This Is How to Properly Set Your Rates as a Freelancer
Freelancersmake up more than 35 percent of the US workforce, and technology is making it even easier for professionals of various disciplines to earn a comfortable living while working at home. But before you start raking in the moola with a profitable side hustle, first you have to figure out how much to charge for your products or services. Unfortunately, most new freelancers find this task incredibly challenging; of course you want to make enough money to be able to afford all of your bills and expenses, but you also want to price yourself aggressively enough to land those crucial first gigs. We’ve enlisted several freelancing experts to finally answer this age-old question and help future side hustlers determine just how to set their prices.
1. Make a personal budget. One of the first things freelancers must do before they can accurately determine their prices is to create a personal budget for their expenses. “Your budget should reflect your ideal income and cover need bases like calculating how you will pay for rent or home ownership, utilities, transportation or cars, groceries, and any existing debt you may have like student loans or credit card bills,” says Deborah Sweeney, CEO of MyCorporation, a company that provides legal and business services for entrepreneurs. “If you’re a full-time freelancer, you’ll need to add health insurance coverage into that budget. Once you have the bare bones calculated, you’ll need to think beyond the essentials. Budget for how you can save money for an emergency fund and contributions to retirement throughout the year.” After factoring in any other fixed income from other gigs, you should be left with a good idea of the total amount of money you’d like to earn from freelancing.
2. Check other freelancers’ websites for reference. “One of the easiest ways to figure out what rates you should be setting as a freelancer is taking a peek at what other freelancers in your industry that are doing well in their careers are charging,” says full-time freelance writer and digital strategist Tyshia Shante. “Most of the time, these freelancers will have their starting rates listed on their websites. This will give you an idea of the industry rate and help you determine what range you should be in. Check out a few, find a place where you feel comfortable, and take it from there!”
3. Don’t forget to look at men’s prices. When checking other freelancers’ websites and various price references, Morra Aarons-Mele, founder of social impact agency Women Online, advises to seek prices from both your male and female peers. “Because women tend to get paid less than men, if we only survey other women about what they get paid, we won’t truly have a sense of the market,” Aarons-Mele says. “Make sure you know what men are getting paid for the same work.”
4. Ask your audience what they’d be willing to pay for your services. Once you have a general idea of what your peers in the industry are charging, full-time freelance social media consultant Lauren Allen advises freelancers to ask folks in their target audience how much they would be willing to pay for their services. “Don’t put out a general call,” Allen warns. “Ask people specifically, or try a test run for a small group and monitor the response.”
5. Take into consideration hidden fees and taxes. Whether you’re a full-time freelancer or trying to set up a weekend side hustle, there are always going to be hidden fees and taxes that you must take into account when setting your prices. “Personally, I steer away from charging by the hour and prefer to work on a per-project basis, but if you or your clients are comfortable with hourly, keep in mind that your hourly rate as freelancer includes much more than just the time you’re working on a project,” says Shante. “For starters, as a freelancer, you’re responsible for your own taxes, which are about 30 percent of your income. Also, your hourly rate should include time you are spending on non-billable tasks like marketing, administrative tasks, and meetings.”
6. Don’t underprice yourself. “This one is kind of hard as a new freelancer, especially when you’re trying to land those first few clients, but it’s essential to your long-term success,” notes Shante. “After reviewing industry prices, deciding on an hourly rate that you’re comfortable with, and being honest about the value you provide, set a firm, realistic price for your services. This number may scare you at first, but if you’ve done your research you know it’s possible to achieve,” she says. “Undercharging will only leave you frustrated, underpaid, and burned out, which will hinder you from [doing] your best work. Not a good idea if freelancing full-time is your goal!”
7. Understand the differences between hourly and per-project pricing. “Depending on the type of work you need to do, you will need to negotiate with your client on whether you want an hourly pricing structure or a project-based one,” says David Selden-Treiman, former freelancer and current project manager and director of operations of Potent Pages, a company that provides computer programming solutions. “While many people seem to recommend project-based pricing (since you can charge a higher fee in many cases), depending on your level of certainty in what a project will take to complete, hourly pricing may be better. It just depends on your level of certainty and what your client is looking for.”
8. Justify your rates by building your portfolio and references. Now that you’ve determined your prices, you have to be able to back them up with evidence regarding why you deserve to be paid that amount. “If you’re feeling nervous about the price you’re putting on the table, don’t be afraid to drop names: past clients, past employers, experience, a fancy school you attended, or a qualification or commendation you’ve gotten,” says Aarons-Mele. “If you have a popular blog or an impactful Instagram feed, or do public speaking or impressive pro-bono work, mention that too. This increases your worth in the marketplace.”
9. Evaluate every opportunity individually. “In the gig economy, no two projects are identical, and your pricing should reflect this,” says Dr. Kat Cohen, CEO and founder of admissions counseling and tutoring service IvyWise. “One gig may require a more complex skill set, extra hours of research, and a lengthier revision process, and if so, you should adjust your rates to reflect this additional work.” Of course, there are also times when you should consider offering a lower price for a portfolio-building gig. “If you are just building your freelance career and have an opportunity with a prestigious client that promises the potential for consistent projects, consider reducing your rate slightly. Having a steady stream of work and gaining exposure by working with a recognizable brand will be incredibly beneficial to your freelance career, so much so that it may be worth taking a small pay cut to facilitate the opportunity,” she advises.
10. Don’t be afraid to test new prices or ask for a raise. “As a freelancer, you are working for yourself and you need to become your own advocate,” says Cohen. “If you believe that you deserve a certain level of compensation, discuss it with the company you are doing a project for. Have references from past freelance gigs and examples of your work on hand to demonstrate your ability. Practice what you will say to the company and the points you will make to illustrate why you deserve the compensation you are asking for. Depending on the rate you agree upon, you can determine whether the project is worthwhile or if your time would be better spent working on a gig for another client.”
Do you have any tips for setting your price as a freelancer? Tweet us by mentioning @BritandCo.
(Photo via Getty)
