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A freelancer wonders what to do after his best client's best friend refuses to pay his invoice; Bryce offers advice for charging clients. 

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Freelance FAQ: How should I charge my client?

The basic answer is, “if you want to earn X this year, you need to be making Y for every hour you work.”

• My rule of thumb: Take what you want to earn in a year and drop the zeroes. If you want to earn $45,000 this year, you need to be earning, at least, $45 for every hour you spend on your business.
• The logic behind this rule of thumb: There are about 2,000 billable hours in a year (40 hours a week x 50 weeks in a year – we’re losing two weeks for holidays). You cut those billable hours in half, because at least 25% of your time will go into business upkeep, and the other 25% will go into taxes, insurance, and retirement (which adds up to 50% of your time – half). Thus, take what you want to earn in a year (e.g. $60,000) and divide it by the 1000 billable hours (e.g. $60/hour). Remember, these are ballpark estimates, not fine-tuned figures.

Besides hourly, there are numerous ways to charge a client:

• Daily
• • Can begin charging for value (not time) and you get to focus on one thing at a time
  • You can’t be flexible with your day; this billing rate doesn’t work with every situation
• Weekly
• • More flexibility to charge for value and not time; it is very results orientated.
  • Weekly rates are more applicable to consultants and results-based work; the time investment for some weeks can wildly exceed a typical 40-hour workweek
• Monthly
• • A monthly rate offers regular income that bolsters a long-term relationship with clients
  • It’s similar to being a full-time employee, with the pros and cons associated with that. Typically, you’ll have to charge more than a full-timer would and it can be difficult to communicate to a client why that is.
• Per deliverable
• • This style of billing is directly tied to a product or result; your rate and time commitment are completely irrelevant.
  • Scope changes and negotiation are commonplace
• Per project
• • Your billing purely by value; there’s less need for oversight and micromanagement regarding your day-to-day activities
  • However, there’s an immense amount of planning involved; if you miss something, you eat the cost.

You should know your hourly rate even if you do not intend to charge by the hour. Your hourly rate informs all other forms of billing, typically as a bare minimum you need to be making.

Experience will teach you how you like to work, and how you like to work will influence the ideal way for you to bill your clients. Despite weekly billing having a higher potential income attached to it, monthly billing works better for my clients and me.

Feedback from the Inferno: My best client's best friend stiffed me – now what?

(This segment originally premiered over at The Freelancers Union.)

My biggest client referred his best friend to me. That friend stiffed me on my invoice. What can I do without ruining the 15+ year relationship I have with my client?

In a nutshell, my best and biggest client referred me to his close friend for some IT work. It came as an emergency. I did my best, and I got my client’s friend up and running again.

Over two visits, the friend accumulated $1600 worth of time within a few days. Both of his checks bounced. His business went bankrupt, and he claimed creditors to be relieved from, but I wasn’t one of them. I got his word he would pay me and that he appreciated the work I did for him.

Time went by. Nothing happened. I asked my client about his situation and from what I saw, my client was also one of the people his friend borrowed from. I’m unsure if he was someone he was relieved from.
When I asked my client if I should pursue it, he said I should drop it that I would probably never get the money back.

That $1600 isn’t chump change. With the economy like it is, I could sure use it. I don’t want to alienate my client, but it burns my ass that his friend got off, especially since he’s rich and lives in an exclusive neighborhood, nice cars, has another business which is flourishing, etc.

Additional context: the freelancer who wrote in has been in IT since 1994, and he started his business in 2004. There are no contracts involved in most of his work, as most of his clients have long and personal relationships with him – often spanning over a decade.

– A freelancer with a burnt butt

Honestly, it seems like you've already reached the conclusion on this: it's frustrating, but that money is likely gone. A lot of time has passed, and there was no contract in place. It's certainly possible there's a route you can take to regain that lost $1,600, but I don't see a way that's worth that amount of money – almost all of them will cost you in much more damaging ways.

I respect the crap out of the style of work you offer – close relationships, time-honed offerings, constant support – but it's a style where a contract-free experience should only be offered to proven and qualified clients. As you stated (this was in a separate email), it's the newer clients that take advantage of your stalwart offering.

I'd suggest taking a look at how you qualify these new clients and if there's a way to offer an expedited contract or down payment.

Here's how I deal with this: I have a simply-worded and short contract template that I use for clients I'm unsure about. I fill in the blanks with the client, and that ensures we're both on the same page regarding it (e.g. what results do they expect? what services do they need? who's my main contact? who's in charge of payment?).

My first meeting or two with the client is spent gaining an understanding of their issue, offering my solution, and engaging them for the work. My third meeting is a 5-45-minute engagement where we fill in those contract blanks and ensure we understand each other. I'm protected, my client is protected, and we’re both clear what I'll be doing with them. Plus, that contract-creating experience is my built-in client-qualification system.

I also suggest you check out the Freelance Isn’t Free act. I think you’ll be interested in supporting it.

Otherwise, I wish you the best with your future clients. I know a principled business (with such a remarkable pedigree) will do just fine in the long run, so my final piece of advice is this: don't sweat the crappy experiences. They seem to be few and far in-between.

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