HOW TO SET YOUR RATE AS A FREELANCER
Working out your rate as a freelance can be tough, as there is no ‘one size fits all’ method, and ask for too much and you could potentially scare clients away; charge too little and you risk looking second rate and are under-selling yourself. You will also most likely have to negotiate your rate for different clients and projects, but ensuring you calculate your rate competitively is so important to ensure you’re covering your costs and making a profit. In this article I delve into tips on how to work out your rate as a freelancer.
The most common pricing models for freelancers are Hourly, Day or Project-fixed rates. Different clients may prefer different ways of working, so bear that in mind when you suggest your rate.
So, how do you work out what you should be getting paid? Here's some tips to help you determine your freelance rate:
Know your worth. Ask yourself these questions: How much money would I make as a full-time employee? How much value am I bringing to the client?
Know how much money you need to support your lifestyle or family. Have in mind a rough annual salary goal, and make sure you add about 30% to the going rate for PAYE - see points 3 & 4 as to why you would add this.
Calculate your business expenses: List all the costs associated with running your freelance business, i.e. equipment, software subscriptions, office space, internet, insurance, marketing, and any other overhead expenses. Freelancers do not get the standard benefits such as holiday or sick pay; nor many of the additional cash benefits enjoyed by permanent employees such as pension contributions, car allowance, and other cash or in-kind benefits, so it is important that we are charging more than employed people.
Calculate your non-billable time: Recognise that not all your time will be billable - i.e. all the admin, marketing and sales side of being a freelancer. In general freelancers’ average hourly breakdown is 60% billable hours and 40% non-billable hours.
Benchmark yourself: Look at your competitors and research into your niche and see what other freelancers are charging for similar freelancing services? And are they using an hourly rate or a fixed price per project? Consider your level of expertise, specialized skills, and the value you provide to clients to try to work out a day or hourly rate.
Factor in taxes: Remember that as a freelancer, you're responsible for paying self-employment taxes. Ensure that your rate accounts for these taxes so that you're not caught off guard at tax time.
Geographical Location: Different rates may apply depending on the geographical location of the client and cost of living in that area, especially if you are a remote worker and working with clients overseas so bear this in mind when working out your rate.
It’s important to note that your rate will most likely constantly change, based on the client but also based on your evolving expertise and knowledge. Rregularly review and adjust your rate, and be ready to negotiate your rate with the client, and make sure you have a clear understanding of your bottom line, i.e. what is the lowest fee you are willing to take for completing this work?
Upwork has some useful resources to help you navigate how to price your freelance services. For more information, check out the two major pricing models that freelancers use: hourly pricing and project-based (fixed) pricing.