Your income as a freelancer hinges greatly on your freelance rates. As a new freelancer, it can sometimes be difficult to decide what rates to charge a client. This is one of the aspects of freelancing that requires some amount of thought and can be daunting if you have never had to set rates for your expertise before. As a freelancer you offer services that clients need and that they should be willing to pay for. The problem is that there are some clients who believe that because you are a freelancer that you should give away your services for free. Well, excuuuuse me, you are a freelancer but your services are definitely NOT for free! But how exactly do you decide what rates to charge a client? Many freelancers struggle with this decision; not wanting to charge to much in fear that they will lose the sale or on the other hand, not wanting to charge too little so that they end up working virtually for free. This week’s post will help you to establish a freelance rate that is comfortable for you and that will allow you to earn a decent living as a freelancer. If you have ever wanted to know how to set your freelance rates without giving away your services for free, then go ahead and read the entire article now or bookmark it so that you can read it more thoroughly later on. Before we go any further, just know that whatever services you have to offer as a freelancer, that your services are valuable and that you are worth just as much or even more than a salaried employee would be worth. Don’t think for a minute that because you are a freelancer that your services are somehow less than the services of an employee who is dedicated to a single employer. Once you establish that in your mind then you are ready to establish your freelance rates. Bear in mind that freelance rates are dependent on several factors including:
- Level of freelance experience
- Level of industry experience
- Market conditions
Start With the End in Mind
When establishing your freelance rates, you should start with the end in mind. Decide how much you would like to earn on an annual basis. The amount should be sufficient for you to cover all your personal and business expenses and enough profit that will allow you to live the lifestyle that you want including having a considerable amount of savings. This is essentially establishing a freelance budget.
Bear in mind all the expenses that you would need to cover for your freelance business including income taxes, utilities, supplies, travelling costs, marketing expenses etc. It may be useful to start by first coming up with the “take home” salary that you would want. This is the amount that you would consider to be your personal salary and it should be able to cover your personal expenses (groceries, childcare costs, etc) and leave enough for savings. After you have established that figure, you should then add on another amount that will adequately cover all business-related expenses including income taxes for the year. The total would be the annual income that you desire to make.
Decide how much hours you plan on working each day and how many days of the week you will be working. If for example, you plan to work 6 hours per day, 5 days per week , that would total 30 hours per week or 120 hours per month. For 12 months that would be a total of 1,440 hours (12 months x 120 hours) per annum. Let’s say you determined that you want your total annual salary to be $80,000.00, your hourly rate would be found by dividing that $80,000 by 1,440 hours to total approximately $56 per hour.
After you have come up with your ideal freelance rate, you then need to do some research to adjust your rates to take other factors into account. When you have looked at the different factors and how they affect your freelance rates, you should be prepared to make adjustments as necessary.
Industry Freelance Rates
As a freelancer, your rates should be set based on the industry or industries that you serve. Typically, each industry pays differently based on the services required. For example, if you are a freelance writer serving the health industry, your rates would be different from a freelancer who is serving the technology or the financial industry. Similarly, a freelancer who offers creative services such as website design services or logo design services may need to incorporate material costs into their freelance rates. So, when deciding upon a freelance rate, you should research to find out what the going rate is for services in that particular industry.
My advice would be to avoid looking only at freelance rates in the freelance market but to make your search broader to include industry rates on a whole. The reason for this is that you want to get an idea of what salaried workers are being paid to fulfill the same services that you would fulfill for your client. Looking at freelance rates within the freelance market alone is certain to yield rates that are at the lower end of any pay or salary scale. If you offer valuable services, then you want to price your services accordingly and not based solely on what other freelancers are charging.
Just like a typical job search, you would need to have an idea of what the going market rate is. If you are just getting into freelancing then you need to find out the going rates for corresponding entry level positions within the industry. A simple google search is likely to return some valuable information. Avoid using the word “freelance” when you conduct your search so that the results include broad industry information. Also, speaking with other more experienced freelancers will give you valuable insight into the going rates.
