When you enter the world of freelancing, it's hard to know how much to charge and what the hourly or daily rate should be. It's really as if there are no rules or obvious solutions, it's simply a matter of trial and error.
You don't want to charge too much and be left out of the market, but you don't want to sell yourself short either. Above all, remember that your skills are valuable, so it's very important that you set your rates well before you talk to any potential clients, or modify them as you build experience.
Here are some tips on how to calculate your freelancer rate:
- Do thorough research An important first step is to do some research to see what other freelancers are charging for similar work in your area. If you have more established freelancer friends, ask them what their hourly rate is; compare and set a price that you feel reflects your skills and experience, but make sure it's always competitive.
- Calculate your overhead. When considering how much to charge, all of your business costs should be taken into account. Whether it's your office rent (if you have one), insurance, travel, stationery, materials, etc. You have to cover your expenses, so make sure your hourly rate is reasonable and realistic.
- Take into account lost time. You can't expect to charge 40 billable hours a week, especially since there is always time lost to other day-to-day things and breaks. Be sure to take all those non-billable hours into account when setting your rates.
- Ask yourself how much you want to earn. Another way to get your rate is to ask yourself how much you would like to earn per year; taking into account your weekly billable hours and the amount of vacation you want to take. This way it's more based on what you want and know you deserve.
- Be flexible. When you start talking to clients you'll realize that a day rate, or hourly rate, doesn't suit everyone. Therefore, it is important that you have your minimum hourly rate in mind, i.e. the lowest you are willing to charge, in case you have to negotiate with your client. Don't go below that figure as you must remember that you have to cover overhead and company costs. Trust us, you don't want to run out of money.
- Be transparent with money matters. Everyone has issues talking about money. But when it comes up with clients, be comfortable, open and honest about how much you charge and why. Don't be afraid to negotiate and be confident in yourself, your abilities and your worth.
- Budgets. When you meet with a potential client for the first time, try to establish their budget before you give them your rates. This way you can either adapt to the client or decide if you are the right person for the job. If the client expects to pay an exorbitantly low price for your time, that's a good red flag to run away from.
- Choose your pricing strategy. When calculating the price of the projects you accepted, you have to take into account two ways of charging: by time or by project. Time is when you record your hours/days and then bill the client accordingly; project is when you calculate how long you think a job will take and provide a fixed price up front. Choose the one that works best for you.
- Create a tabulator. Since your rates are likely to differ from client to client, create an Excel document to keep track. Consult it every time you meet a new potential client and modify it as needed. At Crema we have one already created that can help you get started, available at this link.
- Breathe, you'll be fine. Don't worry too much about having a fixed fee, it is inevitable that it will vary from one project, or client, to another. Take into account the competition and the economic situation, and you'll be fine.
If you still feel you need more help figuring out how much and how to charge, we have what you need. Our first Talks by Crema opened with a class on this topic with Lic. Barbara Millote in which she gave very useful details on how to calculate your freelancer rate. Learn, along with our 100 attendees, to give you the economic value you deserve, click here.
On the other hand, in Crema we are gathering data about our community to be able to give a general tabulator about freelancer rates in Latin America so you can improve your prices. We appreciate your support by answering this survey so we can share with you this valuable information!