One of the biggest challenges new freelancers face is setting their rates. Charge too high and you could end up alienating good clients with tight budgets. Charge too low and you may leave money on the table and not make enough to cover your expenses.
Your freelance rate shouldn’t be an arbitrary number that you choose on a whim. To ensure that it accurately reflects your expertise and encompasses your expenses, you need to evaluate a variety of factors, like your business costs and professional competitors.
Steps to Take When Setting Your Freelance Rate
Freelance rates aren’t one-size-fits-all. Before you commit to a freelance rate, take these steps to ensure you — and your clients — benefit from reasonable and considered pricing.
1. Review Competitor Pricing
Whether you’re a freelance copywriter or web developer, you’ve got competition. There are always other freelancers who offer the same services as you, either in your local area or remotely.
Gather rates for a variety of your competitors. Pay attention to their credentials, past work experience, reviews, and the quality of their work. Once you have a good idea of the general range of rates for your line of work, consider positioning yourself somewhere in the middle, depending on where you are in your career.
Look for freelancers who have similar work experience, skills, and services compared to you to get the most accurate competitor rates. If you don’t know of any right off the bat, try finding them:
- On LinkedIn
- Through freelance websites like Upwork
- By joining local and remote freelance groups and networks
You can also reach out to your existing industry contacts if you have any. A lot of clients come through networking and relationship building, so this provides the added bonus of expanding your contact list for future work.
2. Consider Your Industry
Some industries pay better than others. Although you may be able to offer your freelance services in more than one industry, chances are that your experience is related to a particular focus.
For example, as a freelance writer, the more you write for a specific industry or trade, the more of an expert you become. The same is true of legal or technical writing. Potential clients are more likely to seek out freelancers who have proven experience in a given industry because they’re familiar with the terminology and audience.
Look for comparable salaries for full-time employees at companies within your industry as well as other freelancers in the space. This will help to give you a better idea of where your industry falls on the pay scale. If your industry pays its employees and other freelancers better than average, you can aim for an above-average fee.
3. Price for Your Specialization or Niche
The more you carve out a niche when freelancing, the higher rates you can charge. When new clients hire freelancers, they’re looking for a specialist who can perform a specific service with high-quality results. And although you can certainly offer some general services, your specialized skills are what set you apart.
Make a list of the services you plan to offer and separate your general skills from any specialized ones. If you have trouble figuring out what counts as a specialization, consider the skills you’ve honed as a professional that other generalists in your field might not be able to do as well as you.
For example, a software developer might be specialized in iOS development or a graphic designer in user experience design. A freelance marketer might be especially skilled at search engine optimization or setting up marketing automations.
These are the specializations that potential clients will look for — and that will allow you to charge a higher per-project or hourly rate. When reviewing your competitors, look for others with similar skill sets to get a more accurate idea of what your own freelance rate should be.
4. Evaluate Your Experience
If you’re new to freelancing, you may think that automatically means you have to charge a lower rate. Thankfully, that’s not the case.
Freelancing typically incorporates all your previous professional experience, including time spent working for an employer. Just because you’re starting a new freelance business doesn’t mean you aren’t a seasoned pro. Instead, you’re using your years of experience and expertise to branch out on your own.
Remember to count all your relevant experience when determining your freelancer rate so that you get paid what you’re worth. This includes any previous employers, roles, and education related to the services you offer to prospective clients.
5. Compare Your Rate to an Annual Salary
Take a look at comparable positions on Glassdoor or Salary.com to see how a full-time employee’s salary compares to your own for similar work. As a freelancer, you’ll likely want to charge a higher hourly rate than what you’d make as an employee in order to cover your expenses, but it’s a good starting point.
While you may not find an exact match, you should be able to view enough similar positions to give you a range, which you can then compare to your competitors and costs.
