How Should I Price My Freelance Services?
Freelancers learn their value over time. With every new project, you get a better idea of what your skills are worth to the customer and how effective you are at solving their problems. But how do you set freelance rates when you’re brand-spanking-new to freelancing?
Pricing is one of the hardest things for new freelancers to get right. You don’t want to underpay yourself (because that’s no fun). And you don’t want to price-gouge your customers and end up not getting any work (you’ve got bills to pay, right?).
The truth is, your freelance rate will be unique to you. Here’s how you can find your magic number and feel confident about it.
What’s the Going Rate for a Freelancer?
I didn’t do much research when setting my own freelancing rates. But a quick Google search gave me a lot of food for thought:
First, freelance rates vary greatly depending on country, industry, and experience. According to one Payoneer survey, the average hourly rate among all freelancers was $21/hour. This isn’t a great figure to go by since the survey included freelancers from 150 countries. It didn’t account for huge gaps in the costs of living.
Upwork also claims that $20 per hour is the median freelancing rate. Again, we’re looking at data from a globally used platform that can skew results based on where you live and what you do.
Another freelance study from Freelance Map found that freelance IT professionals average about $105 per hour. What a jump from $20 per hour!
And a report from the Editorial Freelancers Association gave a range of $30-$100 per hour.
Setting your freelance pricing is far from being cut and dry. Is there really a difference between a $30 per hour freelancer vs a $100 per hour freelancer? If so, how do you make it into that top tier?
Ultimately, it’s up to you to decide how much to charge. But here’s how you can make an informed decision when setting your rates instead of pulling numbers out of your hat.
Freelance Price Setting: How Much Do You Need?
Freelancing won’t work for you unless you’re making enough money to support yourself. And truly, your freelance salary needs to be significantly higher than what you made at your day job.
If you were making $40K working for someone else, a $40K salary as a freelancer will end up being a lot less. That’s because when you freelance, you have extra expenses you didn’t have as an employee.
For instance, you used to pay a portion of your employment taxes (e.g. social security) while your employer paid the other part. Now, you’ll have to pay for both parts.
You will also be responsible for your technology and equipment, such as a desk and a laptop. Health insurance premiums, marketing, and office expenses add up quickly.
Suddenly, your old salary doesn’t go as far as it used to.
So how much do you need to make as a freelancer?
Start by adding up all of your personal and business expenses. Leave no stone unturned. Some areas to include are:
Internet
Website hosting fees
Taxes
Insurance (health insurance and business insurance)
Home office expenses (like electricity, water, etc.)
Legal/accounting fees
Personal bills
If you got perks and benefits from your old job, think about the total value of the benefits package and add it to your expenses. No expense is too small or insignificant.
I suggest turning all of your expenses into annual costs. Then, break them down into monthly costs (divide by 12) to see what you need to bring in monthly.
The average month has about 20-21 working days when you take off the weekends. So, take your monthly salary and divide it by 21 to get an average daily rate, then divide by 8 (the standard workday) to figure out your hourly rate.
There’s a lot of room for adjustments here. After six years of freelancing, I now work a four-day workweek (before it was cool). I also work mostly school hours while my kids are in class, with occasional evenings. If you don’t want a traditional work schedule, just plug in your own numbers.
Freelancing Price Setting: Trial and Error
When I first started freelancing, my initial goal was to make more per hour than I was making at my day job. At $17 an hour, it wasn’t hard to do. I remember being thrilled when I calculated my hourly rate to be around $25.
So what changed for me? I eventually outgrew my time. I had more work than I could handle less than a year into freelancing. So I raised my prices. And less than a year later, I had to raise my prices again.
Getting a lot of work at whatever price you’ve set usually means you’re not charging enough for the quality and value you provide. You’ve created a too-good-to-be-true-but-it’s-actually-true scenario and people will throw their money at you. It’s a good feeling – until you realize you are selling yourself short.
Remember, you don’t have to be affordable to everyone. I’ve had clients begging to work with me but just can’t find it in their budget. But just because they want you doesn’t mean you have to lower your value to make them happy.
Freelance Price Setting: Comparison Shopping
Looking at what other freelancers are charging can give you a baseline idea, but their rates don’t give you context into your own financial situation. Plus, I know a LOT of freelancers who are charging way less than they’re worth. But that’s a topic for another day.
Not all freelancers will disclose their rates on their websites. You can reach out to them directly, or you can scope out sites like Fiverr and Upwork to get a feel for rates for specific types of projects.
Comparing rates among freelancers in your industry will help you get a feel for the market. I suggest comparing their rates to their portfolio so you can see the caliber of work they produce at that rate.
Then, be honest with yourself about the quality of work you can produce. Your rate needs to match your capabilities. That’s why you probably won’t start out charging $100 an hour if you’re brand new to freelancing. But you can always change your pricing as you grow to match your increased value.
Freelance Pricing: The Value to the Customer
I saved the best for last because this is usually the hardest for new freelancers to get right. When I started pricing my services, I thought about the value I was getting from each project. I didn’t stop to think about what the project was worth to the customer.
That’s when I started charging a premium for 24-hour delivery. I discovered that some customers needed things yesterday, and they needed them to be perfect. So those projects cost more – not because I spend more time on them than the average project, but because the customers see more value in them.
That’s not to say I overcharge customers who are in a hurry or have huge budgets. But I do quote customers based on their perceived value of my services.
At the end of the project, they need a problem solved or a need filled. If I can deliver on their expectations, save them time, and make them look good in the process, that’s worth a lot to them.
Stop thinking that charging the lowest price is the most important part of freelancing. It’s not. Your clients will choose you, love you, and refer you when you can give them the best results. And when you can focus on quality and value, price becomes much less of a decision-making factor.
I offer some helpful tips on pricing your services and justifying what you charge in my latest course: How to Market Yourself as a Freelancer. Go check it out — it’s on sale for a limited time!
Care to share how much you’re averaging per hour as a freelancer? Drop your rates below and let our audience see their true potential!