How much you should charge for your freelance bookkeeping services is always a hot question. But I had a question come in from one of the members of TFB Premium that shows how important it is to have the right mindset first, whether you decide to charge by the hour or package your services using a flat rate method.
“I want to respond to some ads in the local paper looking for bookkeepers, I want to respond as a freelance bookkeeper not an employee. What is your suggestion on the best way to do that?”
Here’s my response to this question:
While this could be a way to get new clients, you need to be VERY clear on what you want and the type of clients you will accept (and at what rate).
The downside to approaching potential clients this way is that they have already decided that they want to hire an employee. That means someone on-site that they control and that they decide when they will work and how much they’ll pay the bookkeeper.
If you’ve hired employees yourself, you know that hiring is very expensive and time consuming (and employees aren’t easy to let go either). There’s a commitment on the potential client’s part when they come to that hiring decision.
As a freelancer, you are a fellow business owner. You provide leadership as a professional and get paid at a professional level, not at the rate an employee gets paid. The potential client is thinking about employee hourly rates, not professional freelancer rates. So they may have some sticker shock when you mention your rates, and you run the risk of accepting a rate that they dictate that will be too low for running your business.
When approaching this type of potential client, you do not want to have the mindset of filling the role of the employee position. Instead, you want to be offering them an alternative solution to their need and focus on all the benefits to them (such as no payroll costs, don’t need to provide office space / equipment, no management or training required by them). They will (and should) pay a higher rate, but will get a far superior result over hiring an employee that will save them time and long-term costs.
So it comes down to your own mindset and confidence. You need to be rock-solid clear on…
- Who your Ideal Clients are and whether this business owner fits that profile
- What your rates are for the services they need
- How you plan to fulfill those needs (working on-site is not recommended)
I recommend that if you cannot find a win-win working arrangement with these types of potential clients, that you walk away. DO NOT accommodate anything they want just because you need new clients. In the long run it will not turn out well for either of you.
Many freelancers starting out are tempted to go this route. It can turn out well, but most often it does not because the freelance bookkeeper is not focusing on what is most important in her business. But if you know what you are looking for in a client and are clear on your rates, the potential is there to snag a few new clients that you’ll have for years to come.
Of course, this begs the question, if you haven’t figured it out yet…
How Much Should You Charge Compared to an Employee
Often new freelance bookkeepers reason that they can charge the going rate for a bookkeeping employee and do quite well. This is faulty thinking!
What they don’t realize is working for yourself is much more expensive than working as an employee. When you work for yourself you need to cover your own employment and business expenses, such as…
- Taxes an employer usually pays (the other half of FICA / medicare)
- Business taxes and license(s)
- 100% of your health insurance
- All your own equipment, software and Internet services
- Time spent on administrative non-billable tasks
- Billable time lost to vacations, holidays, sick time, etc.
In short, your fees should be based on a rate that is at least twice as much as a bookkeeping employee’s salary, so that you can cover all the additional costs, with enough left over to pay yourself.
If potential clients expect to pay less than that, they have disqualified themselves as viable clients because they don’t recognize the value of your professional level services. Quality clients realize that skilled professionals deserve to be paid more than the hourly rate they might expect to pay an employee.
One way to get out of the employee mindset AND not have to argue over hourly rates with potential clients is to use a flat rate fee structure. If that’s what you’d like to do with your business, then you may want to join us in TFB Premium this month, since since you’ll learn…How to Create Proposals & Package Your Services
So, have you found answering want ads to be an effective way to get new clients at a profitable fee level?