Freelance negotiations should focus on finding a fair agreement.
- Business owners need to set a clear budget and work scope when negotiating with freelancers.
- You should always strive to pay freelancers what they're worth.
- Paying a freelancer at or above market value can ensure a good working relationship.
- Freelancers should stand firm on their value during the negotiation process.
Small businesses don't always have the budget to bring on additional employees. In many cases, however, SMBs could use more help. This conundrum leaves small business owners looking for ways to add talent without bringing on a full-time employee. Some business turn to interns and volunteers, while others look to freelancers.
According to Upwork, nearly 57 million Americans freelanced in 2018 – up nearly 4 million from 2014. As freelancing continues to gain popularity, small businesses need to consider using freelance labor to help their businesses. Whether it's with logo design, copywriting, website design or anything else, freelancers bring a vast array of skills to the table without requiring an annual salary or company benefits. Using a freelancer can reduce your costs, while also helping the freelancer build their portfolio and make money from helping you.
If your business decides to utilize freelance help, it's important to provide fair pay rates for the freelancers without being overcharged. This requires an understanding of how to negotiate with freelancers and how to offer fair rates in the first place.
1. Set your ideal budget.
Before looking for freelancers, determine what projects you want to complete with freelance help. Upon finding your project, come up with a budget. What are you willing to pay for someone to help complete this project? By setting internal expectations prior to seeking out freelancers, you'll be better prepared to negotiate a fair rate with a freelancer.
"I usually have a set budget range in mind based on the average going rate for the type of work I'm freelancing out," said Nicole Fallon, CEO and editorial director of Lightning Media Partners. "We're still a relatively new business and definitely not in a position to pay top dollar yet, so I usually frame the discussion that way. I'll let the freelancer know upfront that we don't have a huge budget but we are growing, and if the work feels like a good mutual fit, we can discuss a raise in the future."
The process of setting a budget also means creating a job description for the freelance position. While it doesn't need to be the same type of job description you might see for a full-time employee opening, there should be a set scope of work for the freelancer. Clearly defining the scope of work makes it easier for you and a freelancer to agree on a fair price.
For a freelancer to accurately know what their time and effort on a project is worth, they need to know what their potential client wants. Don't determine what you want from a freelancer after speaking to them. Create a budget and scope of work beforehand to ensure the negotiation process goes smoothly.
2. Search for freelancers using reputable sources.
Once you're ready to seek out external help, you want to look for help from reputable freelancers. You can look at online sources or ask people in your network who might know experienced and talented freelancers.
"I have been hiring freelancers, from all over the world, for nearly 10 years," said Lior Krolewicz, founder and CEO of Yael Consulting. "The best way I found was to use a third-party website (like Upwork) so you can filter out for freelancers who have proven experience and good reviews."
In discussions with experts and through our research, we found that the following sites tend to be some of the best for hiring quality freelancers.
- LinkedIn – Asking your LinkedIn connections for freelance recommendations is one way to use this social media platform to reach freelancers. You can also try searching specific titles like "freelance graphic designer" or "freelance writer" to find freelance workers on the platform, though this can be a more difficult method than tapping into your current LinkedIn network.
- Fiverr – A popular service, Fiverr offers "gigs" starting at $5 and going up to much higher prices. It's a good spot to find freelance help for various tasks.
- Upwork – Similar to Fiverr, Upwork is a popular freelancing platform that helps connect qualified freelancers with businesses in need of their services. It's a good place for small businesses to look.
- Toptal – This company looks to connect people with the top 3% of freelancers. If you're looking for elite freelancers, as determined by Toptal, this is a good place to look. It's an especially great resource for tech help.
Perusing those four sites should yield plenty of interested, talented freelancers. If you're wary of using a freelancing site, as some businesses are, you can never go wrong with speaking to people in your network. Spending money on poor freelancers is avoidable – it just takes some effort during the phase when you're searching for freelancers.
"It's always better to find someone you know directly or through a mutual connection, so you or your contact can vouch for the quality of their work," Fallon said.
Once you find interested freelancers, you can start determining a fair rate for the project. While it isn't normally considered part of the negotiation process, finding reputable freelancers will make the negotiation process much easier.
3. Let the freelancer suggest a rate.
"I will always ask a freelancer what their current rate is before I mention our budget," Fallon said. "We never want a freelancer to feel like we are trying to lowball them, so I put the power in their hands to ask for the rate they feel is fair."
