As a self-employed professional, you’ll hear this advice about one million times. It’s mostly foolproof. Still, it’s a bit too absolute.
There’s a time and place to work for free. And by “free,” I mean forgoing monetary payments—not entirely compensation-free.
This may sound sacrilegious to the average go-getter. But knowing how and when to work for free is a craft new freelancers and entrepreneurs must master.
This knowledge is essential for business growth and endurance. Here’s what you need to know about when (and when not) to be flexible with your pricing.
The problem with overly rigid pricing
As a self-employed person, your rates must be consistent. Too much fluctuation risks destabilizing your business. Too much rigidity and you could shut out potential high-quality clients. It’s best to fall somewhere in the middle.
Unfortunately, pricing flexibility gets a bad rap. Some frown upon the idea of “compromising” on your prices. It’s as if the very notion of forgoing affluent earnings is an insult to self-employment altogether. Yet, others realize that clients need a little bit of breathing room to close a deal.
The latter is crucial for freshly self-employed professionals to learn. As a newcomer in your industry, you might not yet have the standing to demand high rates. A small portfolio or lack of testimonials offers little to no leverage for negotiating compensation. That’s why even the highest-earning freelancers and entrepreneurs once earned budget rates when they first got started.
“You need to give this thing time,” says copywriter Adesewa Quadri. “We are all different human beings. Some people, they can make their first $1,000 in their first month of freelancing while others make their first $1,000 after 12 months, after 18 months… We all have different processes.”
Refusing to recognize the value of a flexible pricing structure could hurt your business before it even starts. Plus, this attitude pressures you to earn an unnecessarily exorbitant income, often when it’s not realistic.
“We all seek validations for different reasons,” says Quadri. To her, the joy of freelancing is the ability to live her dreams and travel the world, not in record profits.
“As long as I make the little amount that can allow me to explore the world as much as I want, wake up at the time I want, and do things I love, I’m fine. We all have different reasons for freelancing, we all have different validations. So don’t compare anybody else’s journey to yours.”
Only you get to decide what rates and pricing structure work best for you. These tips will help you understand and apply the practice of working for free or at budget rates.
The basics of working for free or cheap
Determine what “free” or “cheap” means to you. For our purposes here, we’ll say that “free” means no monetary compensation only. You should already have a healthy income if you decide to commit to “free” work, and it shouldn’t bog down your workload. That said, this option is best for transitioning to self-employment from a full- or part-time job.
Reserve this for rare circumstances and extremely trustworthy clients. I’d recommend a limit of only one or two such arrangements per year.
Consider what you might accept instead of cash payments, such as advertising or backlinks. Whatever it is, make sure its value is equivalent to or greater than your forfeited financial gains.
Regarding “cheap” work: It’s wise to offer discounts when you’re able. This could be seasonal coupons, close-out sales, or even per-client budget rates. It’s easy to do this without undervaluing yourself and your work. I’ve done it! All you need to do is establish a range of ideal rates and adapt your price points to ideal clients’ budgets without falling below your minimum threshold.
Without these strategic measures, I’d have passed up dream clients just for the sake of being stingy with my business. This would have hindered not only my personal fulfillment from work but also my ability to adapt to the boom-and-bust business cycle.
Refusing to negotiate price points can leave a sour taste in many people’s mouths. It can also make you look greedy as if the money matters more to you than the work. (This isn’t always a bad thing. But it can look bad regardless.)
Poor impressions could leave you stuck when you need more clients and hurt your business in the long run. Here are two examples of working for “free” or “cheap” from my own life to demonstrate the value and know-how of these techniques.
An example of working for free
An acquaintance reached out to me after following me on Twitter for a while. They’d just begun the process of creating a non-profit and had a lot on their plate.
They had a modest budget and couldn’t offer much. I wasn’t hurting for the money. And at the time, I had a pretty full workload. Still, I deeply cared about the work I was doing, and their alternative offer made sense for both of our circumstances. In exchange for me volunteering as the social media content creator, I’d get an ad spot in their target audience outreach.
After a few months, they had enough flexibility in their budget to offer me a portion of their donated funds in addition to the promo. Although the financial compensation doesn’t meet my standard rates, the additions to my portfolio and the extra marketing go a long way.
Still, this is tricky to put into practice. These are some things you need to consider before making a commitment.
Scope of the work: Working for “free” doesn’t mean phoning it in. Adjust the quality and scope of your offer to match the alternative compensation. This will ensure you avoid setting yourself apart.
Value of work: Does this work mean a lot to you? It’s okay to volunteer for things you care about if it won’t hurt you financially.
Client details: Vet clients thoroughly. You can tell when someone is exploiting you vs. someone who genuinely has a modest budget. Make sure they’re trustworthy and that you share the same values. That will help create a healthy working relationship, regardless of the specific alternative compensation type.
Again, this isn’t an arrangement to take lightly. Be careful about who you enter such agreements with, and make sure they follow through. Otherwise, you risk proving the common saying, “exposure doesn’t pay the bills.”
Why you might work at discounted rates
I’d just led a webinar on the historical exclusion of marginalized groups in environmentalism and conservation. A conservation organization’s lead staff member attended and contacted me shortly afterward. We set up a few calls to discuss a contract and expectations, and I laid out a few plans, each with unique pricing structures.
