{"course":{"slug":"ai-careers","title":"Working in AI","url":"https://addaly.com/learn/ai-careers","level":"beginner","track":"work"},"lesson":{"slug":"setting-a-rate","title":"Pricing the work, and raising the price","url":"https://addaly.com/learn/ai-careers/setting-a-rate","position":70,"of":85,"minutes":9,"answer":"Set a floor from your own cost arithmetic, price fixed work with 20% to 50% contingency behind a paid discovery phase, and raise the rate on new enquiries rather than waiting for permission.","keyIdea":"Set a floor from your own cost arithmetic, price fixed work with 20% to 50% contingency behind a paid discovery phase, and raise the rate on new enquiries rather than waiting for permission."},"body":{"format":"markdown","text":"## Four ways to charge, and what each one does to you\n\n**Hourly.** Simple and universally understood. Two problems: you are penalised for being fast, so the better you get the less you earn per job, and the client watches the clock, which turns every conversation into a cost. Fine for open-ended or exploratory work.\n\n**Day rate.** The same, in units nobody argues about. Better for contract-style engagements where you are effectively on the team for a period. Most contract markets run on day rates.\n\n**Fixed price per project.** You quote a number for a defined outcome. You keep the gains when you are efficient, and you absorb the loss when your estimate was wrong, which it will be, early. Requires a real scope, which the next lesson covers.\n\n**Retainer.** A fixed monthly amount for an agreed scope or a block of availability. The best of the four for cash flow and the hardest to sell first.\n\nMost sustainable freelance businesses end up mixing fixed-price projects with one or two retainers, and use hourly only for work that cannot be specified.\n\n## Setting the first number\n\nTwo directions, and you need both.\n\n**Bottom-up**, from the previous lesson: target revenue divided by realistic billable hours. This is your **floor**. Quoting below it is subsidising the client from your savings.\n\n**Top-down**, from the market. Free sources: published rates on freelancing platforms for your skill and region; contract rates on job boards; asking two or three people who do what you do; and agency rates, which are typically 1.5 to 2 times what they pay the subcontractor, so an agency charging ₹4,000 an hour is paying somewhere near ₹2,000.\n\nIf your floor is above the market, the problem is not the price: it is either the market you are selling into or the value you are offering, and the geography section below is usually the answer.\n\n## Fixed price without losing money\n\nThree rules.\n\n**Add contingency honestly.** For work you have done before, 20%. For work with an unfamiliar system or an unfamiliar client, 30% to 50%. This is not padding; estimation error in software and data work is consistently in one direction and every experienced person prices for it.\n\n**Sell a paid discovery first.** For anything substantial, phase one is a short paid piece (two to five days) producing a written assessment and a fixed quote for phase two. It protects you from quoting blind, it is useful to the client even if they stop there, and it converts at a high rate because they have already paid you once.\n\n**Never quote in the meeting.** \"I will send you a number tomorrow\" costs nothing and has saved more freelancers than any other sentence in this module.\n\n## Value-based pricing\n\nThe idea: charge a share of the value created, not the hours spent. If your reporting work saves a client twenty hours a week of manual reconciliation, that is roughly ₹10,00,000 a year, and charging ₹2,00,000 for it is defensible whether it took you four days or fourteen.\n\nWhere it works: when the client can quantify their own gain, when you have evidence from prior clients, and when you are talking to somebody who owns the budget and the outcome.\n\nWhere it does not: most first engagements, most small clients, and anywhere the buyer is a manager comparing you against a day rate they can benchmark. It is oversold by people who sell courses about pricing. Treat it as a technique available in a minority of engagements, not as the goal.\n\n## Geography is the largest lever\n\nThe same work, delivered by the same person, is priced against the client's market. A data pipeline built for a company in Berlin or Boston is worth several times what it is worth to a company in a low-cost market, for identical work.\n\nThis is the single biggest determinant of freelance income for somebody in India, Nigeria, the Philippines or Brazil, and it is worth being clear that it comes with costs: harder sales, longer trust-building, time-zone overlap, slower payment and currency risk. A sensible progression is local clients first to build proof, then regional, then international once you have references somebody abroad will believe.\n\n## Raising your rate\n\nNobody will do it for you. Two mechanics that work:\n\n- **Raise on new clients first.** Quote the new number to the next enquiry. If they accept without pausing, you were too cheap. If three in a row accept instantly, raise again.\n- **Give existing clients notice.** \"From April my rate for new work will be X.\" Ten to twenty per cent a year is unremarkable. Some clients leave; in practice fewer than people fear, and the ones who leave over 15% were the difficult ones.\n\n## The discount that is never worth it\n\nWorking cheaply or free for \"exposure\", \"a case study\", or \"lots of work coming later\". The future work rarely arrives, and if it does it arrives at the price you set. A discount you must give (for a charity, for a first reference) should be shown on the invoice at full price with the discount stated as a line, so the anchor stays where you put it."