As with other “tough” questions, the answer is too multifaceted to be given in a single sentence. Hence, the article!
It All Starts With…
…how much you spend! Before you even start thinking about the price for your freelance services, you must realize how much money you are going to need to break even.
Whether you view it like that or not, being a freelancer means running a small business where you act as:
– any other position you can think of
At this stage, you need to act as your own accountant and calculate precisely how much money you will require not only to break even but also to feel comfortable and compelled to continue working as a freelancer.
Budgeting is important because it helps you to reach your goals and puts you in control of your spending.
1. Creating Your Own Budget
There are two types of costs: fixed and variable. Fixed costs remain the same independent of the amount of work that you do. Variable costs are proportional to the amount of work.
Fixed costs: utility bills, food, personal expenses.
Variable costs: taxes, savings, hardware (computers, printers, scanners, tablets, etc.), software (programs you need to purchase), other miscellaneous expenses such as stationery
Let’s say they all amount to $2,000 a month. Hence, your first metric!
No matter how much work you are going to be doing a month, you can’t make less than $2,000. Do the simple math:
- 40 hours a week = 160 hours a month
- $2,000/160 = $12.5
Therefore, you can’t charge less than $13 per hour – pretty obvious, huh?
2. Deciding on Your Earnings
Next thing you need to figure out is how much money you would like to earn. Not just to survive but to thrive – after all, this is why you chose freelancing in the first place, right?
As always, apply common sense and logic. How much money were you making before you went freelance? Was it enough? What would you like to buy – a car, a new house, an expensive cruise, or a private jet?
Figure out your long-term goals and break them down into monthly objectives. E.g., a year from now, you would like to make $7K per month or any other amount that is ambitious enough for you.
Even it seems highly unlikely at moment (while you are just starting your freelance career), you still should do it – you might not reach the desired goal of $7K per month, but, hey – will you really get upset if you only reach $6.5K?
Ambitious goals keep us driven and motivated – that’s how our brain works. First, you get a picture in your head, an idea of what you want to achieve, and then your mind starts to scout for the ways of reaching that goal. Never the other way around.
Obviously, you can’t go from, let’s say, $3K/mo you’re making now to $7K/mo in a matter of weeks. Therefore, you should start with $4K/mo as your next objective. That brings us to your second metric – your desired gross income, which is $4,000 in our case.
$4,000 divided by 160 working hours a month amounts to $25 per hour – now that’s something.
If you are not sure at all how much money a person like you ought to make, use websites like Glassdoor to research the average pay rates for different professions.
3. Research the Rates for Similar Work Online
You’re not the only freelancer out there. In fact, there is a whole industry and network of freelancers, who all vary in quality, speed, and the level of professionalism in their work.
Where you rank among those freelancers is just a guess, but you should take that guess anyway. A rule of thumb for up-and-coming freelancers is to underprice their service rather than overprice them.
If you are just starting out as a freelancer, underpricing your services will give that necessary boost in confidence when you will start getting your first clients and orders.
You should refer to these three metrics:
- The average hourly rate for similar services on the market
- The desired rate of yours ($25/hr)
- The minimum acceptable rate ($13/hr)
Here are some average rates for the most popular freelance services in 2018:
- writing and editing – $30/hour
- graphic design – $40/hour
- tech/programming – $50/hour
Keep in mind that these are ballpark numbers, and they may vary depending on the region, your experience, and other factors.
Even if you start working at the rate of $20/hr, it is okay to keep doing that for a while as long as you know there is a real possibility of making more in the nearest future after you gain some experience and expand your client base.
However, you should always aim at that desired rate of yours and keep pushing for it, constantly raising the rate in accordance with your overall goal ($7K per month in a year from now).
If you are still confused, here is a nifty online tool that will help you calculate your hourly rate – Hourly Rate Calculator for freelancers.
4. Adjusting Your Hourly Rate As You Go
There are two basic ways of increasing your monthly income as a freelancer:
- working more hours a week while keeping the same rate per hour;
- charging more money per hour while keeping your total working hours the same.
Of course, there can a combination of both, but, in general, it’s either more hours or higher rates.
You can go with either of the options, but we strongly recommend increasing the rates gradually as you gain more experience and notoriety.
Is there any guide to increasing the rates? No, there isn’t.
In fact, it’s not a matter of life or death – pricing is always about experimenting. Test out different rates to see how the market (the clients, more specifically) respond to that and stick to the one that is currently working.
5. Switching From Hourly Rates to Project-Based Pricing
Sooner or later, you will inevitably face the following problem. You will have a client who has agreed to your rate ($30/hour at the time) and supplied you with a project that you (with your mighty skills and professional experience) will complete… in two hours!
What’s next? Try switching to project-based pricing – here’s all the reasoning you will need:
- Project-based pricing gives you more flexibility – you charge reasonably little for a small, one-time project and reasonably much for a major, serious project that will enrich your portfolio
- You will be able to concentrate on the actual value and quality you deliver and spend as much time as needed to provide that value
- Clients mostly care about the final result – they wouldn’t mind you spending a few extra hours if it’s really going to benefit the project
These are the basic steps to pricing your freelance services. To recap:
- Start with budgeting
- Decide on how much you’d like to earn
- Research the similar rates online and start with the market average
- Experiment with rates and gradually raise them as you gain more experience, knowledge, and skills
- Switch from hourly rates to project-based pricing
More Helpful Tips
These are the things you might find useful:
- whenever working on an hourly rate project, be sure to track your time meticulously (use one of the free online tools created specifically for that purpose – e.g., Screenshot Monitor)
- introduce the “jerk” tax (if a client is particularly annoying or eating up too much of your time and energy, it’s alright to charge that client more)
- when you are just starting out, it’s better to UNDERPRICE yourself. However, when you are already an established freelancer with a pool of clients, it is actually better to OVERPRICE yourself from time to time. This way you will be able to balance your time between the projects that you really LOVE to do and projects you HAVE TO do
- join a freelance community to share your experience with other freelancers and learn about theirs (this article ought to help) and don’t forget to showcase your talent on various platforms for freelancers (here are the ones you should check out first)
In fact, we’ve got a whole blog of our own where you can find useful tips and information on how to be a more efficient freelancer. Here’s the recent piece where we talk about how to start a project right – “Five Questions You Will Regret Not Asking Yourself Before Starting a Project.”
Thanks for getting to the bottom of today’s “How Much Should You Charge as a Freelancer? 5 Steps to Reasonable Freelance Pricing” article – we hoped it’s been useful and you’ve learned something new.
One last thing before you go – freelancing is not a science, it’s a process of constant experimentation and evolution. Don’t be afraid to try new methods and approaches in your pricing, and you will eventually get where you want to be. Do you have any other tips or best practices that you’d like to share? Join the discussion in the comments below!