How to price yourself as a freelancer is one of the hardest things to decipher when you first start out, no matter what the industry – and it will continue to be a challenge as the years go on! There is no exact science to this but it is one of the most important things to work out, because fundamentally we all work to get paid. Money is often a taboo topic and something that we shy away from discussing, so finding advice on these matters can be tricky – which is why I decided to put this blog post together. My advice is by no means official, but it’s based on my personal experience of navigating the freelancing world and I hope it helps you on your journey!
Charging an hourly rate – the pros
Beginning with an hourly rate is a good starting point when working out how to price yourself as a freelancer. As you might not have much experience with freelancing work, your knowledge of how long something will take you could be limited – so an hourly rate is great, as you are still compensated if a job takes you longer than anticipated. As your jobs keep coming in and your experience grows, you’ll be able to predict how long things will take you which helps with your time management and being able to give clients an ETA for completion as well as ball park figures.
Working out your hourly rate as a freelancer is tricky! When I started my business I made a BIG mistake when working out my hourly rate. I had a think about the equivalent salary that a marketing manager would be making in a corporate role (around $70-75,000) and based my hourly rate on this figure assuming 40 hours a week was equal to 2,080 hours per year – leaving me with an hourly figure of around $33. In my naivety I forgot to do THREE crucial things here:
- Add my overheads and new expenses as a freelancer – e.g. working space, internet and phone bills, marketing costs, invoicing and accounting software fees, web hosting, project management fees, the list goes on…
- Add costs of living – superannuation, sick leave and annual leave are three luxuries you can kiss goodbye to when you work for yourself!
- Factor in my billable hours – 40 hours per week of billable hours is completely unrealistic for a freelancer. Firstly – you left that 9-5 for a reason, right? Why would you want to jump from one to another… Work out how many hours per week you *actually* want to work, and calculate your rate based on that. Secondly – there are so many hours each week that you have to invest into other areas of your business, that you will not be able to bill for. For example, sales, marketing, accounting, invoices, admin, pitching, signing new clients and EMAILS(!) account for at least 25% of my working week.
As you can guess, that hourly rate got whittled down faster than lightning and I was left with a pretty shoddy compensation for work that was bringing my clients a LOT of value. Luckily the clients I had at the time were able to see the value in my work, so when I increased my rates (another tricky task to do!) they were happy to stay on board.
Check out the infographic below from www.creativelive.com to work out how to calculate your hourly rate without making the same mistakes as I did when I first started!
Charging an hourly based rate – the cons
While having a set hourly rate has its pros, it definitely has its limitations too. For example: let’s say Super Sally is a whizz at building websites and knocks together an amazing website in 3 hours for her client Jerry (who would’ve spent at least 24 hours trying to do this himself) – Sally might only be able to bill $150 for this if she worked at an hourly rate. An amazing website is worth SO much more than $150 and will bring incomparable value to Jerry, so why should Sally suffer because she is so super, skilled and fast at her job? What’s more, working at an hourly rate limits your earning potential massively because there are only so many hours in a day!
Charging a project based rate
In my opinion, this is a much better route to go down when working out how to price yourself as a freelancer. It increases your earning potential and allows you to make more money in less time. It also allows you to price yourself by the value that you bring a client, rather than the hours that you work.
Coming up with a fee for a project is even more of a maze than coming up with an hourly rate and can often involve a fair bit of guess work, but here are a few things that you should factor in when doing so:
- How long it will take you – from your experience you should roughly be able to work out how long a project will take you, which is a great place to start when conjuring up a project fee. Always make sure you add a good amount of extra hours on top to allow for hiccups along the way. Also remember that if a client asks you to carry out additional tasks that weren’t included in the initial brief or quote, these will be extra. Again – you don’t want to be working at an hourly rate, so this is just a starting point to make sure you are covering yourself for the bare minimum.
- Creative enjoyment – I think we can all agree that if you are working on something boring, uninspiring or monotonous that you won’t enjoy or be able to upskill yourself from, you should charge more. Similarly if you are bidding for a job that you would LOVE to do, that would look amazing in your portfolio, or comes with great extra perks – you may be willing to work at a lower rate to win the client.
- Client relationship – this might sound like a strange thing to take into consideration but there are some jobs that you would charge more or less for, depending on who the client is and what your relationship is with them. A start-up business owner from down the road that you would love to have a professional relationship with is someone that you may charge less for in comparison to a big cheese at a large corporation with a difficult personality… Remember that when you begin a project with someone, you’ll be spending a fair bit of time with them for a while – so if they’re a nightmare client make sure you’re getting your money’s worth!
- What will their budget look like – asking a client what their budget is, is a great way of finding out how much they are willing to pay for a project, which can really help you work out your fee. If you can’t ask them directly (or can’t get an answer) have a think about the size of their business, how long they’ve been established for and hazard a guess at how well they are doing. For example an air b&b owner will have a significantly lower budget to an international luxury hotel chain.
- How much value am I bringing the client – this is the most important one to remember! Coming back to my previous example of Super Sally, the website that she built Jerry enabled him to sell his products online and not just at the markets. Consequently the value that the new website brought him was huge because he now had two income streams for his business and he could cover her $150 fee in just one online sale. If the project you’re pricing up is something that will continuously bring the business owner value, or something they will cover the cost of rapidly, keep this at the forefront of your mind when coming up with your fee. Then when you are pitching your client, make sure you mention all this amazing value that your work will bring them!
You’ll find that the best way to price yourself as a freelancer and decide what is right for you and your individual services is to experiment, experiment, experiment. The worst case scenario is that a potential client is going to say no – and if someone can’t see the value that your work will bring, they probably aren’t a good fit for you anyway.
Still not convinced? Save these images to your phone, stick them round your desk and always remember to know your worth – and then add tax. (Artwork by @freelancingfemales and @homsweethom and @mrldelrosario.art).