6. Calculate Your Costs and Expenses
Aside from your regular expenses, like rent and utilities, you’re going to have to cover some freelance startup costs. For example, you may have to pay for:
- A website and hosting
- Office furniture like a desk and chair
- Software subscriptions
- Advertising and marketing
- Hardware, like a laptop and printer
Combine your total estimated costs per year and divide them by 12 to determine what you need to make each month. From there, take your monthly expense amount and divide it by the total number of hours you plan to work per month. This will give you the hourly rate you need to charge to cover your costs.
However, you still need to make a profit from your freelance work and cover any emergency costs, so be sure to account for that as well.
7. Factor in Both Nonbillable and Billable Hours
In step six, you estimated how many hours you want to work each month, but did you consider whether all of them are billable or not?
Billable hours are the work hours you spend actually earning money from clients.
Nonbillable hours are work hours that you can’t bill clients for, such as time spent taking care of administrative tasks like building quotes and sending out invoices.
Both billable and nonbillable hours are essential in running a successful freelance business, but how you get paid for them differs. Billable hours can be directly attributed to a specific client and project, while nonbillable hours can’t.
As a rule of thumb, your freelance rate should not only cover your billable hours but your nonbillable time as well. This doesn’t mean you charge clients for the time you spend updating your business’s social media pages, but it does mean that your overall rate needs to be high enough to support all of your working hours.
When you set freelance rates, estimate both billable and nonbillable hours to ensure that you’re making enough to support yourself and your business.
8. Choose a Pricing Model
Whether you’re a freelance web designer or marketing specialist, you have a variety of pricing models to choose from. The two most common pricing models are hourly and per-project.
Which you use depends on the amount of time and work that needs to go into a contract. If the project is straightforward and easy to estimate, a project fee might be the best way to go.
But if there are aspects of the project you aren’t familiar with, or it’s hard to estimate the amount of work it will take, charging an hourly rate will keep you from putting in more time than you’ve budgeted for.
You also need to determine whether you plan to charge a deposit upfront, which can affect your cash flow and budget.
Many freelancers charge differently based on the scope of the project, timeline, and skill level required. Having a basic understanding of how you prefer to bill clients will make it easier for you to project your monthly income and develop a consistent billing process.
9. Make a Pricing Sheet
Not all your contracts are going to be straightforward and easy to estimate, but for those that are, making a pricing sheet will make your quoting and invoicing process easier. Create a spreadsheet of your base services and your desired rate for each.
For example, if you’re a digital content writer, you can take a base service like writing a blog and estimate your typical charge by detailing what it normally includes and how long this kind of project takes you. You might include:
- One blog article, up to 1500 words
- A maximum of two rounds of edits
- Topic provided by the client
- Includes title and photo
From there, you would determine a standard rate. Let’s say you want to make $50 per hour and you know these kinds of blogs take you about five hours on average to complete. So you might set your standard rate at $250.
If a client were to request a higher word count or additional rounds of editing, you would increase the cost. And if a client was looking for a shorter piece and didn’t need a photo, you could offer a scaled-back rate.
Keep a spreadsheet of your standard prices for the most common services you provide to your clients to keep your rates consistent and to make quoting easier and less time-consuming.
10. Include a Renegotiation Clause in Your Contracts
As you grow your freelance career, you may want to increase your rate. Perhaps you started out too low or you’ve put a lot of time and effort into growing your expertise. Whatever the reason, it makes complete sense to reevaluate and increase your freelance rate from time to time.
You can set yourself up to get a higher freelance rate from new clients by including a clause in your contract to renegotiate your rate after a certain period of time.
This will ensure you aren’t stuck at a lower rate for long periods of time.
Your freelance rate shouldn’t be left to stagnate. Instead, you should review it at least once per year to consider factors such as inflation, any new skills you’ve learned, and the types of clients you’re attracting.
Even if you started your freelance business before calculating an accurate rate, you aren’t stuck with it forever. It is possible to get a higher rate from existing freelance clients — it just takes a little elbow grease.
Regardless of whether you’re new to freelancing or you’ve been at it for a long time, setting reasonable and sustainable freelance rates is essential to your long-term success.