},"check":{"question":"A freelancer is asked to quote a fixed price for integrating a client's undocumented legacy system, which they have never seen. What is the best response?","options":[{"text":"Quote a fixed price with a 50% contingency, since the uncertainty is priced in.","correct":false,"tempting":"Prices for uncertainty without reducing it, so the number is either uncompetitively high or still wrong in the same direction."},{"text":"Quote hourly instead, so the risk sits entirely with the client.","correct":false,"tempting":"Transfers the risk but usually loses the work, because a client asking for a fixed price is asking for a bounded cost."},{"text":"Propose a short paid discovery (a few days producing a written assessment and a fixed quote for the build) so the fixed price is set after the system has been seen.","correct":true},{"text":"Quote low to win the work, then raise a change request once the true complexity emerges.","correct":false,"tempting":"Wins the engagement by making a claim the freelancer knows to be unreliable, which destroys the relationship exactly when the difficult conversation arrives."}]},"prev":{"slug":"freelance-economics","title":"Utilisation, and why a rate is not a salary divided by hours","url":"https://addaly.com/learn/ai-careers/freelance-economics"},"next":{"slug":"where-clients-come-from","title":"A pipeline, after the first three clients","url":"https://addaly.com/learn/ai-careers/where-clients-come-from"},"authorship":"Founder and series editor: Dr Mustafa Mun. Written by AI models to a written standard. Exam keys checked blind by a second model: 3,665 of 3,666 agreed. Academic review invited.","review":{"status":"Draft, open for academic review"},"cite":"Addaly (2026) 'Pricing the work, and raising the price', in Working in AI. Edited by M. Mun. Addaly. Available at: https://addaly.com/learn/ai-careers/setting-a-rate (Accessed: 13 October 2026).","licence":{"name":"CC BY-NC-SA 4.0","url":"https://creativecommons.org/licenses/by-nc-sa/4.0/"},"reader":{"schema":1,"title":"Pricing the work, and raising the price","courseTitle":"Working in AI","module":{"index":8,"slug":"working-for-yourself","title":"Freelancing and contracting, as a business"},"answer":null,"keyIdea":"Set a floor from your own cost arithmetic, price fixed work with 20% to 50% contingency behind a paid discovery phase, and raise the rate on new enquiries rather than waiting for permission.","hero":{"kind":"plate","image":null,"alt":null,"caption":null},"blocks":[{"t":"h2","id":"four-ways-to-charge-and-what-each-one-does-to-you","runs":[{"text":"Four ways to charge, and what each one does to you"}]},{"t":"p","runs":[{"text":"Hourly.","b":true},{"text":" Simple and universally understood. Two problems: you are penalised for being fast, so the better you get the less you earn per job, and the client watches the clock, which turns every conversation into a cost. Fine for open-ended or exploratory work."}]},{"t":"p","runs":[{"text":"Day rate.","b":true},{"text":" The same, in units nobody argues about. Better for contract-style engagements where you are effectively on the team for a period. Most contract markets run on day rates."}]},{"t":"p","runs":[{"text":"Fixed price per project.","b":true},{"text":" You quote a number for a defined outcome. You keep the gains when you are efficient, and you absorb the loss when your estimate was wrong, which it will be, early. Requires a real scope, which the next lesson covers."}]},{"t":"p","runs":[{"text":"Retainer.","b":true},{"text":" A fixed monthly amount for an agreed scope or a block of availability. The best of the four for cash flow and the hardest to sell first."}]},{"t":"p","runs":[{"text":"Most sustainable freelance businesses end up mixing fixed-price projects with one or two retainers, and use hourly only for work that cannot be specified."}]},{"t":"h2","id":"setting-the-first-number","runs":[{"text":"Setting the first number"}]},{"t":"p","runs":[{"text":"Two directions, and you need both."}]},{"t":"p","runs":[{"text":"Bottom-up","b":true},{"text":", from the previous lesson: target revenue divided by realistic billable hours. This is your "},{"text":"floor","b":true},{"text":". Quoting below it is subsidising the client from your savings."}]},{"t":"p","runs":[{"text":"Top-down","b":true},{"text":", from the market. Free sources: published rates on freelancing platforms for your skill and region; contract rates on job boards; asking two or three people who do what you do; and agency rates, which are typically 1.5 to 2 times what they pay the subcontractor, so an agency charging ₹4,000 an hour is paying somewhere near ₹2,000."}]},{"t":"p","runs":[{"text":"If your floor is above the market, the problem is not the price: it is either the market you are selling into or the value you are offering, and the geography section below is usually the answer."}]},{"t":"h2","id":"fixed-price-without-losing-money","runs":[{"text":"Fixed price without losing money"}]},{"t":"p","runs":[{"text":"Three rules."}]},{"t":"p","runs":[{"text":"Add contingency honestly.","b":true},{"text":" For work you have done before, 20%. For work with an unfamiliar system or an unfamiliar client, 30% to 50%. This is not padding; estimation error in software and data work is consistently in one direction and every experienced person prices for it."}]},{"t":"p","runs":[{"text":"Sell a paid discovery first.","b":true},{"text":" For anything substantial, phase one is a short paid piece (two to five days) producing a written assessment and a fixed quote for phase two. It protects you from quoting blind, it is useful to the client even if they stop there, and it converts at a high rate because they have already paid you once."}]},{"t":"p","runs":[{"text":"Never quote in the meeting.","b":true},{"text":" “I will send you a number tomorrow” costs nothing and has saved more freelancers than any other sentence in this module."}]},{"t":"h2","id":"value-based-pricing","runs":[{"text":"Value-based pricing"}]},{"t":"p","runs":[{"text":"The idea: charge a share of the value created, not the hours spent. 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