One of the most difficult things for a freelancer to accomplish after obtaining clients is to calculate their freelance pricing. You don’t want to overcharge, but you do want to be compensated adequately for the effort and time you put into your project, as well as your talent and skill. You must also earn a living! Remember, the only thing worse than charging a client, or quoting a lower price and then regretting later that there was room for more.
Moreover, freelance rates may vary in a variety of ways, including freelance hourly rates, a fixed price per job, and more complex value-based pricing.
Many people inquire about hourly rates for specific professions, but there are no set freelance rates. As a result, we’ll look at a few different approaches to determining the ideal freelance pricing for you.
When we have a lot of work on our hands, we tend to quote more. This isn’t the best technique to figure out the price. Instead, have a peek at the work that will be available in the near future. As a freelancer, you should always be able to see the workstream for the next three months.
Why Is It So Difficult To Set Freelance Rates?
The dilemma of how much to charge is the one that all freelancers face. Evaluating your value, target clientele, and the larger competitive market are all important components of any pricing strategy. If you set your charges too low, you risk losing money and not being compensated for the services you provide. If you set your charges too high, though, you risk losing business to competing freelancers who charge a lower fee.
As a freelancer, you have the flexibility and freedom to adjust your freelance rates whenever you want. The price you decide on isn’t set in stone. As a result, don’t overthink it. This post will teach you tactics and tips for determining a price that you feel comfortable charging.
How to Decide Your Freelance Pricing?
Are you seeking the ideal formula to calculate how much to charge? Everyone understands that time equals money. However, how valuable is your time? Which factors influence the amount of money you can charge? It is mostly based on your experience, talents, location, value, industry, and so on.
In truth, there is no such thing as the ideal freelance pricing formula. You’ll need to choose a rate, and then you’ll be able to watch how potential clients react to it and adjust it to meet your needs.
Let’s take a look at two of the most typical price models – freelance hourly rate and project-based (fixed) pricing, and some other less popular models too. These models will help create a strong base for pricing your freelance services.
Freelance Hourly Rates
The idea is so easy, hourly pricing is the most typical way new freelancers determine their rates. This approach requires you to calculate an hourly rate for your labour and multiply it by the number of hours you spent doing it.
Customer support and technical support are two examples of initiatives that perform well on an hourly basis pricing strategy.
(Fixed) Price Based On Projects
A freelancer charges a flat rate for the entire project in this arrangement. Rather than being paid based on the number of hours you labour, you are paid based on the outcome you produce. This is the best option for projects with well-defined deliverables.
Web design and mobile app development are two examples of projects that are well suited for fixed-price contracts.
Rather than pricing the project on the basis of what it requires, you price your services based on the value it will provide to the client. It may be applicable if your job directly contributes to a client’s profit.
If the work you provide, for example, has the potential to generate a significant amount of new business, you might charge a percentage of the new business earnings as your fee. It is completely based on how much money the customer makes from what you submitted, not on how much time or effort you put into the project.
Performance-based value is tying your price to the financial benefits the client will receive as a consequence of your efforts. As it’s so closely linked to analytics, it’s a frequent approach in areas like SEO, branding, and website design (e-commerce, etc).
After knowing the different models on the basis of which a freelancer can establish his/her pricing strategy, it’s time to go through the steps which will help you frame that strategy.
Steps To Frame Freelance Pricing Strategy
1. Before you begin, ask yourself these essential questions
When deciding on a freelancer rate, ask yourself the following questions and reflect on your responses. This will assist you in identifying the aspects that will eventually shape your pricing strategy.
- The money I would need to support my current way of life?
- What’s my goal or target?
- What do the other freelancers price for services that are similar to yours?
- What money would I make if I worked full-time?
- What are the costs of running a freelance business?
- Are my freelance abilities in high demand?
- What kind of value do I deliver to the client?
2. Determine your annual salary target
Do you have a family or do you support yourself? Do you have money set aside or do you rely on your paycheck to make ends meet? Freelancing can be used to augment or replace a regular income.
You’ll find your freelance rates by working backwards from the amount you need to make and the amount you want to make. Choose a yearly salary and use it to determine how many working hours you’ll need to get that wage.
For example, a $40,000 annual pay is broken down as follows:
$40,000 per year (before taxes)
Working a 30-hour workweek (5 x 8 hour days)
4 weeks off for vacations, sick days, and unforeseen absences
= 38 weeks x 30 hours per week = 1140 hours of labour
$40,000 divided by 1140 hours equals $35 every working hour
This rate, however, counts all of your working hours as billable hours. Many operations, including administrative work, invoicing/billing, responding to emails, pitching and discovering new clients, advertising, and more, necessitate time that you are not compensated for. This brings us to the next step.
3. Think about how many billable hours you’ll need to work
While each case is unique, the average hourly distribution for freelancers is 60 percent billable hours and 40 percent non-billable hours. You can alter this percentage when determining your freelancer rate to reflect your objectives and procedures.
What proportion of the time, if we allocate a total of 1140 labour hours based on the estimates above, will be billable vs. non-billable? We may calculate the freelance hourly rate considering only the billable hours using the 60%/40% as a baseline:
1140hours* 60% = 684 billable hours(+ 456 non-billable hours)
$40,000 divided by 684 billable hours equals $58.47 per hour
As a freelancer, you should strike a balance between getting the most out of your time and getting the most out of your money.
