Flexible Pricing Models for Agencies and Freelancers
As an agency or freelancer its important to be flexible and provide solutions to your clients needs in a way that is mutually beneficial. Having the wrong pricing structure can really hurt your business. Either your turning away valuable business or your locking a customer in to a relationship that they aren’t able to honor for the long-term and the relationship is strained.
By utilizing an array of high-level pricing models your able to provide your clients with a solution that you both can grow with. We’ve broken out the pricing model in to three over reaching models. This includes: Time and Material, Fixed Price and Monthly Retainer.
Before we dive into the pricing models lets talk about how you should organize and adhere to these pricing models.
We suggest you honor these arrangements via a super simple contract structure. When I client first comes on they will sign a Master Service Agreement (MSA). This agreement is the binding contract in which all other work will be held to. Usually this contract is good for 5 years or so. Once the MSA is signed, a client will then sign one or more Work Orders. Work orders are incremental contracts with little legal info which are related to the project at hand. Thus, a client may sign a work order for a website design, then a social media campaign, mobile app or they could sign a work order for all the above. It just depends on the relationship. So each time a work order is signed it is then covered by the MSA previously signed. Remember the more flexible you can be, the happier the client will be in the long-term.
NOTE: Spend the time and money and make sure to have a lawyer write-up solid agreements for you.
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Flexible Pricing Models
Time and Material
Time & Material model best fits clients who do not have continuous and ongoing outsourcing needs. Your team is compensated based on the actual working hours of the staff. Since it is in the nature of short term or incontinuous work assignments to create difficulties for teams to plan resources, the hourly rate for this type of service is higher than the hourly rate benchmark rate. Please see following for two scenarios:
– If the number of overall working hours in a month is more than 80 hours (including 80 hours), the rate will be 1.3 times of the hourly rate benchmark.
– In case the number of overall working hours in a month is less than 80 hours, the rate shall be 1.6 times of the hourly rate benchmark.
Fixed price is quoted for a project with a fixed timeline and cost provided that the detailed specification can be provided by the client. You should charge a premium along with a certain coefficient based on your hourly rate benchmark price, to cover the risks of underestimation, requirement creeps, revisions and also the potential downtime period, time to wait for response.
The hourly rate for fixed rate model is 1.3-1.6 times of the hourly rate benchmark depending on how complex or how much possible “hidden requirement” there might be with the fixed quoted requirement.
We recommend the Monthly Retainer model if your client has ongoing and long term outsourcing requirements. With this model you will provide dedicated resources to the clients projects. Since the creative resources will not be shifted around during the cooperation, they can be maintained continuously so that you can make sure the experiences and expertise could be accumulated and developed along the way.
This model is a cost effective approach from the long term cooperative planning point of view. During project cooperation, your team will work and communicate closely with the client on daily basis, and will keep all progress transparent. We suggest widely adopting agile methodologies here. The main features are: regular and sufficient communication (normally daily via IM chat, email, brief document, etc), mutually transparency, priority discussion, work plan for iteration and work plan adjustment, value Client’s real and changing (business) requirement, etc.
By being flexible in your pricing structure you not only set your clients up for success but provide yourself with the tools to bring on the clients you want when you want.
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