Image courtesy of Tim Collins on Flickr. I always work toward an annual financial goal (the income I want to earn x 1.4 to cover the cost of paying my own benefits -- health and disability insurance, a retirement plan, vacation days, etc.). This yields an average hourly rate that I increase or decrease, depending upon the type of client and the nature of the work. When I am asked to quote a price, I use this average as my starting point. Then, I follow these steps to help me develop a fair price, become clear about the financial value of my work and prepare me for any conversations I may need to have with my client about my work's worth.
1) I build my price structure by listing all of the steps I'll need to engage in to complete the process. I then identify the amount of time it will take to complete each step; for example, conduct background research on the Internet (2 hours), identify the best subject experts and how to contact them (1 hour), reach out to subject experts (30 minutes), interview experts (6 experts x 45 minutes) or whatever. When I've identified all of the steps and the amount of time it will take to complete them, I multiply this total by a fair hourly rate.
2) I determine the fair hourly rate by looking at the pricing guidelines in Writer's Market. (I don't know if the online version offers pricing information; the reference book does.) I usually build these up to a project rate.
3) I ask friends who have done similar work what they charged and why. I also talk to friends who hire people into the role for which I'm being considered and ask what they typically pay and why. The "why" is critical; it helps me understands the rationale behind the pricing and why I may want to increase or decrease my price.
4) I compare these three prices and select one (I often create an average) based on the nature of the work -- on the higher end for corporate clients, on the lower end for nonprofits. If you consistently underestimate the amount of time it takes you to do your work, you might want to increase this number by that percentage -- say, 25 percent.
5) I make adjustments for whatever may be happening in the market; for example, if times are hard or my work is more in demand. One cautionary note: In my experience writers tend to devalue their work. Yes, more people are writing than ever, and you may want to make trade-offs so that you can break in. But I'd be far less likely to do this if I am a subject expert and that expertise is needed for the work. Instead, I'd prepare myself to educate my client on the value that expertise lends to the project.
6) I may search Salary.com or other Internet databases containing salary information. I will divide the salary corresponding to the type of work I'm doing by 49 weeks -- I'm assuming 3 weeks of vacation -- and compare the weekly salary to what I intend to charge and adjust accordingly.
7) I quote my price. Because I've thoughtfully prepared myself, I feel confident about my proposal, able to have an intelligent conversation with my clients about my price structure, and I know if and by how much I'm willing to negotiate.
Building your price quote takes more time than making a wild guess. But it is fair to both you and the client, simple to explain and will help you obtain what you're really worth.
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