Getting paid, not played: 3 models for freelancer fees

Startups and small companies have an obvious staffing conundrum: in areas like Marketing and Communications, there isn’t always steady, full-time activity. When the company is young and budget-constrained, and especially before there is an active user base or ongoing marketing programs, it’s understandably difficult to employ someone at even a modest salary when you’re not sure he or she will have meaningful work every day.

Israeli startups in particular have an added challenge: Small tasks that involve writing in English for public consumption (emails, website edits, company descriptions, etc.) can rarely be done right by a non-native English speaking team. As I’ve noted before, even Israelis with Anglo parents or having lived for a time overseas can’t necessarily provide the syntax quality and natural flow that marketing messages need for that “don’t make me think” effect.

Enter the freelancer. Whether an individual working alone or a small company like mine, freelancers fill that gap, offering affordable, on-the-fly help in dozens of areas. Recent immigrants flock to these roles, looking to maximize the value of their mother tongue. The high-tech Marcomm freelancer is a well-known, often-used entity in the Israeli start-up ecosystem.

The question, then, is pricing. Here are three pricing models we use, with the pros and cons of each. Sticking with one model is a challenge, and both clients and freelancers need to be open-minded enough to choose the one with the best mutual benefit and highest probability for productive cooperation.

Time is money, money is time.
Time is money, money is time.

1. The Retainer
Obviously the most sought after in the freelance world, it provides the closest thing we have to job security: knowing that there is a monthly check we can count on. For the company, it means a simple budget line without constant reviews, paperwork, or decisions about each small assignment. No commitment, office space (usually), equipment costs, or benefits to pay (usually estimated at about 23% an employee’s base salary). Naturally, this relationship requires good task definition, so neither side is taken advantage of. For better or for worse, the commitment being offered by the company to the freelancer requires a quid pro quo: you need to be generous and over-deliver, so that the question of justification does not constantly — or even occasionally — rear its head. You stick with us, you say, and we won’t nickel and dime you for those extra little things we probably should. We’re here for some serious time to do the job right, not simply score a quick win. In short, this one’s about trust.

2. The Hourly Fee
Way on the other side of the spectrum is tracking and reporting every hour and every task. Sometimes in this model, when a client needs quick text reviews, you actually need to bill down to 15-minute increments. It’s a hassle and it’s overhead, but it’s accurate. The client needs to ponder and then justify each assignment internally, and you need to justify the time spent. Especially on the more artistic/editorial creation tasks, it’s always a “soft” figure because hey — how long should X words take to edit? It depends on the raw material, the experience on similar texts, and the goals of the edit. It’s also the easiest to argue/wonder about, and in my experience the least comfortable all around. Neither party knows the total cost in advance, or how much time to invest in the relationship.

3. The Project Fee
This one’s a solid compromise if they first two don’t appeal — and not because it’s necessarily the most lucrative, but because it’s the simplest and a perfect hybrid of the first two. Basically, using your own hourly rate, analyze the project and estimate the cost. If left at that, you’d often do just fine (as would your client), but there are times when it simply takes a lot longer (and let’s face it, it’s generally because the client makes changes or requests “just one more thing” along the way). And sometimes, yes, it takes less time than predicted. And when it does, you feel a little dirty taking the amount you quoted anyway.

Our solution is what I call the “20% Rule”. In the event that the actual project stays  within 20% of the time in your original estimate, the pricing stays the same. This goes in both directions — so that you might finish up a little more quickly or it may drag on a tad.  If it appears to be taking less time, the client will simply be delighted. And that helps earn more work and generates word-of-mouth. It’s my favorite phone call to make or e-mail to send. If it appears to be taking longer, you warn them along the way with an explanation, and together agree upon the reasonable new cost beyond your original quote.

Depending on the business you’re in, there are probably a half dozen other ways to price freelance work. Translations by the word or voiceovers by the minute are pretty natural and rarely get you into trouble. The most important thing is to discuss all three options at the start and actually be ready to offer any of them, should the client be interested. Discuss the pros and cons; there’s nothing wrong with promoting the arrangement that you think makes the most sense all around.

In the unpredictable income structure of a freelancer, you’ll sleep better knowing you have clear options lined up to optimize both your income and customer satisfaction. And that’s the magic combination.

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About the Author
Jay is the CEO of RapidFire Consulting, helping Israeli companies "tell their story" - figuring out what to say and to whom - through Explainer videos and the other dozen modes of web messaging.
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