Do you have a freelance business? Perhaps you’re looking to start freelancing in the near future.. If so, you’re either already looking to grow your client-base and scale your business, or you’ll soon be joining the over 54 million freelancers in the US, all seeking to gain more control over their careers.
One of the tallest hurdles in launching a freelance business is deciding what your hourly rate should be. This will directly affect how much you make as a freelancer, what the perceived value is for your services within the industry, and how you’ll define your personal brand.
Test your way into pricing your services by launching a freelance business while you still hold onto your day job. Start high with your pricing and gradually move down (if you have to), but keep in mind that the best freelancer-client relationships are borne out of both fair prices and realistic expectations.
One of my favorite clients I worked with way back when I started freelance writing was from a freelance marketplace website—PeoplePerHour.
The reason I had such a great relationship with my first client, is because I was bringing on a lot of domain expertise in learning how to start blogging from scratch and building an online community (a high value to Martiel), at an affordable cost from her perspective. I was very satisfied with the hourly rate we negotiated, the workload each week, and most importantly – the work was engaging and interesting to me. Signing this client helped me validate my business idea of becoming a freelance content marketer.
Before you decide on an arbitrary hourly rate for your services, there are a few very important questions you need to ask yourself.
Do you want a few high-paying clients that take a significant time investment, or would you rather have a higher volume of lower-priced jobs that keep things fresh? You need to clearly define your strategy in order to attract the right clients for your desired business.
It can be very tempting to set your prices low when you’re beginning your freelance career, in hopes of bringing on so many new clients that you’ll offset the low income, with a high volume of clients. However, in the long run this is far from sustainable.. and can eventually break your business when you try and scale.
This pricing lesson is one that’s reiterated over and over again by the world’s top entrepreneurs in their best business books and online business courses.
Do you know exactly how much you’ll have in expenses as a new business owner? $35/hr at your salaried day job is not the same as $35/hr as a freelancer doing work from home jobs. You’ll need to factor in all of the additional costs of doing business (office, phone, online tools, accounting software) and new costs of living (healthcare, taxes) that your employer is no longer subsidizing.
To help you calculate exactly what your freelance hourly rate should be, I architected this handy infographic over at CreativeLive.
How to Calculate Your Freelance Hourly Rate architected by Ryan Robinson and created by the incredibly talented Rachel Frankel at CreativeLive.
If you want to take this calculation a step further, check out this awesome online calculator based on this equation from the team over at Beewits and check out my favorite motivational quotes to fuel your freelance hustle this year.
This infographic is really awesome. It makes the calculations whole a lot easier when it’s visualized. Thanks Ryan.
You’re welcome! Glad you found it useful 🙂
Thank you so much for this info – I’m just starting out, (actually “starting” with the 2-3 hours a day I have after my 9-5), and I have no business or self-employment experience. Your infographic is invaluable, I’m so glad I stumbled on to this site.
I feel you on that one. You have to start somewhere. Do you have a website of your own up yet? That’s a big first step in establishing some credibility (and a place to showcase your experience) as you start reaching out to form new potential client relationships. Happy to give you some direction on putting together a great portfolio site.. it’s something I’ve had a bit of experience in, myself 😉
Hi Ryan!
The infographic is a great start for me, thanks. I was wondering though, do you have any advice for how to set project rates? I have a potential client who would prefer a project rate, but I’m really not sure how long this project will take me or how much work will be involved. What would you do in this situation?
Thanks!
Lisa
Great question! I actually prefer to go with project-based fees with my freelance work, too. Similar to what I believe about “the right hourly rate” being relatable to the amount of value you provide & enough for you to justify doing the work, I think a project rate needs to factor in an estimate of how much effort you’ll be putting into the job. I hate to say it, but you really do need to at least have a ballpark understanding of how much time/effort you’ll be putting into the project – otherwise you can really shoot yourself in the foot (or your client’s foot) which either scenario could result in no repeat business.
In your situation, I would try and shop around to see what comparable freelancers charge for this type of work (even emailing a few people and asking them – you’ll find most freelancers are often more than generous with helping each other out).
