For new freelancers, the question of “How much should freelancers charge?” is often the trickiest one to answer.
Setting your freelance rate can seem like a daunting task. How the heck should you know what you should charge when market rates range from $3/hour to $10,000 per project!?
There is no magic formula to decide what your freelance rate should be, but there are a few things you should consider to get an idea of how much you should be charging.
Here are 4 steps to answering the question “How much should freelancers charge?”
1. SET YOUR INCOME GOAL
How much money do you want to make? How much money do you need to make?
If your goal is to make $50,000/year with your side hustle before quitting your day job, you need to be charging accordingly to get there.
What do you really need to survive? Maybe you need to match your current salary to continue supporting your family. Maybe you could take a small cut and still be comfortable.
Whatever the number is, write it down.
2. DETERMINE YOUR BILLABLE HOURS
Now that you’ve got your income goal for the year, let’s figure out how you’re going to get there with an hourly rate.
(Even if you charge per project, you want to know your approximate hourly rate in order to forecast how much you can make.)
most all freelancers, not every hour spent working can be billable hours. Freelancers are business owners, responsible for so much more than just getting the work done. Other things that will eat up your time include:
- marketing your business on social media
- networking to get clients
- writing your blog and maintaining your website
- invoicing, writing contracts, and other administrative tasks
- pitching clients and writing proposals
- answering emails and phone calls
- maintaining communication with past clients to get referrals and recurring work
The list goes on, but it definitely eats into billable time.
So if you want to bill 40 hours per week, you will probably have to work more like 55-60 hours. That’s the reality of being a business owner, for better or worse (but totally better because it’s super fun and you’re the boss!)
Consider the amount of hours you want to spend working in total – on client work and on your business. You can anticipate that approximately 50-75% of that will be billable time.
This number is different for everyone and it totally depends on your business goals and your work style. If you’re not sure, track all of your time for a few weeks with a tool like Paymo to see where your time is going. You’ll have a better idea of what it actually looks like for you in a few weeks.
3. TRACK YOUR EXPENSES
Don’t forget about expenses! You’re the boss now, so you’ve gotta pay ’em.
Expenses for freelancers can include anything you need to do your job.
- Office or coworking space rent (or a daily latte)
- Internet and phone bills
- Office supplies
- Equipment and software
- Marketing or advertising
- Administration, bookkeeping, tax prep
- Travel expenses
These things definitely add up and they should be factored into your income goals.
Another important expense to consider is your taxes. Every month you should put away 30-40% of your income to cover your taxes, depending on where you live.
We’re all accustomed to having our taxes deducted from our paycheques, but that won’t be the case now that you’re a freelancer. This is why you don’t want to do a one-for-one trade on what you were making in your old job.
Do a quick calculation to determine approximately what your yearly expenses will be as a freelance business owner.
4. DO THE MATH
Now that you’ve mapped out how much you want to make, how much time you’ll be billing for, and approximately what your expenses will be, you can do the calculation to determine your freelance rate.
There are a few rate calculators out there that allow you to fill in the blanks and get an hourly rate, like this one from MotivApp.
It’s that easy to determine how much freelancers should charge!
Wait – is it?
Doing this calculation is a quick and easy way to see what you need to charge to meet your income goals, but does it mean it’s the right number to be charging?
Depending on what your income goals are and how much you want to work, your hourly rate could be seriously out of line with what people are willing to pay. If the number is really low, you could be selling yourself short. If the number is really high, you might have a hard time getting people to pay you that much.
That’s why there are a few other things that have to be taken into consideration when you’re determining your rate.
The work that you do for a client doesn’t just save them the time of having to do it themselves, it solves their problems and helps to improve their business. If the landing page you design brings in 10 new leads for your client, the value of your work is equivalent to the value of 10 leads, not just the hours they paid you for.
Think about the real problems that your work solves for your clients, and how much it means to them. Does it make them money? Save them time? Teach them a new skill?
Being able to present the value you provide is the fastest way to charging more and signing clients faster.
You can take a look around at what others in your industry are charging. This definitely shouldn’t be your only consideration as you and your experiences are unique, but it’s a good place to start if you seriously have no idea.
This research should also take into consideration who your ideal clients are.
Depending on who your clients are, they may be willing to spend more or less money on your services. Consider what your clients’ budgets are for your type of work. Does $500 exceed their quarterly marketing budget, or is it a drop in the bucket for them?
If your ideal clients aren’t willing to pay you fairly for what you do, you may want to rethink who you are working for and if it really aligns with your goals.
PACKAGING YOUR SERVICES
If your desired hourly rate is incredibly inflated over the market rate, perhaps you can better position yourself by creating packages or retainers, rather than billing by the hour.
By packaging your services, you can combine several tasks into one package that solve the needs of your ideal client. You can then present the value of the overall package rather than the individual services, making it far more appealing to your audience and removing the sticker shock of a high hourly rate.
Putting a price on your time can be challenging, but selling yourself short is the quickest way back to your 9-5.
The most important thing about setting your freelance rate is feeling confident in what you are charging for your services. Clients need your expertise and your unique point of view, so you should be charging fairly for that.