Do you prefer to work on a greater number of projects at a lower rate or a smaller number of projects at a higher rate? Considering the percentage of billable time for a project will allow you to determine whether it is reasonable in comparison to the number of non-billable hours required to complete it. You can also charge a higher rate for smaller tasks and a lower rate for larger or longer-term ones.
4. Include the cost of freelancing in your freelance rates
You will have business costs as a freelancer that must be factored into your freelancing pricing. Make a list of all of your expenses and add them up. To pay these costs, you’ll need to boost your freelance hourly rate and add this number to your wage objective. The following are some of the typical costs that freelancers should factor in:
- Health-care coverage
- Your Taxes
- Licenses and insurance for businesses
- Rent for office space
- Subscriptions to software
- Costs of marketing and advertising
If your annual objective is $50,000 and your hourly rate is $73 ($50,000/684 billable hours), your annual target is $50,000 and your hourly rate is $73.
It’s fine if your freelance hourly rate is larger than what you’d earn on a normal wage. As many extra costs are shifted to the freelancer, clients should consider paying a little more for freelancing services.
You are liable for the additional costs of maintaining and expanding your own business as a freelancer. Furthermore, unlike full-time employees, your client does not have to pay employment taxes and benefits.
5. Be aware of the prevailing fee for your services
It’s time to evaluate freelance hourly rates for the market now that you’ve determined a rate that fits your pay objective and expenses. What do other freelancers charge for a service like this?
Do some research and check your competitors’ rates to find this information. You can obtain an estimate of freelance hourly rates using Refrens or Glassdoor.
If your charges appear to be comparable to those of other freelancers in the market, you’re off to a solid start. You may need to reassess your spending or salary goals if the freelance rates you’re looking to charge are too high. You may be undervaluing your skillset if the rate is too low. Reconsider your calculations in both cases.
6. Recognize your worth
To ensure that you’re charging a fair price for your services, you should know your worth. Your price point should be determined by the value you deliver to the client. How do you value the information you’ve gained, the freelance skills you’ve honed, and the customer services you provide? Reflecting on your experience, skill level, and previous job portfolio is one technique to estimate your worth.
Knowledge is an investment rather than a cost. Naturally, the more expertise you have, the higher your freelance hourly rate can be. A web developer with ten years of expertise will be capable of charging more than a web developer with only two years of experience.
Your price strategy will be influenced by the scarcity and complexity of your skillset. You’ll be able to charge greater freelance rates for your services if you can illustrate the standard of accuracy and return on investment.
Source of Leads Determining Freelance Pricing
- Referral-Based Quality Lead – If a potential client comes through the reference of a past client, you can charge more. The idea is that the referrer has already done the selling for you. You should gauge if the lead is talking to a competitor also, if yes, you should be careful and find ways to increase the quality lead. The real selling here is done by the referrer.
- Online Sites/Directory – If someone is coming to you through an online directory or industry forums etc. you should be careful to not quote high. The lead has not qualified you yet and they might be talking to competing service providers, so don’t turn them off with off-the-mark pricing.
- Past Relation – If the potential client already knows you, as a distant family, a family of a friend, or just happens to be connected online, work on educating them before quoting the price. It would still be quite low here. There is a good chance that they are only enquiring and will only commission the project if the price is low.
3 Reasons To Look At When Trying To Quote Freelancing Rates To A New Client
- I want this client – The brand value of the client you are targeting is high in the market. Having this client in the portfolio will increase your chances of winning more business in future. In such cases, we should look to charge just the bare minimum. I would go to the extent of doing the work for free if I get to mention them publicly. “Exposure” as a currency is acceptable here.
- I want to experience this work – If you are trying to change your work domain or add a new domain. Or even if you are just new to the field of freelancing, you should charge less. Just charge a basic fee. Treat this as learning at the client’s expense. Don’t do such work for free and also don’t keep a price that would compare to more seasoned people. The right strategy is to quote a price and give in to the client’s bargain.
- I want to maximize profit – When it is none of the above cases, you should charge high. If the client isn’t a well-known name and you are already good at work they want you to do, quote them high. You should regret less if you lose the client due to price here.
Next Step After Deciding Freelance Pricing
You have complete discretion over how much you charge for your time, attention, and skill set as a freelancer. When it comes to determining freelance rates, there are numerous factors to consider. You can think about the issues raised in this article, utilize the annual salary calculator, compare your rates to those of your competitors, and make adjustments based on the value you provide.
The most essential thing to keep in mind is that your freelance rates aren’t set in stone. Choose your freelance pricing that you’re comfortable with and give it a shot. If your price plan fits the worth of your service, the market and potential clients will tell you. As you gain expertise, enhance the value of your services, and your revenue goals will alter, on the basis of which you can adjust your fee.
Sign up on Refrens if you’re ready to start your freelance career. Each day, tens of thousands of projects are placed on Refrens’ work marketplace, so establish your freelance rates and apply to projects to observe how potential clients react to your freelance pricing.
Furthermore, you can use Refrens for all national and foreign customer payments.