What do you do if you're unsure how to set your freelance rates as an IT consultant?

Researching market rates is crucial, but it's equally important to effectively communicate the value we bring to clients. Our focus on delivering top-notch services in AI/ML, Web/Mobile Apps, and more ensures clients see the value in what we offer. Skillset, technology stack, and time to delivery also influence cost. Short-term and complex assignments may cost more, on the contrary, the client's buying power may also impact the pricing model, sometimes we offer massive discounts to startups and small-scale companies. Regular rate adjustments reflect our growth and the continuous commitment to delivering successful services.

When we make an assessment of added value we have to do it in terms of IMPACT on customer outcomes. That is, understanding the customer's needs and identifying how we can help to meet them. This will not only help us to understand the value we provide but also to maximise it, as it can help us to focus our services in a differential way.

Consider three factors: your value (experience, skills, certifications), market rates (research competitors), and your desired income (target salary, desired work hours). Once you understand these, you can set a competitive yet profitable rate that reflects your expertise.

If unsure how to set freelance rates as an IT consultant, start by researching industry standards and competitor rates. Consider factors like your level of expertise, the complexity of the project, and the client's budget. Calculate your expenses and desired income to determine a competitive yet profitable rate. Offer tiered pricing options or packages to accommodate different client needs and budgets. Periodically review and adjust your rates based on market trends, experience, and value provided to clients.

We must have a competitive rate, for this, it may be interesting to analyse the market, or deal with a trusted customer, who can give us a clue. A negotiation process is always the best benchmarking; it will always be the best reference.

You should not be tempted to make a reckless discount. Reducing the costs incurred will increase the risk of the service. You may incur penalties for non-compliance with any of the elements of the contract. As a sourcing consultant I can often see that customers are increasingly sceptical of great bargains.

Discuss pricing models with clients upfront. Some may prefer the predictability of an hourly rate, while others might value the certainty of a project-based fee. In my experience, smaller projects might be better suited for hourly rates, while larger projects could benefit from a project-based fee.

In recent years we have seen that customers are moving away from the idea of a fixed price or time & material contract to a value-added model. A value-based model must be accompanied by a pricing model associated with that value. In other words, a partnership or alliance model.