Calculating Your Freelance Rates - Final Installment

February 19, 2008

In this last installment, I’m going to wrap up my series on freelance pricing techniques. Pricing, at least when you’re starting out, is more art than science.

It’s like planning a vacation itinerary in detail and, when you arrive, having to completely re-write it because things changed. The vacation isn’t ruined, it just changed. And so it is with pricing.

You may price too low or too high when you’re starting out. That doesn’t mean you’re wrong. It’s part of the growing pains of starting a new business.

How much do you want to make?

Do you want to maintain your current standard of living? Are you willing to sacrifice in the short term for longer term gain? This question really depends on your preferences.

It may be the most difficult to answer. Sure, you may want to make $60,000 per year but is that possible given where you live and your current market conditions? The best decision you can make at this point is to pick a reasonable figure—based on your calculations—and try it out.

I also recommend setting an earnings goal based on smaller, short-term goals. For example, you might have credit card debt ($3,000) and be looking at buying a new car ($15,000). Maybe you want to add a pool or porch to your house ($10,000). Added up, that’s $28,000 worth of goals. I use this technique myself. It allows me to work towards individual goals while steering me along to my overall goal.

If you’re starting out part-time, you might want to figure out how much you need to save so you can leave your job sooner. If you have some money put away, and your work freelance is increasing, you’ll feel more confident about leaving your job if you know you have a nice savings cushion.

By the project or hourly?

I don’t recommend telling clients your hourly rate, unless they specifically ask. I usually don’t even offer it when they inquire. I’ll throw it right back by saying, “Tell me what you’re thinking and I’ll let you know (within a range) what it will cost.”

Costing out a project takes longer but it gives the client a good benchmark, especially if they’re shopping around.

And don’t worry about putting in more hours than you estimated. That’s part of the interative process. The key is to make detailed notes on your productivity. Once you start taking on similar projects, you’ll know almost immediately how much to charge.

If you charge by the project, your parameters are spelled out, your clients know what to expect and your rates will be fair given your experience and speed. If a client wants anything extra, include it as a separate item and let your client know the cost…upfront.

Conclusion

Researching and setting your rates can be tedious. But it can also be fun. Don’t worry about getting “the right answer”. As you finish a project, look at your notes and adjust your rate accordingly. Ultimately, you can’t go wrong if you set a rate that gives you the confidence and courage you need to reach your goals.

The key is to keep moving forward, stick with a rate you feel comfortable with, and go for it. There’s nothing like getting your first client, charging them the rate you came up with and getting paid for a job well done.

Tags: freelancing rates, pricing techniques, service pricing

Related posts:

1. Calculating Your Freelance Rates - Part 1
2. Calculating Your Freelance Rates - Part 3
3. Calculating Your Freelance Rates - Part 2

Posted in Pricing