No matter how many times you do it, defining your worth in monetary terms is daunting, and being able to strike a balance between a fair rate for both you and your client organisation can be difficult. So how do you set a rate that is both competitive and reflective of what you have to offer?
For those working as project contractors, also known as independent professionals or IPros, self-evaluation can be incredibly difficult. While IPros may be experts at assessing the success of projects or employees, the perfectionist latent in many high achievers means they are often their toughest critic when looking inward and judging their own value.
People choose to engage as IPros for a multitude of reasons. Variety of work, flexible hours and a sense of freedom are all consistently cited as pull factors to the contracting lifestyle, but for an overwhelming majority, the perceived ability to earn more is one of the biggest drawcards. Attractive earning potential is something many aspire to, but the responsibility of setting a rate can incite more fear than fantasy. So how can you overcome the apprehension and determine a competitive rate that is relative to your value?
Know the value of the role
The first place to start when setting your rate is to look at the average market offering for similar positions. There are a variety of sites that disclose general market rates, with MyCareer offering up-to-date figures on average yearly salaries based on industry, occupation, and location.
Hays offers a similar service, with a snapshot of more than 1,000 salaries across Australia and New Zealand, and PeopleBank provide industry specific guides for both permanent and contractor rates. While these are generic figures that may not translate to the unique skills that you have to offer, they can be a good ball-park to start from. Consider what you’ve charged for similar projects in the past, but be sure to take into consideration the additional value that makes you unique.
Define your value
Though it’s important to understand what the market is willing to pay for your services, this is not the only benchmark for determining your rate. Your real dollar worth should be determined by highlighting your value, rather than drawing comparisons with competing candidates.
If you are having difficulty defining the value you provide, asking current and past clients what you do well, and could do better, can be a great way to ascertain your skills and find areas in which you could improve. You may even uncover value you don’t even realise you are providing.
How to package your rate
When deciding upon a rate, it’s important to consider more than just the time, effort and value you provide clients. You are your business, and your rate needs to cover more than just your living expenses. Managing a business of one brings with it a host of considerations unique to the engagement. Insurance, WorkCover, business expenses, home office or technology needs, are all costs you may have to bear, and therefore incorporate into your rate.
If you are concerned about the more statutory and administrative side of working as an IPro, it may be worth considering using a contractor management organisation (CMO). A good CMO brings a depth of industry knowledge and expertise in areas such as legal, industrial relations, workplace health and safety, insurance and taxation, and will simplify the entire process for you.
Don’t compromise your standards
While it’s a competitive market out there, it’s important to not undermine your own worth or compromise your value with unreasonably low rates. If your rate is reasonable and reflects the value you provide to clients, you will invariably attract those who are willing to pay for value.
In many cases, a low rate carries with it a perception that the quality of service is inferior. Therefore coming in with a low rate may actually work to your detriment. If a client isn’t willing to adequately remunerate you for a quality offering, they may not be a client worth taking on. The prospect of work may be tempting, but consider the opportunity cost if you pursue a role that is not within your remuneration and lifestyle goals.
At the end of the day, it’s important to be fair to your client. Your reputation is one of your most valued assets and you never know where your next referral or recommendation will come from. If you and a client can’t come to an agreement on a fair and reasonable rate, politely decline and move on.
The benefits of a fair pricing strategy
Determining a rate that is reflective of what you have to offer provides supplementary benefits that go beyond financial reward. If you are being properly rewarded for your work, it’s probable that you’ll be more motivated to go above and beyond to meet the needs of your client.
If a client organisation is willing to pay for quality, they are likely to have a clearer idea of exactly what they want and understand the time effort that will go into producing the desired outcomes. Finally, they will appreciate the work you put in to producing a quality end result, and may even end up passing your name onto other clients who have a similar appreciation for quality.
While not an exact science, setting your rate is an important decision that must take into consideration the role, requirements and the value you add while always maintaining your competitive edge. Ensuring that you’re open to negotiation and have done your research will boost your chances of bolstering your earning potential.