They told me their budget–it was lower than the plans I’d offered. Instead of shutting them down outright, I adjusted the scope and details of the work to meet their needs and match their budget. In this case, that meant fewer deliverables, each with minimal resources. Other times, reworking an offer might call for switching from a fixed to an hourly rate, depending on the skills and materials required.
Regardless, I was flexible because:
The client’s proposed budget fell within my ideal earnings range.
The client proved to be genuine and trustworthy. They also had a longstanding, positive reputation in their field.
The third factor is the kicker: I wasn’t losing any money working on this project. No, their budget couldn’t match my initial offer. But it wasn’t insultingly low either. To make a decision like this, you need to plan ahead.
Establish your pricing standards
Make a range of price points you’d be willing to accept for different types of work. Follow a scale like this: too low, comfortable, ideal, exceptional, or bonus.
Deny anything below a “comfortable rate.” These projects will ultimately cost you money and time. Doing them will only lead to resentment of yourself and your client. Trust me; I’ve been there.
You’re free to accept everything above that threshold. If it’s more than your “ideal” and “exceptional” rates (some clients offer to pay more than your standard—don’t fight it!), consider the extra money a bonus or added “value tax.”
How to develop dynamic pricing
Another major problem with excessive pricing rigidity is a lack of adaptive capacity for changing markets. Setting and fixing your rates assumes too much about the consistency and intensity of market demand.
For example, an artist might charge premium rates for holiday advertising illustrations. But they offer more flexible options throughout the rest of the year. This is because the demand for the former is much higher than the latter in some industries. Plus, competition intensifies during the holiday season.
In this case, the artist understands that demand is dynamic, so their pricing structure must keep pace. Still, demand is not the sole influence on pricing. Thus, it shouldn’t be the only thing determining whether you work for free or cheap. Here are some other factors to account for.
Assess competitor rates
No market exists without competitors. They exert just as much influence on your rates as customer demand.
Depending on the uniqueness of your product, the decision to work at discounted rates could trigger a “race to the bottom.” This means that a competitor with a similar product sets their prices lower than yours.
Their rates attract more customers, so you do the same to regain your market standing. Eventually, you both lose because you’re constantly trying to undercut each other.
This is a tough spot that many budding entrepreneurs get caught in. You don’t quite have the reputation to back up demands for premium prices. But you can’t afford to be on the clearance rack, either.
In this case, the trick is to talk to your target audience. Ask about what they’re missing from your competitors within different price brackets. Then, study those competitors’ specific prices and offers. Note if they ask for subscriptions or one-time payments, hourly or fixed rates. Use those insights to adjust your offer at various price points.
The beauty of online markets is the ease of price comparisons—use it if you can. After all this, you’ll be in a much better position to determine a reasonable price range without constantly undercutting yourself and others.
How similar are product characteristics across firms?
Identical / quality differentiated goods
Are products to be considered durable and how can this affect pricing objectives?
Perishable / durable goods
Should competitive pricing problems be considered dynamically
Time-dependent / time-independent setting
How far does the market structure of interacting firms influence the nature of price competition?
Assess your product’s or service’s uniqueness against competitors’. The more distinguished it is, the more of a say you have over the price point. There are two types of differentiation in competitive conditions:
Vertical differentiation: The product is distinguished by objectively measurable and quantifiable quality standards.
Horizontal differentiation: The product is distinguished by qualitative standards.
The latter is usually more prevalent in markets with homogenous offers. This means that competitors’ products or services are mostly the same. In these cases, customers can easily substitute competitors’ products for yours. This gives you less leverage to set unique price points. Plus, working at discounted rates or for free in these conditions is more likely to get you caught in a race to the bottom.
This said, you need to work on your unique selling point. Determine what sets you apart from your competitors. Highlight that in every bit of your marketing. That way, you’ll attract more clients to build up your business and gain more leverage to raise your rates later.
Consider product costs and logistics
Professionals with fixed production costs are in a stronger position to establish dynamic pricing structures than others. They have a much clearer, more consistent idea of their lowest acceptable compensation thresholds since material and distribution costs don’t fluctuate.
On the other hand, those who depend on complex or multi-level supply chains will have a harder time adjusting their prices when needed, as production isn’t entirely in their hands.
That said, think about all it takes to provide your product or service. Is there anything that can be streamlined?
Consider this simple example: You’re selling a planner. Lots of people want to buy it but say they don’t need a physical planner, especially at your price point.
As a compromise, you offer a digital version at a slightly lower price. This way, you can still uphold the value of your offer while also accommodating more customers’ needs.
Plus, you don’t have to rely on anyone to print or distribute the planners. The digital product is entirely under your control, in infinite supply, and available to be updated whenever you deem it necessary.
The more control you have over your business operations, the more of a say you have in your rates.
Know when to work for free or cheap
Determining your rates as a self-employed professional isn’t as black and white as some would have you believe.
There’s a time to work for free, a time to offer discounts, and a time to demand higher pay. The trick is knowing which is which.
Take some time to think about the income range you feel comfortable earning per project, product, or client. Research your market and competitors to avoid a race to the bottom and gain an edge when pursuing more work.
You’ll grow your business steadily with careful, strategic application of free and budget-friendly offerings.
More importantly, you’ll gain more leverage to demand higher rates in the future as your reputation strengthens with each sale you close.