So let’s say that you are a freelance writer serving the retail clothing fashion industry in the United States. Your Google search may involve typing the keywords “fashion copywriter salary” into Google search. The results that are returned would be broad and would include salaries for different states in the US or salaries in other locations based on your Google search settings. You should research all the salaries for the locations that you intend to target. Take note of the level of experience and the level of expertise that is required for the position. Most listings would return an annualized salary or a salary based on hourly rates. Expect the salaries to vary by location. If you are not serving the US market then your search would be similar but you should include the geographic location that you are targeting as a part of the search. This would give you a good idea of what employers are paying for these services. Take careful note of the mean or the median salary. This figure will form the base of your freelance rate. Look at the salaries over a range of different organizations to get a solid idea of what the market standards are in that particular industry.
How Location Affects Freelance Rates
Your location as a freelancer as well as the location of your client should play a part in how you establish your freelance rates. As explained previously, different locations pay differently. For example, positions in New York generally pay higher than positions in other states. Similarly, if you land a job with a client outside of the United States, the rates of pay may vary tremendously. This is based on the general economy of the location and the value that is placed on that particular service at that specific location. You should try to get a general idea of the level of pay in the locations to which you would like to offer your services.
On the other hand, you shouldn’t let your own location negatively affect your freelance rates. Just because you may live in a location where salaries are low in general, does not mean that you should set low freelance rates for yourself if you offer a valuable, in demand service. Do not allow your freelance rates to be limited by where you originate from especially if you offer your services online. Clients sometimes seek out freelancers from certain locations because they view it as a way of getting cheap labor. But the clients are not so much to blame for this. It is the freelancers who tend to set their freelance rates so low in general, that the location takes on the reputation of being a cheap labor market.
Avoid being put in a box and set your rates based on the value of the services that you offer. If other freelancers with similar qualifications and experience from other locations are landing higher rates of compensation, there is no reason why you shouldn’t be able to attract similar rates. So while you should be cognizant of the fact that freelance rates differ based on location, don’t allow that to be a limiting factor. This is especially true if the location where you offer your services generally pay higher rates to freelancers. For example, if your client is from the United States and you are based in India, don’t be tempted to settle for low rates just because pay tends to be on the low end in India when compared to the US. If the client values the services that you offer, they should be prepared to compensate you just as well as they would compensate an equally qualified and equally experienced freelancer from their native country.
The Effect of Experience and Qualifications on Freelance Rates
The more experienced and the more qualifications you have as a freelancer, the higher you should set your rates. Also, the amount of experience you have prior to becoming a freelancer, should be taken into consideration. This means that each year that you operate as a freelancer, you should review your freelancer rates to account for the fact that you have added another 12 months of experience to your work history. What this should mean is that you should be now better qualified and better equipped to help your clients having learned new skills and acquired new knowledge during the preceding year. Therefore, you should be more valuable and your rates should reflect this increase in value. Any freelance rate increase that you give yourself should at least account for inflation and a further percentage depending on how much new knowledge and new skills you may have acquired during the year. So if the inflation rate is 6% and you gained new certification throughout the year, you may consider increasing your rates by about 12% to account for these factors.
On the other hand, if you are new to freelancing, you should consider starting at lower freelance rates until you have built up a reputation as a valuable freelancer. This doesn’t mean that you should under-price your services, but be prepared to accept lower rates to get your feet in the door. Then slowly build from there based on how well your customers rate your services and on how in demand your services are.
Market Conditions and their effects on Freelance Rates
It goes without saying that any freelance rates that you set should be done taking market and economic conditions into consideration. If the demand for your particular type of services is high, this is an opportunity to increase your rates. On the other hand, if the demand is low, you should consider adjusting your freelance rates accordingly to help to boost sales. Look at what is happening in the economy in general also. A sluggish economy means that your services may be less in demand and that potential clients may be less able to afford your services. Be flexible to avoid losing business.
At the end of the day establishing your freelance rates requires lots of thought and research and should be revised on a regular basis.