Ah, the freelance life: working in your pajamas, coffee in hand, and being your own boss. But hold on a minute! Before diving into that comfortable freelance life, there’s one very important thing you need to decide: how much to charge. Setting your freelance rates is not quite as simple as picking a number out of the sky. Let’s really get down to the nitty-gritty.
Understanding Your Worth
First thing first is know your worth. Knowing what one brings to the table makes it easy to charge a reasonable rate. You wouldn’t sell a diamond at the price of a pebble, right? The same holds true for skills.
Being a freelancer often comes down to selling your time and skills. But how do you determine what your time is worth? First comes an evaluation of your skills, experience, and quality of work. Are you a graphic designer with ten years of experience and a portfolio that can make jaws drop? You’re in another league compared to a guy who is just starting.
Alright, you know what you’re worth. Now, let’s see what the market has to say. Researching the market rate feels like keeping an eye out for the detective in the town. Glassdoor, Upwork, and even LinkedIn can at least give you a ballpark figure.
For instance, you’re a content developer, then you may find that the going rate would be around $20 to $100 an hour. It’s also like comparing apples-to-apples when you would position yourself somewhere you’re knowledgeable about.
Calculating Your Costs
Now we have to talk turkey: expenses. Freelancing is not just about what you can do; it’s about what you can do to get by. Sure, you need money to pay rent, utilities, the internet package, subscriptions to different kinds of software, and—for some people—coffee.
Make a list of everything you spend money on each month. Let’s say that comes out to be $2,000/month. Now add a little bit more to that for savings and unexpected expenses. Let’s say another $500. So you need to bring in a minimum of $2,500/month in order to keep your head above water.
Setting Your Hourly Rate
Now, set your hourly rate. Take the total sum of all your monthly expenses ($2,500). Now divide this by the number of hours you plan to work in a month. For instance, you are planning to work for 100 hours, so that equates to $25 per hour. But wait! You need to make room for taxes. Add at least 20-30% on top of that as a general guideline.
So your final hourly rate might be something like $30 – $35. The basic rate! But mind you, this is just a starting point. You might raise it up based on project complexity or if the client’s budget dictates that.
Project-Based Pricing
Hourly rates are great, but for certain types of work, project-based pricing is actually the better deal for your customers. This isn’t theoretical; it exists for some kinds of work that are very different in complexity. Let’s say you are a web developer in the business of designing unique websites. In such cases, per-job charging may turn out more profitable for you.
For instance, it may take 50 hours to build a simple website or 200 hours to build a complex e-commerce site. Instead of a per-hour charge, you might develop standard fees based on different project types. For instance, charge $2,000 for the simple site and $10,000 for the complex one. In this fashion, clients know what they are getting, and you don’t get home with hours.
Value-Based Pricing
Now here’s the one to really put a feather in your cap: value-based pricing. It’s where you charge a client based on what you are bringing to them, not based upon the actual time you are putting in. For instance, as a marketing consultant, let’s say you’re able to raise the sales in a business by $100,000 a year. Well, that certainly sounds fair that you would charge $10,000 for doing that, doesn’t it?
Value-based pricing can change everything. You become an investment for your clients, not an expense. You will be able to negotiate with them on higher rates and let them experience for themselves that they will indeed benefit from your help.
Tailor-made Rates for Individual Clients
Every client does not hold the same amount of money for expenditures. Some might have large amounts of money to spend, but some can be a small startup as well. Working with rate adjustments on a basis of different clients can lead to lining up projects on different scales. For example, a two-tiered pricing scheme: one for the startups and another for established businesses.
Let’s take a graphic designer, for example. You work for one startup, and your rate can be $50 an hour. You’ll work with another?—your rate can be $100 an hour. You are able to work with very different clients here and not have one STEALING from the other in this case.
Negotiation Tips
Bargaining makes part and parcel of the freelancing work. Do remember, you are not a doormat. Here are a couple of pointers which will help you get a hang of negotiations:
- Know Your Bottom Line: Be very clear on what the least amount you can is. It helps you avoid situations when you tend to undersell yourself.
- Show Your Value: Highlight your achievements, testimonials, and benefits to the client.
- Be Confident: If you don’t believe you are worth the rate, neither will your clients. Confidence is pretty sexy.
- Offer Packages: Package offerings can sometimes make the price look more attractive to clients. For example, a content writer might have a package together of X number of blog posts per month, Z social media updates per week, and Q newsletters per quarter.
Real-Life Example: Jane the Freelance Writer
Let’s consider an actual example. Meet Jane, a freelance writer with a five-year portfolio of magnificent articles in her bag. Naturally, she googles the going market rates and finds out that experienced writers charge between $50–$100 per hour.
She estimates her monthly expenses to be $2,000. As she plans to work 80 hours per month, her base hourly rate is $25. Adding 30% for taxes, the hourly rate was $32.5. For the sake of simplicity, Jane rounds this off to $35 per hour.
She offers a basic package with 10 articles for $1,500 and a premium package with 20 articles for $2,500, plus social media updates. By offering packages, Jane adds value to her service and also sweetens her rates to make her go-to choices more attractive to clients.
Long-Term Client Base
One of the gems of freelancing is developing long-term client relationships: it feels like working with a full-time payroll, without the 9-to-5 grind. Take good care of your clients: give them quality work and reliability, and they are most likely to return to you.
For example, you are a web designer. Develop maintenance packages and charge a small fee monthly to update, make backups, and provide support so that you grab an income stream that turns up each month and also lock the client into a good relationship with you.
Increasing Your Rates
As your skills get better and you gain more experience in it, don’t regret asking for more. Think of it like a promotion. You wouldn’t expect to stay at that same salary forever, would you?
Just kindly let your clients know why you are increasing your rates. The better part will accept the changes as long as they also experience the quality of work from you. For instance, if you are a graphic designer who has taken new courses and improved the skills, let your clients know that they’re getting a better service from you.
Establishing freelance rates is both an art and a science. It’s a mix of self-awareness, market research, and strategy. Of course, one thing to keep in mind is that your quotes are liquid. Be flexible, and when the time is right, revise how you need to. Most important, show confidence in what you know you deserve. Happy freelancing!
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