As Fallon mentions, allowing a freelancer to share their rate first starts the negotiation process off fairly. Unfortunately, some freelancers don't know their hourly rate or what they should be paid per project in relation to market standards, and the freelancer might ask for a low price. While that seems like it would be beneficial to the business, that's not always the case.
"Newer freelancers can often under-price themselves, which is bad for them and bad for us," said Penni Pickering, website design, WordPress support and SEO specialist at Kabo Creative. "A freelancer who under-prices won't stay in business for the long term. When we come across this situation, we'll often push their rate up a little, test them on a project, and if they are good, then we'll be with them for the long term and are happy to pay a little more as they gain confidence and experience."
For small businesses, it often makes sense to use the same freelancers on a regular basis. If you find a trustworthy freelancer, you may want to use them multiple times. Paying them below market value will only decrease the chances of them wanting to work for you in the future. If you offer them their market value or above, they'll feel more comfortable working on future projects for you.
Letting a freelancer suggest the pay rate is a good starting point, but you still need to know what a fair price is for both them and your business. Treating freelancers fairly is the best way to negotiate. Don't try to save a few extra dollars when it could burn a bridge with a qualified freelancer who enjoys helping your business.
"If you have a specific budget and freelancer you want to work with, share that upfront," said Andres Lares, managing partner at Shapiro Negotiations Institute. "Otherwise, don't try to save an extra 5% only to get less than 95% of the freelancer's effort."
Once a freelancer suggests a rate, be honest about your budget. Again, it's about treating the freelancer fairly. Don't go into the negotiation looking to belittle the freelancer's ability by offering them less than they're worth.
4. Be willing to pay what a freelancer is worth.
This is one of the most important aspects of negotiating with freelancers. Don't negotiate with freelancers with the only goal being to reduce the amount you have to pay them. A freelance negotiation should aim to reach a fair agreement for both sides. You'd rather pay a quality freelancer slightly higher than you'd like than use a subpar freelancer for less money.
"I always live by one mantra, and it's the same for hiring freelancers and being a freelancer: Pay the freelancer what they want," said Drew DuBoff, growth strategist and outsourcing expert. "If it's a quality freelancer, you're paying for years of experience and won't be disappointed."
Sometimes freelance negotiations don't even have to be negotiations. If a freelancer suggests a fair price within your budget, accept the offer. There's no need to haggle for a cheaper price when it may offend the freelancer or limit their motivation. Try to be an ideal client for freelancers by offering a competitive wage and treating them with respect. This will help you get the most out of the freelancer-client relationship.
Tips for freelancers
On the other side of the equation, there are a few negotiation tactics freelancers should use to ensure they get a fair rate.
One tip is to educate yourself about the market rate. Go into freelance negotiations knowing what your services deserve. If you're inexperienced, your hourly rate will probably be lower than someone with decades of experience in the industry. As you gain experience, be willing to raise your rate.
"Freelancers should always position themselves in the best possible light," said Kyle Kroeger, founder of Financial Wolves. "You should have a range of value for your scope of work. Do your research for job responsibilities and duties. For me, when I built my freelancing business, I used my base salary rate and calculated an hourly rate based on this. I had no trouble landing work, and my rate was within market standards."
Knowing your worth is critical. By being aware of what other freelancers are making for similar services, you can ensure you're earning a competitive rate.
"Talk to other freelancers and find out what they charge," said Fallon. "Consider your experience in the field and set your rate accordingly. Stand firm on your price, and don't let a client bully or guilt you into a lower rate than you're comfortable with. You can negotiate the work scope if a client is locked into a budget, but don't offer to do the same amount of work for less money."
The bottom line
Whether you're a business owner or freelancer, if you enter a freelance negotiation with the goal of agreeing to a price that's fair for both sides, things should go smoothly. It's when businesses and freelancers try to shortchange the other side that negotiations can get rocky.
"Negotiating is not an opportunity to get a bargain-basement deal, but rather it's for you and the candidate you're considering to come to a mutual agreement based on the value of the project and the freelancer's skills," said Leala Dueno, SMB inbound sales team lead at Toptal.
As a business, you need to set a clear work scope and be clear about your budget during the negotiation process. As a freelancer, you need to know the value of your services going into the discussion, and you should stand firm on your value. If both sides are fair, it's likely you will come to an agreement or decision quickly.