One of the biggest headaches that plague freelancers is trying to compete with much (much!) cheaper workers abroad. We live in a global marketplace, and when companies need design, coding, even administrative tasks done, it’s becoming common practice to hire a contractor from another continent. Or maybe even further.
In fact, the freelance economy in India (which some reports state is the largest freelancer market in the world) is currently booming. Over 40% of freelancers there saw their business grow “very fast” in the last year, and they cover everything from photography to content writing to mobile app development. And because they can afford to (or have to) charge less per hour for their work, freelancers in America are finding it hard to compete.
So how can freelancers deal with being undercut by grossly underpriced workers overseas? Here are some tips of what you can do to stay competitive.
While many freelancers overseas are proficient at English, not being fluent and not understanding localized customs and expectations can be a pain for many companies. When good communication isn’t there, it makes the job tougher, longer, and especially more time-consuming on the client’s end. So, what you should bring to the table is clear, efficient, and one-and-done communication.
If the clients you’re pitching to don’t think good communication is important, they probably don’t know that it can cost them real money. A study by Creative Communications & Training showed that:
a company with 100 employees can expect to lose approximately $450,000 a year or more because of email blunders, inefficiencies, and misunderstandings.
Foreign workers without great communication skills are more prone to do the work wrong, take longer to deliver, or simply take up too much client time. By being an excellent communicator, you’ll have a leg-up on overseas competition. Of course, make sure you are actually better! Learn how to improve your communication skills, and know that it’s a hugely valuable differentiator for your services.
You can’t compete on price when someone abroad is willing to work for $4/hour. But you can absolutely deliver a better product and customer experience than them. Keep in mind the old adage of what happens when a $5 barber sets up shop right next to an experienced, quality barbershop:
Companies quickly come to understand “you get what you pay for” and after being burned by shoddy work from cheap freelancers, they’ll come looking for someone who comes recommended with a history of delivering quality work. These are the businesses who you want to work with, who will gladly pay your hourly rate. The companies that haven’t learned their lesson yet? Don’t bother chasing after them; they’ve got some growing up to do.
Once you do good work, it’s important to become your own marketer. You should have killer examples of your best work in your portfolio that speaks to your level of quality. So, always make sure you do the following after delivering your project to your client:
Your freelancer brand should be that of being worth the price. Your customers should, at the end of the project, feel like they got a bargain at your hourly rate. If you can manage this, you’ll always have clients lined up to pay you what you’re worth.
Competing with cheaper freelancers on online job boards can get frustrating. The best course of action? Not having to use those job boards at all. Sure, that’s easier said than done. But we’re constantly surprised how little effort many freelancers put into finding local clients.
Some lazy freelancers think sending out a few cold emails and hitting a job board for fifteen minutes is the maximum effort they can put in to finding new jobs. Meanwhile, the freelancers who always have work are on their feet, talking to local business owners about what their needs are and what services could be offered to help them.
Obviously, overseas workers can’t compete on this level at all. Since you actually live in the country, state, or city that these businesses operate in, it’s a big advantage. First, having in-person meetings is a huge plus. Companies always appreciate if you can make the trek into their offices to have a meet-and-greet or a kick-off meeting. Second, you can be proactive and seek these businesses out even before they start looking for a freelancer. Does that small-business down the street need design work? Stop by and and ask.
And third, as you build up referrals, word-of-mouth will probably net you a good base of local potential clients. These leads are freelancer gold, and they’re practically unmineable by overseas talent. Work these leads and you’ll never have to compete with international workers again.
As the global marketplace matures, and as international workers become more proficient at English and delivering quality for less, now is the time to hustle to get more freelance clients. You have the advantages listed above, so now is the time to act.
And on this note, keep in mind what types of freelancing jobs can be easily outsourced. Light coding? Probably. Content writing? Probably not. Is your freelancing service potentially on the chopping block to be sacrificed to cheaper workers abroad? If so, as tough as it may be, you may want to expand your skillset into areas not so easily replicated.
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]]>A Google search will bring up scores of articles that offer a general formula to figure out your rate, as I’ve written about previously:
(Living Expenses + Work Expenses + Profit) ÷ Billable Work Hours = Estimated Hourly Rate
Some sites might even have a handy rate calculator if you don’t want to do the arithmetic yourself.
