I am a writer and I have been freelancing my way since 2011. After pausing for a while to work for the corporate world, I went back to freelancing exclusively. The same as any professional starting again, I had to update my freelance rates.
Do I go back to my old rate as a freelancer? Do I match the current rate of other freelancers? It’s a common dilemma for all remote freelancers. Do I base it on the current market rate of freelance writers in my country or do I match it with the expected rate of my clients?
If I charge too high, clients may decide to hire someone else. If I go too low, I may be missing the chance to earn what I deserve. Also, not every project charges by the hour. Some clients ask for fixed rates per project, so I also have to know how to make estimates for these.
How Much Is Your Time Worth?
There is a lot of thought and research that goes on into setting freelance rates. Having a global client network is confusing enough. Working from home as a career freelancer is another predicament. There are certain factors that you need to take into consideration.
- Living expenses
- Skills and Experience
- How much time you can devote to work
We learn skills so we can work and earn money to pay the bills each month. We acquire experience so we can increase that value. Our household budgets depend on the lifestyle we choose to live. For the general working class, income is budgeted for everyday living expenses, house bills, healthcare, loans, insurance and other payments. Since you are freelancing, you decide how much of your time you want to focus on work. You can either work the standard 40 hours a week, work when clients need you, or take on projects as you like.
Luckily, these factors are flexible. You can always cut your expenses to suit your budget or earn more by working more or getting certificates to add to your skillset. Whichever the case, you have to take into account these factors when deciding how much you want to get paid.
How to Set Your Freelance Rate
As a freelancer, you provide services to others using your hard-earned skills. You deliver quality work and charge your clients the right amount. However, you also want to grow your business so you need to charge rates that will allow you to continue providing your services to them.
Professional photographer, Sue Bryce, suggests that we work to thrive in life and not just to survive. So how much do you need to earn to live the good life? Below is a brief guide to help you go through this phase of your freelance career. Learn how to set perfect freelance rates by following these steps.
# 1 – Identify your Annual Target Income
How much do you want to make in a year? You may think it’s easy to just give out a number. Apparently, this is one of the most thought of questions for working professionals. Perhaps you want to compare your last work to the latest engagement and want to do better. Go through the top 3 factors we’ve discussed earlier. Think about your
- Future Plans (career, vacation, travel)
- Retirement Savings
- Emergency Savings
- Daily expenses
Get detailed with your income and lifestyle expenditures, and come up with your target figure.
# 2 – Add in the Costs of Doing Business
Doing freelance is a business. As a self-employed entrepreneur, you will have expenses that you wouldn’t have to worry about as an employee. You also need to pay taxes, regardless of which country you’re from. These expenses count as part of the new expenses to be considered moving forward. Costs vary for every freelancer depending on a lot of factors, but some examples are:
- Internet Plan
- Office Space – for those who do not work from home
- Computer and maintenance
- Mobile phone with internet
- Licensed software and productivity apps – for creative entrepreneurs
- Other work tools – if you cannot get them for free (e.g. project management tools, invoicing/accounting software)
- Miscellaneous fees – such as paying someone to do your taxes, and other third-party service fees
- Overhead expenses – such as marketing if you want to promote your work and services
List every additional expense that you can think of relating to freelancing. Add these costs to your annual target income.
# 3 – Determine How Many Hours you are Willing to Work
There is a good reason why many people chose to freelance. Mine is so that I can do the two things I love most – write and travel – without sacrificing quality time with family. Time is the best gift that you can give to yourself and your family. How you manage it is up to you.
Let’s say you want to work around 40 hours a week. So you have 8 hours per day, 5 days a week, 4 weeks per month, and 12 months a year. That is roughly 1,920 billable hours a year. But you also need to take into account holidays, time off for birthdays and anniversaries, and sick days.
Once you get that figured out, you now have a clear estimate of the hours you are actually going to devote to work each day, or at least each month. Remember that those are just potential billable hours. You don’t get paid to look for new projects, market your skills, and do other business management tasks.
# 4 – Compute for Your Hourly Rate
The formula is pretty simple. Divide your adjusted annual target income by your estimated billable hours per year.
Round it off and you’ve got your hourly rate! Remote freelancers like me who take on clients independently from marketplaces like FreeeUp still have to convert this into different currencies to suit clients. My primary currency is USD, and I make adjustments from there.
# 5 – Grab the Opportunity to Earn More
Hourly rates often limit your opportunity to earn more. You can work as much as 60 hours a week if you want, but how does that affect you? Through fixed price projects, you can actually work less but earn more. Using an example from Forbes,
Scenario 1: A graphic designer tells a client that he can create a logo in 2 hours for $150/hr.
Scenario 2: A graphic designer charges a client $300 for a logo.
When you charge per hour, a client thinks about your hourly rate as either worth paying based on the number of hours you’ve estimated, or too high. If you charge a fixed amount, a client will consider that quoted price as worth it based on the market rate. Most of the time, the latter scenario is more likely to work out for you.
The advantage of fixed freelance rates is that you can maximize your earnings without having to work so many hours.
When to Raise your Rates
At some point in your career, you will gain more experience and acquire more skills. You will want to charge more for your expertise. The question is how you decide if you are ready to raise your freelance rates.
- You have not run out of projects for the last 6 months
- You have been receiving great feedback from your clients for all your work
- You have built such good working relationships with them that you have become their go-to person
- Work for you is easy
When talking about increasing your rates with clients, it boils down to right timing. Make sure that your resume, portfolio, and reviews from other clients can back up your claim that you deserve more for your time. Continue developing your skills and learn how to increase your market value.
If you work through these steps plus some do a little more research, you can successfully raise your rates without seeing a decrease in active projects.
Work with Freelance Platforms
FreeeUp is one of the fastest-growing freelance marketplaces online. Known for its pre-vetting process, you are sure to land awesome projects once you get to join their network. Being known to clients as part of the top 1% gives you the edge over your competitors.
The best thing about joining platforms like FreeeUp is that it gives you the assurance that you will get paid. You bring your skills, bid on projects, and work without constantly worrying if the client will pay you or not. As long as you properly set up your projects in accordance with platform guidelines, you will be protected. On other digital freelance platforms like Upwork and Freelancer, you will also shell out fees for every project, so make sure that you take these into account.
Sign up as a freelancer with FreeeUp and become part of a growing community of highly-skilled remote freelancers. Learn more about how to advance your business by reading their freelance tips.
Lailah Paredes is an engineering student, creative entrepreneur, and a self-confessed island girl. As a travel junkie, she loves experiencing different cultures and sharing them through her writing. Read about her travels across the beautiful islands of the Philippines at her blog laieatsandtravels.tumblr.com.