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I'm about to start doing free-lance contracting work, and wondered the best way to negotiate my hourly rate with my client. I'd like to agree on an hourly rate, then provide cost estimates based on that.

I've taken advice from other questions such as (Does the first person to mention a number in a salary negotiation lose?), which suggest making the other person give a number first and work from there.

I feel like saying "What can you pay me?" is probably not the best opener for this. What are some better ways to approach this kind of negotiation?

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    if you're a freelancer, you don't ask for a salary. You charge a rate. They pay it or they don't. – Kate Gregory Nov 30 '15 at 22:06
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    Really you think what can you pay me is a measure of your value? – paparazzo Nov 30 '15 at 22:31
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    You've definitely misinterpreted the advice. It's about salary negotiations, not about freelancing. – Carson63000 Nov 30 '15 at 23:44
  • You might consider asking their budget. I have been on both ends of negotiating and we all thought it was going great until we discovered that we had totally different thinking on the total budget/total cost. E.g. the group 'doing' though it would take 10x longer and thus get paid more in total, even though the hourly rate was smaller than they'd like. – MikeP Aug 3 '16 at 20:11
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If you're going to freelance, you're going to be selling a product-- you. Part of selling a product is setting a price. I wouldn't suggest trying to get the person trying to hire you to give a number first.

Think of any other situation where you're trying to hire someone to do work for you. If you call up a plumber, they're happy to quote you a rate. If you want to hire a string quartet to perform at a function, they'll quote you a rate. These folks don't ask you what your budget is or ask you to name a price and negotiate. Just imagine how unpleasant life would be if every service was negotiated like a used car-- everyone would end up feeling like they probably paid too much because they didn't negotiate hard enough.

What you can do is to set a relatively high rate and then offer discounts to clients who do things that make life easy for you or surcharges if clients have particularly painful demands. If your "list rate" is x, for example, you might offer 10% off if the client agrees to use at least 10 hours a week for the next couple months. If a client needs you to do 60 hours of work a week for the next 3 months to hit a deadline, you might add a 20% surcharge. This is no different than the plumber that charges you extra to come out after hours on a holiday or that negotiates a lower hourly rate to do all the plumbing for a new house than he quotes for one-off repair projects.

  • I agree with you on the importance of giving a price to your customer just as any other industry, however it differs when it comes to IT concerning how much knowledge and intel your client has. Some clients have a very specific idea of how much they want to pay for a project which eliminates the negotiation phase sometimes. – Rabea Nov 30 '15 at 22:21
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    @RabeeAbdelWahab - Which is fine. If you're a freelancer that believes they are worth X and a client believes that they can't pay more than X * 0.5 then you simply move along to the next customer. You're much better off walking away from many clients than you are making a bad agreement. – Justin Cave Nov 30 '15 at 22:28
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I find it very dependent on the client, if he/she is used to work with freelancers I would ask the question What is your budget for this project? or The range at least that we can discuss because that will give you a shortcut on where the client has his limits, it could be a very fast conversation before you discover that they are not at all fit for the kind of work you are offering. or that the number you had in mind is way higher than his budget.

On the other hand, new clients to the freelance world are better be offered a number, so it works both for the best of the service provider and also for the client that can do his research depending on you as a reference.

Of course a number should be accompanied with a detailed explanation of the expenses in both cases.

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If another party is dead set against giving a number first, there's no way to make it happen. I've tried, it doesn't work.

A much better approach is to know exactly what you want to charge (based on your expenses, the market, your experience, etc), say that number first, and have a "walk-away" number that is the lowest you will accept.

You need to know and believe those two numbers going in to negotiation.

That doesn't mean you need to lead off with your rate -- it's much better to put off rate/budget discussion as long as possible. Spend your up-front time understanding the client's problems, needs, and possible solutions.

Only bring up cost at the appropriate time, either when the client requests, or when you think your rate and the client's budget are not compatible. Also discuss payment model such as time and materials versus fixed bid.

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I have never asked a client to suggest a rate. I looked at what the going rate is from the big companies, and charge the same or higher if I feel I can do a better job. This has two affects, it means I get less work because I'm not in a bidding war. But it also means I get paid more for what I do which (so far) has been by far the better end of the deal for me.

I don't have the overheads a bigger company has, so it's much more profit for me.

Once you build a reputation as a freelancer (assuming you know your stuff) your rate for work gets around, if it's low then it's harder to raise it, if it's high, it's easier to give a client a special rate if you want to.

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Assuming you know what the job in hand entails, I'd forget about negotiating and set about putting a definite value on what you can offer.

Pick a rate somewhere between the minimum you'll accept and what you'd think would be a great rate. It can be tempting to pitch at the extremes but pitch too low and your enthusiasm will be sorely tested if it isn't a simple job. Pitch too high and the client may make all kinds of outlandish demands. If you're being negotiated down, make sure you too get more bang for your buck. What exactly this would be is entirely down to your industry. It might be shorter hours, part time, materials or some other kind of kickback or benefit.

Do your homework - get a feel for what other freelancers are charging - and also what their USPs are.

Once you've done your first job, revise your rate accordingly depending on the work. You might charge a cheaper rate for jobs you could do with your eyes closed whereas there may be expertise you have but you don't enjoy, in which case you can hike up your rates.

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