7 Tactics for Pricing Services in the Gig Economy

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7 Tactics for Pricing Services in the Gig Economy

By Martin Zwilling | Inc Magazine | May 22, 2024

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The gig economy is a key driver to the current boom in new businesses — every professional and consultant is becoming increasingly a solo business. The good news is that each of us now has more control over what we do, when we do it, and how we do it. The bad news is we have to think like a business, with all the implications of branding, finding customers, and competitors.

If you are thinking of joining the rush in this direction, a book ‘Thriving in the Gig Economy’, by Marion McGovern offers you some practical insights for success. She speaks from years of experience mentoring and facilitating independent contractors and helping large companies, since well before the term gig economy was even coined.  Some of the guidelines offered by this book and augmented by the author are:

1. Use project pricing rather than hourly rates. Charging by the hour makes sense only for commodity work. For more complex or creative projects, where the required hours to complete the work are less predictable, your experience, work ethic, and productivity are competitive advantages. Use them to increase your return, and drive repeat business.
2. Quantify value to the client as price boundaries. An old rule of thumb called the 1 percent rule dictates that 1 percent of your annual income should be your target daily fee. Like product companies, your pitch should quantify value to clients, rather than your costs.
3. Your intellectual capital has value — factor it. If a gig will build your intellectual capital by broadening your skill base, or connections to future business, you should be willing to do it for less than you might otherwise. Conversely, if a client needs your unique knowledge and contacts, you should charge a higher price. Know your competitive value.
4. Assess your fixed and variable costs per gig. Many solo entrepreneurs who work primarily from home, underestimate their true costs, since they never had to worry about them as employees. These include office space and supplies, travel, training, bookkeeping, advertising, and other such items. Simple rates-per-hour are very misleading.
5. Factor in project risk before setting a price. The riskier a project is–whether in terms of scope, aggressive goals, or too many unknowns–the more it should pay. The number of competitors that are willing and able to tackle risky gigs is small. The message here is to evaluate and negotiate each gig independently, rather than advertise a fixed low price.
6. Anchor clients always deserve special treatment. An anchor client is one that pays your rent, so to speak, by giving you recurring business, and providing a stable level of income. Some solo businesses don’t hesitate to increase fees each year to match new clients, but that can be a mistake. Having a predictable base income is a wonderful thing.
7. Government contracting is not for the faint of heart. Many require special licensing, insurance coverage, or security clearances. For those, you should consider partnering with someone who has already satisfied the requirements.

2 key takeaways from the article

1. The gig economy is a key driver to the current boom in new businesses — every professional and consultant is becoming increasingly a solo business. Good news: each of us now has more control over what we do, when we do it, and how we do it. Bad news: we have to think like a business, with all the implications of branding, finding customers, and competitors.
2. If you are thinking of joining the rush in this direction, a book ‘Thriving in the Gig Economy’, by Marion McGovern offers you some practical insights, further augmented by the author for success.  Some of these are:  use project pricing rather than hourly rates, 1 percent of your annual income should be your target daily fee, your intellectual capital has value — factor it, assess your fixed and variable costs per gig, factor in project risk before setting a price, anchor clients always deserve special treatment, and government contracting is not for the faint of heart.

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Topics:  Freelancing, Entrepreneurship, Pricing, Marketing, Ethics, Competitiveness, Skills