Calculating Your Freelance Rates - Part 1

February 12, 2008

What do I charge? This question is as illusive as it is scary. Other questions that plague freelancers include: Am I asking enough for this type of job? Should I charge by the hour, or use a flat project fee? Is charging less for nonprofit work considered illegal? These questions are legitimate but really focus on just one aspect of pricing which is the the actual price itself.

Price is just one measure of the value of a product or service. Simply put, the buyer has to believe the value of an object is worth more that what he paid for it or at least equal to what he paid. So, what does this mean for you?

First, you need to think it terms of value. If you can communicate the value you bring to your client (increased sales, better leads, lower costs) then you will have no problem jumping the price hurdle.

But, initially, you will need to make a few assumptions. That’s fine. Once you have a few clients under your belt, you will know your price “sticking” points. You will know at what rates your clients will flinch, or not.

When it comes to pricing, it’s too easy to get bogged down in the numbers, billable hours and schedules. True, you may feel awkward at first but you will feel more comfortable as you work through your own situation.

In this series of posts, I will explain the four questions you need to answer to calculate your own freelance price rates. By working your way through the details, I guarantee you will have a good estimate. But, don’t stop there. Once you test your rate, adjust as necessary depending on you own situation and location.

A few things to consider before you start. If you’re planning on being a full-time freelancer, realize that you won’t be getting paid for 40 hours of work per week. When you’re employed, you get paid no matter what you do. On the other hand, when you have your own business, you only get paid for the work you do.

Also, you won’t have all the “perks” that are usually associated with having a job. So, not only will you have less billable hours, you won’t have vacation, sick leave, health insurance, or a 401k plan. Quite simply, you will have a cost of doing business now. These are a few ideas that will help you as you work through the next 4 questions.

So, don’t fret if your rate seems too high or too low. You will have to make the decision to go with one rate eventually. You can always change it later.

Tags: freelance rates, determining price, what to charge, what do I charge