4 Ways to Set Your Rates As a Solopreneur Do what works best for your business type, and the rest will fall into place.

The following excerpt is from Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers, out September 22 via Entrepreneur Press. Pre-order now from Amazon | Barnes & Noble | Bookshop | IndieBound.

To maximize your earning potential, you need to know how to set the best rates for the type of work you do. There are a variety of ways to set rates, depending on how you prefer to work, your clients' expectations and the products or services you sell. Here are five of the most common ways you can charge fees.

Charge Retainer Fees

Working on retainer means that you charge clients a monthly minimum, no matter how much work you do. However, for certain types of work, setting a monthly minimum number of hours or projects makes sense. Working on retainer ensures that you have enough revenue coming in every month to keep your business afloat.

The pros of charging retainer fees are:

• You do ongoing work for your client and build a close relationship to help them achieve success.
• You invoice clients regularly (usually monthly) without having to keep detailed records of your time.
• You receive recurring payments, almost like a salary, which gives you more predictable revenue.
• You can scale your business by hiring contractors or employees to manage multiple clients.
• You create stability for your business without needing to upsell current clients or continually search for new ones.

The cons of charging retainer fees are:

• You may be asked to do additional work that's not in your agreement if you haven't set clear expectations or an additional hourly fee.
• Your total hours worked may fluctuate significantly from month to month, which may make it difficult to schedule time-sensitive work for other clients or leave you feeling suddenly overworked or underworked.
• Your clients may request to renegotiate your fee when they do their annual budget.
• Your income, while steady, may be lower than with other billing options.

Related: 6 Ways to Turbocharge Your Solopreneur Productivity

Charge Hourly Fees

Charging by the hour is common for many high-paid professionals, such as accountants and attorneys. They keep detailed records of their work and provide clients with an itemized bill, sometimes broken down to 15-minute increments. If hourly invoicing is common in your industry, it may be the best option. But it comes with an inherent problem: If you're efficient, you limit your profitability. The better you are at your work, the less you get paid—unless your rates are sufficiently high. And tracking every minute of your workday can be a hassle. To make sure every project is profitable, consider charging a minimum per assignment.

The pros of charging hourly fees are:

• You have a straightforward way to charge clients that may fit with your desired lifestyle.
• You get paid fairly for your work, especially if you're highly skilled.
• You can also bill for time spent on administrative work and communication with clients, which may cut down on unnecessary meetings and conference calls.

The cons of charging hourly fees are:

• You may need to work more hours to meet your income goals.
• You may get pushback from a client if the work takes longer than they expected, and they receive a large invoice.
• You may find it challenging to scale your business or have a reliable income from month to month.

Charge Flat Fees

Charging a flat fee per project, campaign or assignment is common in certain industries, such as web design, writing and engineering. If you're more productive, this pricing method can allow you to earn the equivalent of a higher hourly rate without needing to closely track your time.

The danger is that you may underestimate the time required to complete a project. Or your client may decide to change the scope of your work or ask for many revisions, taking more of your time and cutting into your profitability.

The pros of charging flat fees are:

• Your work has a clear beginning and end, so you can easily plan vacation time or work for other clients.
• You receive an upfront lump-sum payment for a portion of your work, which boosts cash flow.
• You may have a higher profit margin built into a short-term project.
• You don't need to keep detailed records of your time.
• You may find it easier to sell clients on project-based work than on open-ended hourly charges or ongoing retainer fees.
• You can use short-term assignments to build experience, client relationships, and referrals.

The cons of charging flat fees are:

• A client could push back a project or campaign schedule and delay your final payment.
• You may need to continue selling additional jobs to new clients to ensure you have future income streams.
• You may find scaling your business difficult, with unreliable or variable revenue.

Charge Commission Fees

If your work directly helps clients sell their products or services, you might charge a commission fee based on sales. Working on commission can result in inconsistent income. However, if your expertise and knowledge of a territory are valuable to a client, they may reward you handsomely.

The pros of charging commission fees are:

• You're highly incentivized to help clients make sales.
• You may have a lot of flexibility in how you work and achieve results.
• You don't need to keep detailed records of your time.
• You may find it easy to form long-term relationships with clients who view you as a critical partner for their business growth.

The cons of charging commission fees are:

• You may have a long sales cycle that delays your payment.
• You may have significant expenses related to making sales, which cut into your profit.
• You may find scaling your business difficult, with unreliable or variable revenue.

No matter how you choose to charge fees, keep in mind that a robust accounting and invoicing system will help you manage it all. Do what works best for your business type, and the rest will fall into place.