Setting Freelance Rates in Five Simple Steps: Making Money!

June 6, 2024
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Let's talk about everyone's favorite topic: money and setting freelance rates.

Just kidding. I know talking about pricing makes most freelancers want to crawl under a rock and hide. But unless you've figured out how to pay rent with exposure and good vibes, we need to tackle this head-on.

Here's the thing: pricing your services isn't just about slapping a number on your work. It's about finding that sweet spot where you're earning what you're worth without scaring away clients or feeling like you're ripping them off.

So, grab a cup of coffee (or something stronger—I won't judge), and let's dive into the art and science of pricing your freelance services.

The “How Much Should I Charge?” Panic Attack

We've all been there. A potential client asks for your rates, and suddenly your mind goes blank. You break out in a cold sweat. Should you go high and risk losing the project? Go low and eat ramen for the next month?

Take a deep breath. We're going to break this down step by step.

Step 1: Calculate Your Bare Minimum when Setting Freelance Rates

Before you can decide what you want to charge, you need to know what you need to charge. It's time for some math (I promise it won't be too painful).

  1. Figure out your annual expenses (both personal and business)
  2. Add in taxes (because the taxman always cometh)
  3. Don't forget about savings and retirement (future you will thank present you)
  4. Now, divide that total by the number of billable hours you plan to work

Voila! You now have your bare minimum hourly rate. This is your “I will literally be living in a cardboard box if I charge less than this” rate.

Here’s an example: Let's say Jane the freelance designer calculates her annual expenses, taxes, and savings to be $60,000. She plans to work 30 billable hours a week for 48 weeks of the year (allowing for vacation and sick time). That's 1,440 billable hours.

$60,000 ÷ 1,440 = $41.67 per hour

This is Jane's bare minimum rate. But remember, this is just the starting point.

Step 2: Factor in Your Expertise and Value when Setting Freelance Rates

Now that you know your floor, it's time to build up from there. This is where things get a bit trickier because it's not just about time anymore—it's about value.

Ask yourself:

  • How much experience do you have?
  • What unique skills or perspectives do you bring to the table?
  • What kind of results can clients expect from your work?

Remember, you're not selling your time; you're selling outcomes. A logo design isn't just about the hours spent in Illustrator; it's about creating a visual identity that will represent a business for years to come.

Let’s say you’re a copywriter and you used to charge by the word. Then you realized that a 500-word sales page that generates $100,000 in revenue is worth a lot more than 500 words of filler content. If you switch to value-based pricing, you can charge a percentage of the expected revenue your copy would generate.

man in white dress shirt sitting on black rolling chair while facing black computer set and smiling as he is Setting his freelance rates
Photo by Andrea Piacquadio on <a href=httpswwwpexelscomphotoman in white dress shirt sitting on black rolling chair while facing black computer set and smiling 840996 rel=nofollow>Pexelscom<a>

Step 3: Research the Market (But Don't Let It Rule You)

It's good to know what others in your field are charging, but don't let this be the only factor in your pricing. You are not them. They are not you.

Use market rates as a guideline, not a rulebook. If you find that you're way above the average, you might need to justify your premium rates (or adjust them). If you're way below, you might be undervaluing yourself.

Pro Tip: Create a “swipe file” of how other freelancers in your niche present their services and pricing. This can give you ideas on how to structure and communicate your own rates. But don’t be afraid to try new things!

Step 4: Experiment with Pricing Models

Hourly rates are just one way to price your services. Consider these alternatives:

  1. Project-based pricing: Charge a flat fee for the entire project.
  2. Value-based pricing: Base your fee on the value your work brings to the client.
  3. Retainer model: Charge a recurring fee for ongoing work.
  4. Tiered packages: Offer different levels of service at different price points.

If you charge hourly, you’re essentially penalizing yourself for getting better at your job. Why? Because as you’re skill level and expertise increase, you’ll find yourself working more efficiently over time. Instead, think about switching to a different pricing strategy that allows you to scale your income without working more hours.

Step 5: Don't Forget About Non-Monetary Benefits when Setting Freelance Rates

Sometimes, a project might be worth taking on even if it doesn't quite hit your ideal rate. Consider factors like:

  • Will this project help you break into a new industry?
  • Will it give you a impressive addition to your portfolio?
  • Could it lead to more lucrative work down the line?

Just be careful not to make a habit of undercharging for “exposure” or “opportunities.” Your grocery store doesn't accept those as payment (trust me, I've tried).

The Art of Communicating Your Rates

How you present your prices is almost as important as the prices themselves. Be confident. Be clear. And most importantly, focus on the value you're providing, not just the cost.

Instead of saying “I charge $X per hour,” try “Your investment for this project is $X, which includes [list of deliverables and benefits].”

cheerful multiethnic businesswomen shaking hands in modern office after agreeing on project rates
Photo by George Milton on <a href=httpswwwpexelscomphotocheerful multiethnic businesswomen shaking hands in modern office 6953835 rel=nofollow>Pexelscom<a>

I used to send quick email quotes with just a number. I started losing out to cheaper competitors until I changed my approach. Now, I sends detailed proposals that break down exactly what the client is getting, the process I'll use, and the expected outcomes. My close rate skyrocketed, even though my prices stayed the same or increased (depending on the project).

Review and Adjust Regularly

Your rates aren't set in stone. As you gain more experience, learn new skills, or shift your focus, your pricing should reflect that. Set a reminder to review your rates every 6-12 months.

And don't be afraid to raise your rates for existing clients. If you've been delivering great work, they'll understand that your value has increased.

Pro Tip: When raising rates for existing clients, give them plenty of notice and consider grandfathering them in at a slightly lower rate than new clients. It's a nice way to reward their loyalty.

The Bottom Line: Price for the Freelancer You Want to Be

Here's a mindset shift for you: Price your services not just based on who you are now, but on the freelancer you want to become. Think about where you want your business to be in 10 years.

Want to work with higher-caliber clients? Want to be seen as a premium service provider? Your pricing sends a message about how you value your own work.

Remember, there will always be someone willing to do it cheaper. But there will also always be clients who understand that quality comes at a price. Your job is to find the clients who value what you bring to the table and are willing to pay for it. And trust me, they're out there.

So, take a deep breath, crunch those numbers, and set those rates with confidence. You've got this, and your bank account will thank you.

Now, if you'll excuse me, I need to go raise my own rates. Writing this post has made me realize I'm way overdue!

Author

  • Treasa Edmond

    With 30 years in the workforce, 15 of those running her own freelance writer and content strategy business, Treasa has worked with all kinds of clients. It took her years to break out of an employee mindset so she could become the boss of her business. Now she's sharing her proven client management strategy and communication process so you can become the boss of your business today!


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