How to Ensure You Earn Enough When Outsourcing as a Freelancer
When your business grows, you might find yourself too busy to manage all the work that comes your way. This is a common problem faced by freelancers and small business owners, and it’s one that’s usually encountered after a few years of running your own business. You’ve built your client base to such an extent that you can no longer do all the work requested yourself.
There are various ways of dealing with this problem, which I cover in this blog post containing 3 approaches to a consistently heavy workload. One of these approaches involves increasing your capacity by outsourcing paid work to other freelancers and trusted colleagues.
However, it’s important to ensure that going down this route doesn’t have a negative impact on your business. Outsourcing work to other freelancers is only worthwhile if you can earn enough by doing so.
Since outsourcing work often involves a delicate balance, I’ve created a 3-step strategy to help you put together a quote for a client when you want to outsource work to fulfil their project. In this blog post, I’ve also included an additional consideration on outsourcing work as a freelancer. Not only does subcontracting need to be financially viable for your business, it also needs to be the right thing for you.
How to price your services when outsourcing as a freelancer - A 3-step strategy
1) Know what you need to charge for your part of the project
Before you can properly think about pricing for subcontracting, you need to have a good understanding of what you need to charge for any work you do.
Your rates should be calculated in such a way that they account for your business expenses, personal outgoings, tax payments, retirement savings, and anything else you need or want to have money for. Any project you complete should be earning you enough to contribute to all these things.
How much you need to be making and setting aside for your financial requirements will be unique to you and your individual circumstances. I help freelancers calculate these figures and work out their rates through Charge with Confidence. We’re not talking about plucking a figure out of the air or charging what others charge. Instead, we’re talking about calculating your prices methodically so that you’re able to earn what you need to cover your financial requirements in the time you have available for paid client work.
You can find out why charging the same as someone else is a bad idea in this blog post. Your rates need to align with your circumstances and nobody else’s. When you’re calculating them, you want to identify the minimum you need to earn per hour of paid client work to make your business financially viable and ensure you’re earning a decent living.
Once you know this figure, you can understand the minimum you need to be charging for your contribution to any project you’re outsourcing.
You can’t afford to subcontract work at cost. If you do this, you’re going to be losing out financially. This is because you need to consider the time you’re spending on project management and quality control.
Between emails, price negotiations, questions for clarification, deliverables, and invoicing, managing any project, no matter how small, can be extremely time-consuming. This is why many freelancers and small business owners have a minimum project fee. When putting together a quote, you need to be taking into account the number of hours that are going to be necessary to manage the project.
And when you’re outsourcing, you also need to consider the time you’ll end up spending reviewing any work the subcontractor sends you before sharing it with the client.
2) Ask the subcontractor how much they would charge for the project
Once you’ve calculated how many hours you’re likely to spend on the project and how much you need to be charging to cover those hours, you can think about the subcontractor's fee.
I’m a firm believer that the service provider sets the price, so ask your subcontractor what they would charge for the work you'll be assigning them.
Unless you’ve already agreed a set rate with another freelancer, never guess or assume that you’ll be able to get the job done for a certain price. There may be something you’ve missed, or your colleague may have put their rates up recently to reflect their own circumstances.
Always check your subcontractor’s fee with them before you send a quote to your client.
3) Add your prices together, and then add a bit more!
When you know the subcontractor's price and have calculated your own financial needs, add those numbers together. That's the minimum amount you can afford to quote to the client.
Personally, I’d recommend adding a bit extra on top to leave room for negotiation. This way, if the client does come back to you asking to spend less, you’ll be able to consider different options that will still make the project worth your while. And if they simply accept your quote, that means more money for you!
In any case, always remember that if you're not earning enough on top of the subcontractor's fee to make the project financially worthwhile, you can't afford to outsource it.
An additional consideration on outsourcing as a freelancer
One thing I would say about outsourcing work is to make sure it’s a good fit for you. Often freelancers and small business owners see subcontracting as the next logical step, and they’re told that it’s the only way to grow their business. This simply isn’t true. There are other ways you can grow your business, e.g. by raising your prices, streamlining your client base, or adapting your service offering.
I’ve worked with many mentees who have told me that outsourcing work isn’t a good fit for them. When you subcontract work, there’s only so much you can control. While you may trust your subcontractor, you can’t guarantee the quality of the work they’ll send you or that they’ll meet the deadline you’ve given them. For many freelancers and small business owners, this lack of control can be incredibly stressful and anxiety-inducing.
I’d therefore suggest asking yourself whether outsourcing is the right next step for you rather than going down that route simply because it’s the ‘done thing’. What works for one small business owner won’t necessarily work for another, and it’s important to be mindful of that.
Whatever you decide to do with your own small business, the main thing is to ensure that it’s financially viable and able to support you in the long term. You need to know how much to charge so you’re covering your financial requirements and earning a decent living in the time you have available for paid client work.
If you’d like some help to calculate your unique rates and make sure they’re taking into account your business expenses, personal outgoings, tax payments, and retirement savings, I can support you through my Charge with Confidence programme. Click on the button below to find out more!
Hi, I’m Susie
I mentor freelancers on pricing and business finances so you can earn a decent living doing what you love.
I’m a translator, editor, chocoholic, crochet addict, animal lover, and budding gardener (get it?) who loves empowering others to achieve their goals.
