How do I charge for this kind of project? What do I quote this client? These questions come up frequently for freelancers. It’s also one that I have to consider often as a business owner. The bad news is that there’s no definitive answer for what the “right” freelance rates are. I do have good news, though.
To figure out how to set your rates, there are several factors to consider. Today’s post will help you do exactly that. Here’s everything you need to know to set your freelance rates.
Ways to charge
Before we go any further cover the ways to charge. Here are some of the most common ways to charge for your freelance services:
When you choose to set a rate on a per-project basis, you’re setting a flat fee rate for the deliverable that you’re working on. For example, if you’re a writer you might set a rate for each ebook that you write. If you’re a web designer, you might have a per-project rate for websites.
This is a good way to charge because you know exactly how much income you can expect. Your clients also know exactly what’s being billed to them. However, it can get a little tricky when projects take longer than you expect or if a client requests lots of changes.
If you didn’t factor that into your per-project rate, you find yourself making less than you want to. Before you charge this way make sure that you have a good understanding of what will actually go into a project.
Most people calculate pay per hour. While some freelancers do get paid this way I don’t recommend it. As a freelancer, one of the main benefits is the freedom and flexibility that comes with choosing this path. When you charge an hourly rate, you go back to trading your time for money. Plus, this can create a lot more administrative work for you.
When you charge by the hour, you actually have to track your time to invoice the client properly. That time is usually better spent actually working on the project instead of tracking each moment you’re working.
Per word (for writers)
Per word rates are common for writers. Sometimes it can be useful to charge this way if you don’t know exactly how long the piece you’re writing will be. However, much like hours, a per word rate gives you a little bit more and keep track of.
In addition, some clients may see it as a bit unprofessional. It can make them feel like your squeezing pennies out of them. It’s also hard to charge for necessary tasks that may come later (like meetings or editing) if you charge this way.
Want more advice on starting a freelance writing business? I have a free course to help you with that. You can sign up for free here.
Advanced freelancers tend to lean towards retainers. This usually means that the freelancer has a set amount of work they complete for one client on a regular basis. Monthly retainers are great. They allow you to build real stability in your business.
Most freelancers who bill on retainer get a deposit to start or get paid upfront. Then, they get a set amount each month after that. That will vary, but the idea is that you have large, regular payments coming in.
Once you know how to you want charge, it’s time to set your freelance rate. Now, let’s discuss what you should factor into your rate.
Think about what you want
Above all else, you should think about what your goals are before you set your freelance rates. How much do you need to make to cover your day-to-day expenses? How much do you want to make per month or per year? Figuring all this out is very important for you to take the next steps and choose the right rate.
Next, do some research on what market rates are for your service. For example, you can find a list of rates for freelance writers here. A word of caution: when you’re doing this research take it with a grain of salt. The information you find may not be 100% accurate or be in line with the way you want to charge.
This is a controversial topic among freelancers but stick with me here. Let me clarify what it means to factor in your experience. I’m not talking about the number of years you’ve been working in a specific industry or what degree you have.
Sure, if you have a degree that’s applicable to what you want to do as a freelancer or you have job experience, helpful and you should charge more. However, that’s not the only kind of experience that applies here.
Are you taking the time to get any certifications in your area of expertise? Do you invest time in keeping up with the best practices in your industry? Are you confident that you can execute the types of projects you want to work on or are you still working on building a portfolio?
These are things you should ask yourself when you’re deciding on your rate. You should be charging for the value of your services. If you have relevant experience that makes you great at the work you do, charge more. If you’re still getting started and still wondering if this type of work is right for you, you should charge less.
This doesn’t mean that if you’re starting out need to work for pennies or accept a rock bottom rate. It just means that you have to be aware of how you’ll serve your clients and what that’s worth.
Ask other freelancers
Once you know what you want, how you want to charge and you research what’s typical, it’s time to ask other freelancers. This is a tough question to ask in open forums or communities like Facebook groups. Most of the time people will say rates are different for everyone but it is possible to get answers.
When you ask, make sure you give as many details as you can about the type of work that you’ll be doing. Then, you’ll have the best chance of getting accurate answers from working freelancers.
If you don’t want to ask a whole community, find another freelancer that you can connect with and bounce ideas off of privately. Then you can compare the rate you come up with to the rates you found in your research. That will help you come up with a number that’s right for you.
Consider your costs
Another thing to factor in is the cost of doing business. Most freelancers won’t have tons of business expenses especially when they’re starting out. However, there are some expenses that you may completely forget about. That’s why it’s important to take a step back before you set your rates.
For example, if you do choose to create a website for your freelance business you’ll have to purchase a domain and hosting for that website.
If you accept payments online, you’ll lose out a little bit on each transaction because of the fees.
I don’t recommend stressing yourself out by adding up every penny you’ll spend. That said, you should be mindful of those expenses so that you can offset the cost by charging an appropriate rate.
Listen to the market
At this point, you should have a pretty good idea of what you want to charge. Now it’s time to go out there, send some quotes to clients and get feedback. Once you talk to a client about a potential project, send a with your rate for what you discussed.
This part can be tricky, but if you quote several projects and don’t get any push-back on your rates, you’re undercharging. On the other hand, if you’re sending several proposals but no one is signing off on them, your rate may be too high. If that happens to you, it’s time to either target different clients or lower your rate.
The right rate to charge is the rate you’re happy with and the one that clients will pay you.
Don’t skip this step. Listen when clients give you feedback on your pricing. I once sent a proposal to a client with what I thought was a competitive rate. The next time I talked to them, they told me that my rate was similar to what they were looking at paying at a content mill.
(Yikes. In my defense though, that was one of the highest rates I had ever seen from a content mill).
I didn’t feel right about changing the rate I quoted that client. However, after that conversation, I changed my rates immediately. Clearly, my pricing was WAY off.
Important: The value of benefits
Before we wrap up, I do want to mention that it’s important to consider the value of employee benefits. When you’re traditionally employed you get benefits. This includes insurance, sick days, and sometimes a 401k match to help you save for retirement.
You won’t these things as a freelancer. So, you do have to factor in the value of these benefits when you set your rate. How much will it cost for you to have your own health insurance? How many sick days do you want to give yourself per year and how much will taking those days off impact your bottom line?
For more information on the difference between freelancers and employees, check out this article I wrote on the topic.
Remember, companies are saving money by choosing to outsource to a freelancer. Your freelance rates should be higher than the rate you expect from a regular 9-5 job.
Setting freelance rates isn’t an exact science but using these tips will help you set the right rates for your business. Do you have more questions about how to set your freelance rates? Tell me what you’re struggling with in the comments below.
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