The question of “How much should freelancers charge?” is typically the most difficult for new freelancers to answer.
Setting your freelance pricing may seem quite a difficult undertaking. After all, how do you know what to charge when market rates range from $3/hour to $10,000 per project?
There is no secret formula for setting your freelance rates, but in order to get an estimate of how much you should charge, there are a few factors to consider.
4 steps to answer the question: “how much should freelancers charge?”
1. Set your income goal
How much money do you wish to make?
If your goal is to earn $50,000 per year from your side hustle before quitting your day job, you must charge accordingly.
What do you need to survive? Perhaps you need to match your existing pay in order to sustain your family. You might be able to make a small cut and still be comfortable.
The number you come up with is important. Remember to write it down.
2. Identify your billable hours
Now that you’ve determined your annual income goal, let’s look at how you’ll get there with an hourly rate.
(Even if you charge per project, you should know your average hourly rate so you can anticipate how much money you can generate.)
Freelancers know that not every hour spent working is billable. Freelancers are business owners who are accountable for much more than just completing tasks. Other things that will consume your time are:
- Promoting your business on social
- Landing new clients through networking, writing your blog, and managing your website
- Invoicing, contract writing, and other administrative tasks
- Writing proposals and pitching clients
- responding to emails and phone calls
- maintaining contact with previous clients to get referrals and repeat business
The list continues on and on, but it all eats into billable time.
So, if you want to charge 40 hours per week, you will most likely have to work 55-60 hours. That’s the reality of being a business owner.
Consider how many hours you want to spend working on client work and on your business in total. You can assume that 50-75 percent of that time will be chargeable.
This number is unique to each individual and depends entirely on your business goals and work style. If you’re not sure, track your time for a few weeks with a service like Paymo to see where it’s going. In a few weeks, you’ll have a better notion of what it’s like for you.
3. Track your expenses
Don’t forget about the costs! You’re the boss now, therefore you owe them money.
Freelance costs can include whatever you need to do your job.
- Office or coworking space rent (or coffee house?)
- Phone and internet bills
- Office equipment and software
- Marketing and social
- Administration, bookkeeping, and tax prep
- Travel expenses
These expenses mount up and should have a spot in your income goals.
Taxes are another key item to consider. Depending on where you live, you should set aside 30-40% of your monthly income to meet your taxes.
We’re all used to having our taxes withheld from our paychecks, but now that you’re a freelancer, that won’t be the case. This is why you don’t want to conduct a one-for-one trade on your previous salary.
Make a quick calculation to find your estimated yearly expenses as a freelance business owner.
4. Do the math
You can calculate your freelance rates now that you’ve determined how much you want to make, how much time you’ll be billing for, and what your expenses are.
There are a few rate calculators available that let you fill in the gaps and get an hourly rate, such as this one from MotivApp.
It’s that simple to figure out how much freelancers should charge!
Hold on – is it?
This hourly-rate-based approach will help you determine how much you need to reach your income goals, but does it mean it’s the right number to charge?
Depending on your financial goals and how much you want to work, your hourly rate may be far higher than what customers are prepared to pay. If the figure is extremely low, you may be selling yourself short. If the figure is extremely high, you may have difficulty convincing customers to pay you that much.
As a result, there are a few other factors that must be considered when setting your freelance rates.
Your value
The job you do for a client not only saves them time by not having to do it themselves, but it also solves their problems and helps enhance their business. If the landing page you create generates 10 new leads for your customer, the value of your work is equal to the value of 10 leads, not just the hours you were paid for.
Consider the real challenges that your job helps solve for your clients and how much it means to them. Is it profitable for them? Can you save them time? Is it possible to teach them a new skill?
The ability to present the value you deliver is the quickest approach to charging more and getting more clients.
Industry research
You might search around to see what other people in your industry are charging. This should not be your only consideration because their experiences are different from yours, but it’s a good place to start if you have no idea where to begin.
This research should also include determining who your ideal clients are.
Your clients may be willing to spend more or less money on your services depending on who they are. Think about your clients’ finances for your type of work. Is $500 more than their quarterly marketing budget, or is it a drop in the bucket?
If your ideal clients are unwilling to pay you fairly for your services, you may want to reconsider who you’re working with and whether it aligns with your goals.
Packaging your services
If your intended hourly pricing is significantly higher than the market rate, you may be able to better position yourself by offering packages or retainers rather than invoicing by the hour.
You can combine many jobs into one package that meets the needs of your ideal client by packaging your services. You can then present the total package value rather than the individual services, making it significantly more enticing to your clients and reducing the sticker shock of a high hourly charge.
Final thoughts
It can be difficult to put a price on your time, but selling yourself short is the quickest road back to your 9-5.
The most crucial aspect of determining your freelance rate is feeling confident in the amount you charge for your services. Clients require your experience and your unique point of view, thus you should charge a reasonable fee for it.
