One of the biggest challenges that freelancers face is determining what to charge for their services. Many factors can influence what you ultimately bill your client, such as the quality of your work, what your competitors are charging and your perceived value in the marketplace.
Your cost of doing business is also a very important consideration. For example, a photographer who needs to buy and maintain thousands of dollars worth of gear will have much higher costs to cover than a freelance writer who work from a café on a laptop.
Although there is no easy answer to figuring out how much you should charge, here is a simple formula that can help you get started.
Use this formula to help you determine what to charge per hour:
- Determine how much you want to make in a year
- Determine how many hours you work in a week
- Divide your yearly rate by 52
- Divide your yearly rate by the number of weekly hours worked
For example, if you realistically need to make $65,000 a year and work 30 billable hours a week, you will need to charge $41.67. You might even want to round that out to $45.00!
If you are quoting on a project, you will need to estimate how many hours it will take to complete. If it’s going to take 25 hours, that is a project fee of $1,125.00.
Make sure the number you set for your annual income is enough to meet your financial needs and cost of doing business, with enough leftover for savings to help you through business lulls. In the beginning, you may not be able to justify very high rates, but you still need a number that you are comfortable with and reflects your value.
Also, much of your business could end up coming from regular clients. It can be difficult to suddenly make significant increases to your price list without alienating regular repeat business. Ordinarily, a five to ten percent increase is acceptable, in keeping up with inflation.
Track Your Time
If you are new to freelancing, you may find that you continually underestimate how long it will take to complete a project. Failure to determine the exact scope of a project beforehand can lead to earning less than you should, or paying for things with your time and money that are the client’s responsibility.
Track your time on each project to get an understanding of how many hours it typically takes to complete the work you do. In time, you will be able to more accurately gauge the time involved when you are presented with the scope of a project. When in doubt, it is better to overestimate than underestimate, as projects often take longer than we assume they will.
Don’t Forget Income Tax!
Freelancers need to pay income tax directly to the government, so this needs to be taken into consideration when coming up with a final rate. Always put aside money to pay your tax bill when you complete each project, preferably in a separate account.
Finally, keep in mind that if you are just starting out, you may not land your optimal hourly rate for a while, but as you build a body of work or client list, you will have more leverage to demand higher rates.
In the meantime, value your work and don’t be afraid to ask for what you deserve. You just might get it!
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