How much is your time worth? Determining a freelance rate can be the most difficult decision freelancers need to make. Unfortunately, many go at it the wrong way. You need be paid fair and square for the service you provide to a client. There’s no need to work dirt cheap when you don’t have to.
It’s time to step back and find out if you are being paid what you’re really worth or not and what your freelance rate should be.
Hourly vs Project-Based Freelance Rate
There are two ways you can price your client. Hourly or based on a project. Let’s find out which one is better for a full-time freelancer.
Hourly Freelance Rate is Okay to Start with
Most new freelancers start with an hourly rate. When a new client approaches them, they typically quote their last hourly rate. This is a wrong way of setting your freelance rate as no two clients are the same.
Here’s an example to show you how limited hourly pricing is:
Paul is a new freelancer on Upwork. Since he doesn’t have much experience writing articles, copy and web content, he sets his hourly rate at $10/h.
He then bids for a few projects, lands some and completes them to his clients’ satisfaction. So far so good.
Paul is no longer a rookie and figures he shouldn’t be paid as such. So he starts raising his freelance rate. First to $20/h, then $30/h, all the way to $60/h. He earns a reputation as a fast and reliable writer and clients are very happy to work with him.
But then Paul starts noticing something. His own speed is actually becoming his undoing. One client came to him with a $60/h rate. Paul accepted it and finished the project in 4 hours, earning a total of $240, but he knew he could’ve got much more from this client.
Paul is working with high-end clients now and is still compensated per hour. Now he is being underpaid for his hard work.
…But a Fixed Freelance Rate is Better in the Long Run
Paul stopped billing hourly for his work and started billing per project. Soon, a new client approached Paul. This time, our freelancer billed him differently. He looked at the client’s business, saw it was an established business that needed his solution and billed him accordingly. 500 Dollars.
The client accepted and Paul set to work on this project. After 4 hours, he was finally ready to send his work to the client, who was happy with it and paid Paul his $500.
Paul earned double using a project-based pricing than he would have if he used hourly pricing. From now on, he decided to only charge per project.
Mistakes to Avoid When Determining Your Freelance Rate
However, even project-based pricing is not foolproof and there are two major mistakes you should aim to avoid when setting your freelance rate.
The first one of these is matching your freelance rate to the market price. Don’t set your rate off of what someone else charges. Instead, set your own individual rate, based on the client’s budget. Ask the client what is his budget for this project (or an estimated budget) and then quote your rate accordingly.
The second mistake is estimating the amount of time you will spend on the project. That’s the hourly pricing guy way of thinking, and is not the way if you want to charge per project.
In Setting Your Freelance Rate You Need to Look at the Big Picture
Clients don’t care if you finish the project in 20 minutes, 2 hours or 20 hours. They just want the project to be completed. The end result is all they really care about. Whether you deliver in an hour or 24 hours, it’s all the same to them.
What you really need to look at is the client’s budget and how your work fits into it. Find out what relation your work has with the client’s budget.
For instance, let’s say you get an offer from a big client to redesign the content on their website, including a new home page, about us page, landing page, product descriptions and everything else. A total of 30 pages.
You then start doing the math. The Home Page and the Landing Page are both 500 words, so you set them at $20 each, or $40 combined. About Us Page is 200 words, so that’s another $10 and each product description should be 1,000 words. That’s another $40*27=$1,080. That’s a total of $1,130.
But, if you know that the client’s budget for the project is $10,000 than your $1,130 is barely a tenth of it. With that knowledge you can set your freelance rate much higher and the client will still be happy to pay for it.
What You Need to be Aware of When Deciding Your Freelance Rate?
Don’t think that you have to charge one client the same as the next one. Every client is different, has different needs and different budgets. Understanding what these are will help you greatly when quoting your rate. You need to be aware of your own expenses and how much it costs you to work, though. Therefore, it stands to reason not to set your freelance rate lower than this. Make sure you can cover this and then some.
In the end, however, remember that clients only care about solutions. Understanding this is almost all you need to determine your rate.
Don’t be afraid to aim high with your freelance rate. If it’s is too high for one client, that’s no big loss, most will not say no outright, so there is always room to negotiate.
Finally if you’re still not sure if you should start freelancing, a Payoneer survey from 2015 found that an average freelance rate is $21 per hour, meaning that if a freelancer works 36 hours per week, he can earn over $39,000, pre-tax. That’s more than what those working full-time, 9-5 jobs earn in average in many of the countries (180) covered by this survey.
Do you have any questions or comments regarding this post? How do you decide your freelance rate? Sound off below and don’t forget to like and share this post.