To set your freelance rates, calculate your desired annual income plus business and tax expenses, then divide that total by your estimated billable hours.
You complete a freelance job and feel that you didn’t earn enough for the hours that you invested. Perhaps you were able to quote that price the first time, or perhaps you had to reduce the rate due to fear of losing out. This is typical when you’re not yet familiar with How to Set Freelance Rates.
It’s not just one number that determines a good freelance rate. It’s based on your experience, your skills, your time, the scope of the project, your business costs, your taxes and your business bottom line. Your rate should also be sensible for the sort of client and service you provide.
Don’t look for any frills. Consider what you’re providing, the amount of time it takes, the skill level required and the desired income for your freelance business.
Rate may be based on:
Incomrise helps freelancers and aspiring online earners find practical ways to build income in the digital economy.
There is no need for years of experience to charge a reasonable rate. Examine your existing skills, the quality of your portfolio, your niche knowledge and the type of service you offer.
When you’re starting out, you might choose to quote a base price that reflects the skills you have and the portfolio you’ve built so far, not what the lowest price is. If you’re not sure where to start, how to start freelancing with no experience can also help you understand how to find clients and develop your first projects.
But if you are wondering how much should I charge as a beginner freelancer, then think of the actual work instead of calling yourself a beginner.
While experience is a factor in pricing, it is not the only factor. You find out how to communicate, manage deadlines, deal with revisions, grasp briefs and solve problems more quickly as you work with clients. You also develop a portfolio that provides your clients with greater proof of your skills.
Client results are important as well. If you’re in the process of creating your first couple of samples, you’ll likely have a different pricing stance than a freelancer who has a relevant case study with strong testimonials and industry experience.
Take into account your experience as well as your skills and the complexity of the work when deciding how to set rates as a freelancer.
The following questions make a good review checklist:
These factors give you a clearer picture than simply counting your years as a freelancer.
If you are deciding which skills to develop, exploring the best freelance skills to learn can help you choose areas with practical demand.
Your income goal gives you a useful starting point for freelance pricing.
A basic calculation looks like this:
Desired annual income ÷ realistic annual billable hours = base hourly rate
Imagine you want to earn $36,000 a year and estimate that you can realistically bill 1,200 hours.
$36,000 ÷ 1,200 = $30 per billable hour
The key term in the last sentence is billable. Freelancers don’t work for clients all of the time. In addition, you invest hours in responding to emails, sending proposals, finding leads, invoicing, updating your portfolio and administrative work.
Working 40 hours per week does not mean that you have 40 hours available for client billing. The number you have after your calculation is more useful if you base it on real billable hours.
You can’t keep all the money you earn as a freelancer.
Costs for software, internet service, equipment, payment processing, advertising, professional services and other business expenses can be paid for. Another way taxes can eat into your pay is if you’re earning a commission, such as in sales or real estate.
That’s why how to calculate freelance rates is more complicated than dividing your desired income by the number of hours you work.
Let’s say you want to make $36,000 per year, but you believe that you’ll have $4,000 in business expenses. You need to leave tax and other deductions out of your pricing, too.
Rather than pricing your business to cover $36,000.00, price it to cover your target after expenses and taxes.
Project or hourly pricing is acceptable. This is a matter of the type of work. The freelance hourly rate is good when you don’t know how much work is going to be required. The following may be done in this model: consulting, continuous support, research, editing and work with constantly evolving requirements.
When it comes to project pricing, it can be simpler when the project deliverables are defined. You might want to let the client know the cost of a page, article, logo or social media package before you start.
When you have a client who is offering a lower budget, this does not necessarily mean that you have to turn him down or accept the lower price. First of all, it is important to know what is included in the budget. Discuss expected submissions, timeline, revisions and other demands.
Instead of dropping your rate right away when learning how to negotiate freelance rates, work on altering the scope of the business. It is also possible to provide two or three packages with varying deliverables. In either case, make sure that the final scope is confirmed in writing.
A low rate isn’t necessarily a bad thing. It may be a conscious practice to charge less for a shorter time period, to establish a portfolio or to get into a new niche.
When your battery is undercharged, you can see these indicators:
Ask yourself: how do I know if I am undercharging as a freelancer? Look at your actual hours, income, expenses and workload instead of judging your rate by one client’s reaction.
There’s no set period for which you have to wait before evaluating your pricing. This may be appropriate if you have acquired special skills, tackled a more challenging project, established a more robust portfolio, gathered valuable references or otherwise gained greater expertise.
Before considering raising freelance rates, take a look at existing freelance projects and clients. Review the amount of time that’s being spent, what results you’re getting and if the current rate is still worthwhile.
Keep the conversation professional and direct. For example:
“Starting next month, my rate for this service is increasing to $X. The updated rate reflects the expanded scope and experience I bring to the work.”
A standard freelance fee doesn’t exist for everyone and for all services. The pricing strategy you’ll choose depends on your experience, abilities, project size, costs, taxes, client budget and income goals.
The best place to start how to set rates as a freelancer is to look at your price, instead of setting it and forgetting about it. As you go about your freelancing career, record your time, keep track of your income, look at your expenses and fine-tune your pricing.
If you’re able to charge a rate that pays you what you’re worth and covers your costs, you’ll have a more solid basis for sustainable freelancing.
Begin at a level that is commensurate with your skill level, service, portfolio and time required. Do not opt for the cheapest as you are a newcomer.
Take into account your experience and the project you’re working on, your costs, your taxes, the income you’re seeking and the going rate for the services you’re providing. The rate also should cover non-billable work.
Hourly pricing is ideal for situations where there is an unknown amount of work. The deliverables and scope of the project should be clearly defined to work better with project pricing.
If projects are consistently late, you are not charging enough if you are not making enough money to cover business expenses, or if you are getting requests from clients for more work without them compensating you.
Revisit your rates as you gain experience, acquire special skills, tackle complicated projects, create an impressive portfolio or if your current rate no longer aligns with the amount of work you do and the expertise you provide.