But, in practice, these estimates will barely give you a ballpark figure, and that’s only if you’re very aware of the expenses your freelancing business will have and the hours you’ll actually want to work. Especially if you’re just starting out as a freelancer, these calculators won’t help you.
If you’re trying to figure out your rate, it probably means you are just embarking on your freelance journey. So, working backward from the annual salary you eventually want is fairly unrealistic. That’s like planning a path across the Pacific before you learn how to sail a boat. In reality, when people start freelancing, they are in a transition. They’re often coming out of school or from a 9-to-5 job or trying out a career change. Let’s take this in stages.
A friend knows you’re good at video editing and offers you a paid project. “What’s your rate?” he asks. You don’t know, but you’re a smart cookie, so you browse over to a site like Upwork and see what the general hourly rates are for video editors. It’s a pretty wide range: anywhere from $30 to $100 an hour. You guess $40 is fair, but you really don’t have any idea. Maybe $50 would be fine?
Here’s a better approach: ask for a project fee.
For a beginning freelancer, an hourly rate can be hazardous. If the project takes longer than expected, your first client may be upset at the increasing cost. If the project is too short, you haven’t made much money at all. Setting a project free up front instead is a safety net for both parties so they feel confident, and is especially good for the newbie freelancer still learning how long the actual work may take.
So, how do you set a project fee? Well, you still need to have an idea of how long you think the project will take and estimate an hourly rate. But we haven’t just gone in a circle; again, a project fee for your first few freelance assignments is the best way to get paid what you’re worth and protect the client if you’ve misjudged. At this stage in your freelance career, when this is probably not make-or-break money, it’s all about making your clients happy.
You’ve got two or three clients now. It’s not just beer money; you’re nearly paying rent off freelance work. You’re thinking about quitting your day job, quitting your other side jobs or making this your full-time career. You might even change your LinkedIn job title to “Freelance Video Editor.”
You’re also seasoned. You have a good idea of the time and effort a certain project will take. You’re getting repeat business. You’re even becoming the go-to person for a couple clients on their projects.
Now’s the time to transition to an hourly rate.
The benefit of going hourly is really apparent when you have ongoing relationships with your clients. Negotiating per-project fees quickly becomes a hassle, and as the projects grow in size and complexity, it’s harder to estimate their worth, anyway. Going hourly may also mean more regular paychecks instead of waiting until after a big project ends to invoice. And, perhaps most importantly, charging by the hour makes your clients respect your time. If they want to add in an extra tweak or put you on an hour-long call, they’ll have to pay for it.
Here is where that equation up top starts making sense. Now with some experience, you have a much better understanding of what expenses you’ll have on a monthly basis and how many hours you can realistically work. Factoring in health insurance, taxes, equipment, software and taxes, $40 an hour is now looking to be on the low end of the spectrum if this is going to be your sole source of income.
At this point, you no longer need to be reading this blog. You’re juggling six to 10 clients, and you’re actively turning down work. You’re living the dream! But I’ve got one last piece of advice for you.
Go back to a project fee or employ tiered package rates.
Why? Hourly is working great. However, as Lindsay Van Thoen from freelancersunion.org puts it: “You shouldn’t be penalized because your skill level enables you to provide high value quickly. The client is more likely to accept your proposal of $200 for a project (that you know will take you two hours) than they would be to accept a proposal for $100/hour. Hourly rates have a ceiling.”
It’s true. Once you’re an expert, going back to per-project contracts can maximize your income while freeing up time. It may be difficult to transition clients to this model if they’re used to your hourly rate (that’s a topic for another blog post), but it’s a good way to go for new clients at this stage in the game.
As for tiered package rates, this is a good way for you as a seasoned freelancer to work with a variety of clients with different needs and budgets and also spend more time on the aspects of your work you enjoy most. Sticking with video editing as our example, maybe $500 is your fee for an editing project, but it’s $800 if they want post-edit color correction. Being able to tier these projects is definitely a luxury of getting to this point, so take advantage of it.
This article first appeared in Forbes on August 21, 2017.
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