With my freelance content marketing business, I thought charging $250/blog post was high. Even after doubling that rate as a starting point, I haven’t gotten any negative feedback and my new clients don’t even bat an eye at that price point. I think I’m still leaving some value on the table, so doubling my rates again will be in the near future.
Above all else, know that this will be a learning process. It’s ok to undercharge or overcharge here and there as you get your bearings. What you learn from each negotiation will help inform you on where you can take your prices next time. Bear in mind, I really believe there’s no such thing as prices that are “too high.” The price you throw out may be too high for the client you’re speaking with, but that just means you should reconsider the types of businesses you’re targeting.
Place, time, quality, supply and demand all affect the freelance rates. The prices in the US for the same services vary by almost 55%. We found these differences and used them for the US version of the Freelance Rate Guide. This guide includes five methods you can use to determine your hourly rate. In addition, the guide contains hourly rates of more than one hundred and eighty professions.
What can you ask for your services? How do you get what you want?
The answers depend on a large number of factors. What is more valuable for the lost hiker who has been wandering for days in the desert, a bottle of water or a backpack filled with forty kilos of gold? What do you buy for your loved one, a gallon of perfume/cologne for five dollars or a small bottle of perfume/cologne for 30 dollars?
A higher (hourly) rate results in higher self-esteem; a good rate is important for your wallet, but even more important for your happiness. Studies show that fair compensation for your work increases your self-esteem and happiness. Thus, lowering your prices will lower your self-image. (And for scientific reasons we are still looking for people who think they are overpaid and are not happy about that. Please leave us a message and provide tips for how to deal with that.)
It appears that the price is determined not only by the quality or quantity of the item, but also and perhaps largely on the expectations of the buyer. Although, the price is obviously important and a price reduction can increase sales, there are also examples where a price decrease leads to a decrease in sales.
The infographic is comprehensive and yet easy to work with. Thumbs up for the good work.
Ryan, this is an excellent infographic! As a freelance digital marketing consultant, I often struggle with setting my hourly rate. I enjoy helping small businesses with their online marketing, however, they don’t have a lot to spend on marketing. It might be time to change my focus.
This is was very good, thank you!
Hi, Ryan, this is sabuj from india. Now i study about web development, i wanted to become a web developer. I have also knowledge about photoshop. Now a days i working at a company full-time. I wanted to start my own business as a freelancer, but i have no idea about that, please help me and advice me how i start that…
Correct me if I’m wrong, but on the infographic, shouldn’t the self-employment tax be based on the Adjusted Annual Salary, and not the Target Salary of $75,000? If you add the items
in the Cost Of Doing Business to the original $75,000, minus the self-employment tax, it adjusts to $87,013. So the self-employment tax would be based on that.
Oops, I forgot healthcare cost. So the self-employment tax would be based on $91,813.
Hi I am finished master of Engineering in Embedded System Technologies. I have some skills in Programming languages, and multimedia. I would like to work as freelancer. But I don’t know what to do. can you help me
Wishing you luck in your new career! I’d start by browsing through some of the tech-job focused sites I talk about in this post: https://www.ryrob.com/freelance-jobs/
This infographic is really awesome. It makes the calculations whole a lot easier. Thanks Ryan!
You’re very welcome, Anna 🙂
Hi Ryan, I’ve been reading your blog for a while now and I’m generally pleased with the content. This post took a sharp left turn though. It doesn’t make any sense to me to charge a price based on how much you want to make. Shouldn’t the price be based on what it’s worth to the customer?
If you’re running a business, you need to maximize your revenue and minimize your expenses without sacrificing quality, breaking laws, or burning yourself out.
I propose charging what your product or service is worth. I regularly make $75 to $100 per hour doing bookkeeping because I charge a flat monthly rate, I do the work efficiently, and, most of all, because the value I provide far exceeds what I charge and my clients know that they’re getting a good deal.
In full disclosure, I HATE the hourly rate because you’re paying for someone’s time instead of his work. Other methods like flat rate, piece rate, and profit sharing ensure that the compensation is proportionate to the VALUE of the work being produced. I’ll never again work for an hourly rate.
What do you think, Ryan?