• 3 MIN READ
How to Determine Your Freelance Rates
October 17, 2022
The most frequent question a freelancer asks is “how much should I charge for my work?". You are responsible for pricing works on any freelance platform yourself. This means that you need to make these important choices. On the one hand, you may be hindered by the fear that if you ask for too much money, the client will choose another specialist. On the other hand, you don't want to take less than you deserve. You are providing a valuable service and should be rewarded for your skills, effort, and time.
Freelancers often underestimate themselves and offer their services for cheap, especially beginners. Let's learn how to avoid this and look at the tips that will help you put the right rate for your services as a freelancer.
Evaluate Your Skills
Ask other freelancers how much they charge for similar work to find out the average rate for your field or type of task. You may estimate your annual income and break it down by the number of hours you work each year to calculate hourly pay.
Remember that having experience and professional qualifications increases your rate. When you calculate your rate, you need to take into account the payment processing fee, if the platform has it. It is always important to review your rate after the first few months of work. It will depend on the feedback from your customers, new experiences, works added to the portfolio, price changes, offers, and market demand.
Estimate Freelance Market Rates
When determining what your hourly rate will be, you should analyze your niche and industry. Analyze your competitors in the industry and their rates depending on the experience and type of work. Read how they filled out their profile and what attracts and catches customers in the description of their skills. Some experts share their prices themselves, and you can ask others. Comparing rates of professionals, you will be able to set a rate that meets industry standards. It won’t be a problem, as you can survey average salaries and hourly rates online.
Study Your Client
A better understanding of your client will also help you pinpoint the freelancer's rate. Let's take the Upwork platform as an example. There you can find the client's past assignments, which will give you an idea of what specialists the client chose and how much he paid for similar services earlier. This information you may view in the client's profile on the majority of freelancing platforms. Similarly, if a client has previously hired freelancers in the same field, you can study their profiles, taking into account their authority on the platform, knowledge, and experience.
Estimate Time Frames
When you need to estimate the cost of a project, the most important thing to understand is how long it will take. Everyone has their own pace of work, so take your own experience as a basis. It's better to overestimate than underestimate. Therefore, do not hesitate to take more time if in doubt. Besides, part of the time will be spent discussing edits.
How to Calculate Freelance Rates?
Determine the minimum rate per hour of work based on your necessary living expenses. To give an analogy, it's like a break-even point for a business. Take into account all monthly expenses without exception. This includes personal and professional expenses, for example, rent, utilities, food, transport, work costs (payment for services, internet, work materials), and taxes.
To avoid underestimating your work, you should count expenses, set a minimum threshold and never fall below it. The smallest rate you agree to accept is also known as a Minimum
Acceptable Rate (MAR). Although specialists do not recommend working for your MAR, it is a good starting point for beginners. To calculate your MAR you can use the following formula:
((living costs + overhead business costs + salary) / (hours worked a year)) + tax
As you develop as a freelancer, you can increase your MAR so that it reflects your current skills and experience.
Calculate working days. Determine how many hours and days a week you are willing to work. To find out how many working days you have available per year, you must consider your current working load, the time you spend on education or training, potential sick days, vacation days, and so on. The number of days you will get from your calculation usually fluctuates because we cannot predict the future, but at least we can plan for it.
To make smart financial decisions it is recommended to include a few extra days off. Set a specific, measurable, and achievable goal to make your estimates relevant.
Pricing Options for Freelancers
Now that you have determined your minimum desired rate, you can look at the options for receiving payment. You already know a lot about the hourly rate that you received in the calculations. However, several other pricing strategies could be useful to you for setting prices for freelance projects.
- Hourly BillingWorking at an hourly rate means that you charge the client for the number of hours you spend working on a particular project. An hourly rate is easier to calculate than to determine the cost of the project. It allows you to earn more if you work longer than it was scheduled. What’s more, as your experience grows, you can raise your hourly rate. Hourly billing can suit the best for time-limited projects.The disadvantage of using the hourly rate is that when you get more experience, you risk reaching the price ceiling. It means that your customers will not want to pay the rate you set. It might be unpleasant that you get money only for the number of hours worked, not for the result and quality. Hourly pay does not benefit either from the point of view of profit or efficiency. This requires you to evaluate and track each task separately. This pricing strategy is not effective for experienced freelancers, because it simply does not take into account many years of work.
- Fixed Price for ProjectsFixed price is the most preferable option for freelancers because it is based on the value. Fixed-rate pricing means that you specify a single price for the entire project. At the fixed price, the freelancer guarantees that the work will be completed, while the client knows exactly in advance how much the project will cost. Psychologically, a client is more likely to agree to pay $500 for a project that will take two hours than to accept an hourly rate of $250 for two hours. Additionally, you as a freelancer won't lose money just because you work fast and your experience is valuable.
- RetainersIf you plan to work as a freelancer, but you are afraid of uncertainty and unstable monthly income, a freelance retainer agreement may come in aid. It establishes a contractual relationship between a specialist and a company that guarantees a certain amount of work or the number of hours that it is ready to pay for.
All conditions are negotiated in advance and are valid for an agreed time. The agreement is often repeated or extended by a week or a month, which allows you to simplify planning. Thus, you are not working as a full-time employee, but at the same time, you have a steady income and a safety net in case new projects are difficult to find.
Which is Better: Hourly or Fixed Rate?
It is very difficult to say which option is better, some choose an hourly rate, others are comfortable receiving a salary for a project and having complete freedom of choice and some freelancers like a regular flow of tasks and stability. You will probably find that in some cases it is useful to take an hourly rate, while in others a fixed project rate fits best. To choose, you can ask yourself a few clarifying questions, for example:
- Will I be able to complete this project quickly?
- Is the client sure of what the final result looks like?
- Do I know how long the project will take?
- Is the client ready to offer work regularly?
Get Paid as a Freelancer
There are many industries for freelancing, the Upwork platform alone offers users the to become a specialist in one of nine general categories, where they can choose any of more than 150,000 job offers from clients. Fiverr and PeoplePerHour also provide you with attractive work opportunities all across the world, so that you are not limited to the country you are living in. With such a wealth of choices, your time becomes your key resource. That is why you will need to ensure that you will be paid in full.
When working as a freelancer, you have no boundaries, and the services from Payrow can help you with accepting payments from clients from different countries. We offer easy-to-use online solutions for you to seamlessly receive payments from international customers. You can automate reporting, track income and expenses, and manage documents – all these are indispensable functions for a freelancer.
Get payments for free using an international business account from Payrow!