Figuring out how much to charge as a freelancer is tough, no matter your industry. Here’s how to set your freelance rates, step by step!
It’s hard to believe that I was laid off from my swanky startup editorial job nearly three years ago. At the time, I had no clue what my next steps would be but I dreamed of moving to Germany. I eventually decided to start freelancing so I could apply for a freelancers visa in Berlin and somehow everything wound up working out. Sounds dreamy, right?
While starting my freelance career was exciting, it was also incredibly stressful. Like, cry myself to sleep for five weeks straight stressful. At the time, one of the things that stressed me out the most was setting my freelance rates. I had no clue where to start; all I knew was that I wanted to make at least the same amount of money I’d made when working full-time in an office.
If you’re feeling panicky at the thought of putting a price on your work, take a deep breath and get ready to dive in. I know it sounds cheesy and cliché, but I’m pretty much positive that the biggest reason you’re stressing out about calculating your freelance rates is because you’re undervaluing yourself. IT’S ALL IN YOUR HEAD.
Here’s how to set your rates as a freelancer, no matter your industry:
Step 1: Calculate Your Expenses
Let’s ease our way into figuring out a freelance hourly rate. First, you want to tally up all of your monthly expenses (both personal and professional). Some of the expenses to jot down include:
- Transportation costs (if applicable)
- Programs / apps required for your work
- Insurance payments
I recommend making a spreadsheet and writing down the individual expenses and costs, just so you have everything down on paper.
Step 2: Set Your Goal Net Income
Next, you need to set a goal yearly net income for yourself (i.e. the amount of money you’ll keep AFTER you’ve paid off your monthly expenses). This will look different for everyone and will depend on your experience, industry, and where you live. If you had a full-time job before this, use your previous salary as a jumping off point. Keep in mind that you should aim to earn more as a freelancer than you did at your salaried job because you’ll be losing many of the benefits that came along with it (i.e. having PTO, splitting 401K payments with your employer, company perks, and so on).
Step 3: Calculate Number of Days Off
Something that many new freelancers forget to factor into their rates is the amount of time off they’ll be taking throughout the year. Freelancers don’t get paid time off; any hours you’re not working comes out of your own pocket, so to speak. As such, you need to figure out how many days you anticipate taking off throughout the year.
Your days off will include: weekends, vacation days (the best!!), sick days, and federal holidays. You might have other special days you want to take off as well. For example, I always take my birthday off of work as a little gift to myself. And even though I live in Germany now, I still take the Fourth of July and Thanksgiving off of work because they’re two of my favorite American holidays.
Note that there are typically 104 weekend days in a year. You’re welcome.
Step 4: Calculate Number of Working Hours
I don’t work 9 to 5 every single day, and you likely won’t either. While you may be glued to your laptop during those hours, keep in mind that some of your working hours will be devoted to answering emails, searching for new clients, tallying up your quarterly taxes, and dealing with other administrative work. Not all of the work that you do can be billed to clients, so you need to factor that into your freelance rates.
There are 8,760 hours in a year — start with that number and subtract the hours you’ll lose to weekends, vacation and sick days, and the estimated time you’ll need to do admin work each week. Also subtract the number of hours you won’t be doing client work on a given work day.
Step 5: Bring it All Together!
See? That wasn’t so hard after all! Now that you’ve done the legwork, we can pull everything together to calculate your freelance rates. Here’s the simplest freelance rate calculator you can use:
Yearly Expenses + Goal Net Income / Billable Working Hours = Freelance Hourly Rate
3 Ways You Can Price Projects
There are three main ways to price yourself as a freelancer: based on the time it takes you to complete the work, as a package price per project, or what the perceived value of the work it. Here’s a brief overview of the pricing systems:
Time-based pricing (hourly or daily)
How many freelancers start working. If pricing hourly, you’ll need to track yourself using an online timer of some kind (I know And.co has one, as does QuickBooks). Some clients ask to see your time spreadsheet, so it’s best to actually time yourself to keep everything on the books. The major downside to pricing per hour or per day is that the total amount of money you can make in a year is constrained to the number of hours you can work. If you go on vacation of are sick, you can’t make money.
How I prefer to price my SEO clients. With project-based pricing, you have to estimate how much time and effort will go into completing a project for a client and set a budget before starting the work. I prefer this pricing method because it means I know how much money I’ll be making in a month before I even start on the work. Plus, if I finish a project in less time than I anticipated I still get paid the full amount. The downside of project-based pricing is that if a task takes you much longer than expected, you won’t earn more money from it.
This type of pricing means you charge based on how much money you think a project is worth. This is the type of pricing I use for copywriting projects. High-quality, SEO-optimized landing page copy can drive traffic to a company’s website and bump up their sales — in this regard, the text that I write for each page has a higher value because it will increase sales over time. Many freelancers can charge value-based rates, including copywriters, web developers, web designers, and so on.
General Tips for Setting Freelance Rates
- If you’ve set an hourly rate for yourself and are still nervous about charging “that much,” check out the rates sheet on Freelancing Females to compare your rates to others in the industry. As a rule of thumb, US-based freelancers shouldn’t be charging any less than $35/hour, no matter what you’re working on. Remember, you’ve got bills to pay!
- I highly recommend connecting with freelancers in your area via LinkedIn. Buy them a coffee and chat rates — this is a great way to become comfortable with talking about money.
- ALWAYS CHARGE MORE THAN YOU’RE COMFORTABLE WITH. (Yes, the all caps were necessary). It’s natural to undervalue yourself, but charging less than you’re worth will only hurt you in the long run. I doubled my prices a mere five months after I began freelancing because I realized how low my rates were. I now give myself a little raise each year because my skillset is continually evolving.
- Be crystal clear with prospective clients about your role and what you’ll bring to the table. The clearer you are about how your work will benefit them, the more likely they’ll be to sign you on.
- Resist the urge to lower your rates. People will ask if you can lower them, but do not feel obligated to do so. If their budget doesn’t fit your prices, that’s their problem, not yours.
Setting your freelance rates can be confusing. I’ve been freelancing for three years, and I still had to double check some of the information above — determining total billable working hours, monthly expenses, etc. melts my brain a bit. You absolutely can make good money as a freelancer, but it’s up to you to price yourself appropriately to make that happen.
If you have any questions about setting rates or freelancing in general, leave me a comment below so I can help you out!
Tell me: Do you currently freelance? If so, what’s your industry?