The following post comes from Danielle of ThisQuarterLife.com. I know a lot of bloggers (and even non-bloggers) indulge in the fine side hustle of freelancing, but we all deal with one awful question: how do you set your rates as a freelancer? Danielle offers some advice, and a nice mathematical equation, for our problem.
Whether you’ve freelanced before, or you’re just starting out, establishing a rate at which you agree to work for can be a difficult thing to decipher. According to career expert Jill Jacinto, a major shift has begun toward a freelance economy. “Many people with full-time jobs still have passions that they want to pursue,” Jill says, “and one of the ways to do that is to hone those skills through freelancing.”
If you’re making the jump for the first time, or want to make sure you’re on the right track with what you’ve been charging, read Jill’s advice for establishing your rate as a freelancer.
1) Get in touch with the industry
Before you speak with any potential clients, find out what the industry norms are for freelancers in your region, and for your particular skillset. Visit LinkedIn, take a look at the groups they have for your field of work, and see if you can connect with someone who is established in the line of freelancing that you’re interested in, and could speak to you about hourly rates for that field. Searching sites like Elance or TaskRabbit will give you a good feel for what number would make sense for you to charge.
2) Follow the equation
Full-time freelancers can use an equation to figure out what to charge their clients per hour.
You’ll need to know:
Annual salary: The salary you were making when you were employed full-time (or a comparable full-time salary to what someone at your experience level would make in the industry you are freelancing in).
Annual profits: Which should be 10% to 15% of your annual salary.
Annual billable hours: Meaning, the hours that you work per year. Take 365 days, minus vacation and sick days, weekends off, and the time that you’d spend doing administrative tasks (such as billing) and then multiply that by the number of hours you would work per day.
Annual expenses: Things that are not provided to you by a company anymore now that you’re a freelancer, such as internet and health insurance costs.
Then follow this equation: Your annual salary + your annual expenses + annual profits / by annual billable work hours = basic hourly rate
3) Weigh the pros and cons of charging hourly vs. charging per project
When you’re deciding whether or not you should charge an hourly rate, or if you should ask for a flat price for the project, look at the pros and cons. Working hourly may be great because there is no ceiling, but if you can’t finish the project in time, it’s going to reflect poorly on you. However, charging a flat rate could mean that you end up doing much more work than you had anticipated. Be realistic about the time that it’s going to take you to complete a project before you choose whether to charge hourly or per project.
4) Don’t undervalue your work
You need to think about what a livable wage is for you, especially if you’re freelancing full-time. Your rates are going to be different depending on the size and caliber of the company you’re working for (ex: an article you write for the New York Times won’t pay the same as an article for a smaller publication), but that doesn’t mean that you should just accept any rate your client offers you. When you’re setting your rate, think of yourself as a business, evaluate how much your time is worth, and how much of your time is going to be spent on your assignment. Based on that information, come up with a smart number to ask from your client.
Note from Erin: For those of you looking to find freelance gigs, go check out this post about Asking For the Order! Or if you want to hear me talk about the financial ramifications of a quarter life crisis, click here.
About ThisQuarterLife: Does your Google search history include phrases like “tricks to assembling Ikea furniture,” “the right time to ask for a raise,” or “how to tell if something is microwaveable?” Then visit us at ThisisQuarterlife.com — we’re here to help you navigate all the hard parts of this awkward phase of pseudo-adulthood.