7 Tips to Calculate Your Freelance Rate

7 Tips to Calculate Your Freelance Rate

Tips-For-Calculating-Your-Freelance-RateYou’ve just started freelancing. Your first potential client is on the phone and they ask you: "What’s your rate?"

It sounds like the simplest question in the world. But judging your own monetary value is something newly independent web designers and developers can find extremely difficult. As a consequence, they usually start out charging far too little.

“The biggest mistake freelancers make — especially young freelancers — is undervaluing their experience,” said web designer, educator, and publisher of Tiny Books, Chris Murphy. “The older and more experienced you are, the more your time is worth. But even a recent graduate with some real-world experience deserves to be paid a fair rate.”

And setting low rates doesn’t just mean you can lose money in business transactions.

“If you quote too low then you also run the risk of coming across as a 'budget' service, or having people take advantage of you,” pointed out developer and consultant Sally Jenkinson.

So how do you calculate your freelance rate? We asked several successful freelance web designers for their advice. Here are their seven top tips.

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1. Research the market

The first thing to do is to get a general feel for what people charge, and what you can expect to earn in your location based on your skills and experience.

There may be data out there that can help. For instance, web design agency Our Name is Mud publishes an annual survey of freelance rates for different areas. But most of your research will probably involve talking to other web designers and developers in your area, and getting their input.

“When I first went freelance, I got a feel for the market by reading various freelance job specs,” said UX designer and founder of Glimt.it and UX Fika, Anna Dahlstrom. “I also asked someone I really respected and trusted for advice on what I should set my rate as, based on my experience and the kind of work I’d done.”

Remember though, not all jobs are equal.

“Do your research into what the market rate is for someone with your experience, but also what the going rate is with the companies you want to work with,” Dahlstrom added. “If it's a project you really want to do, then accept a lower rate if that's all they can offer. In the end it should be about the client and the work and not about the money.”

The ‘going rate’ is only one half of the equation, though. You also need to...

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2. Work out what you need

There’s no point in just copying what others are charging if it’s not going to bring in enough money to maintain your current lifestyle. So a vital part of calculating your freelance rate is to be honest with yourself, and work out how much you actually need.

I’d recommend anyone starting out to do a simple analysis of how much they’d need to earn annually to make a comfortable living. Work back from that to factor in holidays, potential periods of illness, and times when you’re short of work, and you should soon get an idea of what a day is worth.

“I’d recommend anyone starting out to do a simple analysis of how much they’d need to earn annually to make a comfortable living,” web designer Murphy said. “Work back from that to factor in holidays, potential periods of illness, and times when you’re short of work, and you should soon get an idea of what a day is worth.”

“Remember to include all of the things that are normally covered in your wage packet such as tax, pension contributions, etc,” added freelance web designer/developer and design lecturer, Neil Robert Leonard.

Also, don’t forget to incorporate time for things like calls and meetings, as well as the actual time you spend designing and coding.

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3. Feel your way along

It's a fair reflection of reality to say setting your freelance rate is more of an art than a science. Freelancers often don’t know what they should charge, and clients often don’t know what they should pay — and whatever figure you first come up with will probably be wrong.

But in a sense that doesn’t matter, because it’s a starting point for what is essentially a process of trial and error that continues throughout your freelance career.

That was certainly the case for Leonard.

“For the first few jobs, I just judged the amount I thought the client could afford and applied a rough calculation of my desired hourly rate,” he recalled. “These few jobs helped me work out better calculations. I quickly became aware that on most jobs I would go over the amount of hours predicted (this was more common with web work). Knowing this would be the case, I raised my rates a bit to account for it.”

It’s a common story among successful freelancers, and shows that it's okay to be uncertain about your rate at first – the way you charge will evolve as you go.

4. Raise your rates

Fairly quickly, you should settle on a rate that the market will bear. This doesn’t mean you should carry on charging that rate forever.

In fact, there will be a point in time – maybe in six months, maybe in a couple of years – when you should start to raise your rates.

Your original rate was based on a certain amount of skill and experience. The logic goes that once you’ve significantly raised your skill level and experience, you should start to demand a higher rate.

When’s the right time for that? It depends on many factors, including your particular specialism, and how in-demand your skills are. If, for instance, you’re constantly turning away work because you’re too busy, that’s a sure sign you need to charge more.

It also depends on how much your skills actually have improved over time, and what evidence you can point to in support of that. Maybe you’ve added a new language to your skillset, or taken on more responsibility in managing other freelancers on a project, for example.

When you’re satisfied you deserve more, then simply inform clients of your new rate – and don’t worry too much about it being rejected. In our experts’ experience, clients are typically happy to agree to payment hikes once you’ve built up a strong reputation.

As I gained more exposure to the different ways freelancers operated, and what people were charging, I'd put my rate up slightly with every new project quote. It was never queried.

