Module 4, Lesson 2

Money Matters: How to Price Your Services

Whether you are an aspiring freelancer or entrepreneur, this module unpacks some financial considerations in the industry, reminding you of your worth as a creative professional.

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IMPORTANCE OF KNOWING YOUR WORTH

An appealing aspect about freelancing/entrepreneurship is self-government. The independence from corporate structures and demands allows you flexibility with your work hours, project/client selection, and notably your service fee. 

Independent practitioners have the freedom in how much they charge per client or output, but it has become a crucial skill in their career success to price their services strategically. There is a threat to more experienced professionals as now emerging talents (though younger and with less experience) tend to charge lower for services, therefore disrupting the CMP economy. 

While this is a practice for exposure and for attracting those with less budget, eventually these entrants would have to put into account their costs, necessities, and most importantly the value of the time and expertise they put onto their works. 

COMMON PRICING MODELS (HOURLY, PROJECT-BASED, VALUE-BASED)

What are some common pricing models for services that can help you decide on the value of your works and how should they apply to your creative media production careers?

• Time-based

This refers to basing your price on the time taken to finish the project. Added to this are any overhead costs such as space rental and equipment use. Although this is the most straightforward method, it may be difficult to predict the hours needed to accomplish a project. Creatives may charge hourly rates or a day rate for longer productions.

• Project-based

You may also choose to charge a fixed rate for an entire project, regardless of the time spent. It is crucial to clearly define the scope and deliverables with the client, as well as negotiate on a price that reflects the service’s quality and subdues the costs.

• Value-based

In this model, pricing is determined by the perceived value of your work to the client rather than the time or cost it took to produce. For example, an advertisement that significantly boosts a brand’s reach can be priced higher than one with less impact.

• Competitive-based

This is pricing based on the competitions’ prices of similar services. One may decide to keep the price equal to competitors, above competitors (for more “premium” positioning in the market), and below competitors (to attract the more budget conscious market).

These pricing models can go hand in hand with one another and there are several resources to learn which ones should best fit your services. It is important to know the strengths and weaknesses of our positioning as well. For instance, just with mispricing, you could be focusing on the wrong on the wrong demographics such as in terms of economic class. The National Wages and Productivity Commission shows the minimum wage of any region you’re targeting in the country. Such data on the country’s current circumstances can supplement as bases for your price and positioning.

COSTS, EXPENSES, AND PRICING (INCLUDE TAXES)

With these models in mind, if you aim to profit effectively, identifying the costs is a crucial practice. Although these costs are not limited to the following, here are expenses that you might encounter in future projects:

Direct Costs	Indirect Costs
Labor (including talent) Raw Materials Short-term Location Rentals Logistics Production Equipment	Utilities (such as long-term space rental) Software Maintenance Taxes (especially for businesses) Indirect Labor

This breakdown can allow creatives to see that doing production costs is not too different from doing that of other enterprises. Every item that you need in order to operate—gear, space, utilities, and manpower—weigh in on your overall cost.

When you total all these, you find your project cost, thus the baseline you need to earn back before deciding on a profit margin or your “tubo”. To reach your target income with these profit/s, you can plan how many projects you should take on monthly or annually.

For registered businesses and possibly for independent artists with bigger clients, there are other costs and requirements that are necessary to be complied with. This means managing several obligations such as obtaining official receipts (ORs) and invoices, as well as the remittances and periodic tax filings to Bureau of Internal Revenue (BIR), according to CJPM Events and Marketing CEO, Japz Cadelina. This is mostly on the business and operational side of CMP, and it’s important to know the administrative and financial costs that come along with these.

DEALING WITH CLIENT NEGOTIATIONS

After establishing your costs and baseline, the next step is communicating your value and negotiating with the clients. Knowing your worth is crucial, and it may be challenging to stand firmly by this in actual conversations.

• Presenting your rates

There are several ways to communicate your rates. A clean, well-presented rate card is one of the common ways to immediately inform even outsiders. In other cases especially in freelancing, custom quotations are preferred—these are for projects with different specifications and needs, allowing flexibility. A starting rate is also helpful for ensuring that costs are covered and that they wouldn’t be underselling.

• Contracts and Agreements

Written agreements are a huge layer of protection for freelancers and businesses. This provides them with the security that clients will fully pay what’s due, while ensuring that the practitioner’s terms aren’t being violated. Case in point: original content could circulate without consent and compensation, as there were no legal bindings to prevent this.

• Communicate Confidently

Aside from defending your rates, effective client communication and negotiation should also be built on trust. Do not be afraid to over-communicate when necessary; it’s better to ensure that there are no crucial details missed. When everything is explained and defined transparently, clients are more likely to trust you with the amount you charge.

After all, receiving offers lower than ideal can be unavoidable. If the client were to be given a fully laid out explanation, such as a breakdown of your costs (crew, editing, casting, etc.), they are likely to better understand why you might have to charge higher.

Here is an example of a confident and professional communication from Luis Danao, a part-time filmmaker and freelancer, 

“Oh, I love your vision a lot. I love your vision so much and I love what you want to achieve with this. I do think, though, that in order for us, for me to bring out your vision, I am going to need this amount of money.”

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Activities

Activity 1: Compute your minimum Rate 

Calculate your price for at least three services/product in this calculator by Getjobber.com

Identify first your theoretical labor, material, and overhead costs before your ideal profit. The calculator will display your total service price along with your profit and markup percentage.

Activity 2: Create Sample Rate Card (Logo, Copy, Rate)

Now with these final rates for your service/product, download these rate card templates we have prepared for you! Download the PDF below or if you have a Canva account, feel free to edit using this template link. 

Choose a template that best fits your taste/services and adjust the details (most importantly the service/product, and the price) accordingly.