a fixed price.
Some freelancers work hourly. Others charge by the word. But I prefer doing fixed pricing for a few reasons:
First, the client knows exactly what they are paying and what they’re getting. There’s no mystery. There’s no possibility of me exceeding my hours and sending them a surprise big bill. This is particularly nice for smaller clients or tight-budget clients. There’s no back-and-forth once I hit a certain number of hours. There’s just a specific set of things I’m contracted to deliver and a specific price they’ll pay for them–all agreed upon before any work starts.
Second, it incentivizes me to be really efficient. If the client has asked for two rounds of revisions but I nail their content on the first try, I make more money. If a project would normally take me 20 hours, but I find a way to do it well in 15, now I’ve made 25% more per hour.
Third, it takes the pressure off. If I’m having an off day and my tasks are taking longer, I don’t have to feel guilty or worry that I’m overcharging a client. Set pricing makes it easier to forgive myself and move forward on tough days and to incentivize myself to work hard on good days. Because the client pays the same amount whether I’m having a spectacularly productive day or a mental health emergency.
Fourth, it means less task-switching. Instead of constantly having to multi-task and think about clocking in and out whenever I take a break, I can focus entirely on getting the work done. I find it significantly less exhausting.
So, how do I set my project prices?
First, I figure out how many hours that project will likely take me. Then I buffer that time a little because I tend to overestimate myself. Once I have a number of hours, I multiply by my hourly rate.
Then I do a gut check. Does that number look similar to past similar projects? Did I hit my targets on those projects? Is there anything special about this project that makes it likely to take more or less time than similar projects?
From there, I set the numbers and move on to the rest of the document…
Timelines & process
Now, it’s worth noting that my contracts for agencies and tech-savvy clients look different than those for small businesses and non-techy clients. For the non-techy crowd, I expand my scope of work section to include two additional elements:
1) Timelines for each phase of the process (at this stage, they’re estimates designed to give the client an idea of timeline and not firm deadlines because I don’t put those clients into my calendar until they pay their first invoice).
2) A quick breakdown of what the project process will look like and where I will need the client’s input.
For the example scope above, I might put something like this:
:: Client provides completed content questionnaire, brochures, website access, any strategy documents they have, SEO keywords, and links to any sites they love and want to emulate
:: Gigi writes and delivers first draft of content for 10 pages
:: Client reviews content and gives feedback/requests changes
:: Gigi revises and delivers second draft of content for 10 pages
:: Client reviews and requests any final changes
:: Gigi revises and delivers final content for 10 pages
Now, as I said above, you don’t need to do this for every contract, but when I think a client needs more information, I spell everything out for them. This is especially relevant when you need a lot of client interaction along the way. Let them know exactly what their role will be and, if you’re on a tight timeline, give them exact deadlines for their approvals.
Payment terms & late fees
Finally, after the scope and pricing, I include a section with my billing policies. It says that by signing this work authorization, the client agrees to my billing policies–and then it spells those policies out.
For me, this means for set projects I charge 50% up front before a project begins and 50% on completion. Clients have 30 days to pay an invoice. After that, I charge a late fee of 10% per month, compounding. If the client delays a project by more than two months and the project is more than halfway done, I issue the final invoice. And if the client chooses a payment method that requires fees (e.g. PayPal), they are responsible for said fees.
So, what is a set project? For me it’s a one-time project with a set scope. For example: writing content for a website or developing a blog content strategy.
50% up front is pretty normal for set projects in the ad/marketing industry, as are late fees and net-30 payments. But, of course, you can tweak this based on what kind of payment systems work for you and your clients. I will say that 50% up front payments usually help to weed out clients with payment issues early. Since instituting this policy, I haven’t had a client who refused to pay (before doing up-front payments, I had one client I chased around for something like six months before they paid me and another who paid only half what he owed and paid it over a year after being billed; in my experience, up-front payment helps weed these people out right away).
Now, not all my projects are set, one-time things. In fact, right now all of my clients are ongoing and send me regular work that varies a bit from month to month. In cases like those, it makes more sense for me to bill bi-weekly or monthly.
So, for example, with my biggest client, I still have fixed pricing based on deliverables. A short blog post has a fixed price. Social media management has a fixed weekly price. A long blog post has a fixed price. But the number and type of deliverables they need varies week to week. Some weeks they need three short blog posts. Some weeks one long one. Some weeks we focus entirely on white papers. Etc. For our business relationship, it makes more sense for me to bill bi-weekly as I complete projects.
Sometimes clients have their own contract (especially large clients). But I’ve found that they rarely get into a ton of detail on the scope of the project, so even if you do have a larger contract, I’d suggest putting together a work authorization that spells out scope, billing, and expectations in detail.
And don’t skip the step where you read the client’s contract in detail. Sometimes there’s weird stuff in there. If that’s the case, push back. Ask to scratch things out or clarify them. Make sure you are fully comfortable with what you’re signing before you put pen to paper.
Now, to you. Any other freelancers out there want to offer tips or tricks for putting together contracts, scopes, and payment policies?