“As I gained more exposure to the different ways freelancers operated, and what people were charging, I'd put my rate up slightly with every new project quote,” said developer Jenkinson. “It was never queried.”

And if it is? Maybe it’s time you...

5. Learn to walk away

If a client does balk at your rate, it’s a good moment to question whether they’re the right client for you.

“Maybe they're unaware of the value that you provide, or are used to working with people who are undercharging,” Jenkinson suggested. “I typically don't open with cost, because I want us to make sure we really want to work together first. If, after that, they genuinely can't afford high rates, then perhaps we can change the scope to do slightly less initially, or come to some other compromise.”

With client relationships it’s all about communication, says UX designer Dahlstrom.

“The biggest danger is setting the wrong expectations,” she said. "If you charge too little, or quote too little time for the job, you'll end up doing more work than you get paid for — potentially overworking yourself, but also setting the wrong expectations with clients rather than educating them on how long it actually takes, and hence costs.”

Above all, says creative director and advisor Dan Mall, whatever you charge, you need to be able to justify it.

“The biggest mistake is using a pricing approach you don't understand yourself, and can’t explain clearly,” said Mall, who recently published a book on the subject through A List Apart.

“However you price, make sure you understand why you're doing so, so that you can talk about it intelligently with your clients," Mall added. Clients appreciate hiring experts, and an answer of, ‘well, that's how everyone else does it,’ often won't cut it.”

6. Hourly, per day, or per project?

One final, vexing question: should you charge for your time or per project? (there doesn’t seems to be much consensus on this one)

“I've always charged a daily rate, with project budgets and activities being agreed up-front,” Jenkinson said. “Value-based pricing is something that I'm considering for certain projects, but as most of my work is consultancy, a day rate works better. I have a minimum booking of a day or half-day depending on the project specifics.”

For Dahlstrom, though, it depends on the job. “I charge a day rate if I'm doing some actual hands on project work,” she said. “For more consulting, training, and advisory work it varies between day rate, hourly rate, and per project/month fee.”

Leonard tells a similar story. “I do both. Agencies will always want hour, day, and weekly rates. This keeps things nice and simple. General clients will not understand what an hour’s worth of work is (unless it's amended), so it’s best to charge per project — but with a limit on the time you will spend (this can be in days, or hours).”

Mall, though, is strongly against charging per hour or per day.

If you're billing for your time, stop it. The more experience you get, the better you'll be, and the faster you'll be at your work. Why get paid less because you're better and faster than your competition?

 

“If you're billing for your time, stop it,” he said. “The more experience you get, the better you'll be, and the faster you'll be at your work. Why get paid less because you're better and faster than your competition?”

7. Stick to your guns

Once you’ve set your rate, it’s important to stick to it. Lack of confidence, especially when clients are being pushy about costs, leads many freelancers to cave-in at the first sign of conflict, and drop their rates.

But while cutting your prices may mean you get the gig, it’s not a good strategy. First off, it’s a sign of weakness: once you’ve given way on your rate, the client will often try to push further and get more for their buck — “could we just add in this one small thing?” will be the phrase that haunts your dreams. And if word gets around to other potential clients that your rates are ‘flexible,’ then your next project won’t be any better.

What’s worse than accepting a cheaper rate under pressure is when freelancers don’t ask for their day rate in the first place. Dahlstrom admits falling for this pitfall.

“Initially, I was too 'snäll,' as we say in Swedish (meaning kind), and too chicken to ask for my actual day rate. I kept offering discounts before anyone had even asked me to, and starting emails with, ‘my usual day rate is X, but for you I can do Y,’" she said. “This pre-emptive bad habit was quite persistent and until a year and a half ago, I was quite rubbish at sticking to my actual rates and daring to say them.”

Resist the temptation, stay strong and stick to your rates. It won’t only mean you get more money, but you’ll also earn more respect, too.

Keep chasing the cash

The fact that there are no clear guidelines on how much you should charge as a freelancer might be seen as a source of frustration. But any web designer or developer with entrepreneurial spirit should instead see it as an opportunity.

Start off by researching the market as best you can, and set a rate you feel both matches your true value and will get you enough money to fund your lifestyle. Use that rate as a starting point, and gradually unearth the real rate the market will bear through trial and error.

Quote higher rates for jobs you’re not particularly keen on, and see who bites. Be prepared to walk away if clients can’t afford you; they probably aren’t the right fit anyway. And once you become established, keep raising your rates on a periodic basis.

How do you calculate your freelance rate? Tell us in the comments section below.

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About the Author

Tom May is a freelance writer and editor specializing in design and technology. His articles are most often found in magazines including Computer Arts, ImagineFX, and Professional Photography, as well as the website Creative Bloq. Follow him on Twitter.

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