Did you decide to take up freelancing? Then your first thought will be about how to set a rate for your freelancing services. It is one of the fundamental questions that trouble most freelancers, especially newcomers. This confusion makes most of them undervalue themselves and offer services at cheap rates. So it’s essential to set your freelance rates right which is a vital part of any freelancer contract clauses.
It is alright if you do not know how to calculate the rates for your freelance service. We are here to provide essential tips and strategies to calculate and set a rate for your assistance.
Let us first go through some factors that influence your rate.
Factors affecting freelance rates
Though several factors are affecting the rates, studies have shown that these two factors play a vital role:
A freelancer with high qualifications and years of experience will set high hourly rates. Nevertheless, the other two factors that also impact your rates include good communication and negotiation skills.
How to calculate freelance rates?
We advise you to do some market research on the freelancing market, the most valued skills, the working conditions, and freelance pay surveys before starting a project. It gives you an overview of the freelance industry as a whole. However, this is a general overview of the market. To get a more customized view, ask other freelancers about their charges and services. This step will give you a basic idea.
However, every freelancer is different, and what works for one may not work for others. To calculate your freelance rates according to your goals, ask yourself the following fundamental questions:
- What are your annual salary goals?
- What are the market rates for your skills and services?
- Are your skills in demand?
- How many hours can you work for a week, month, and a year in total?
After having answers to the above questions, consider the following to calculate freelance rates:
- Your expenses
- Your working days
- Minimum acceptable rates
How to calculate expenses?
Calculating expenses is the first step in calculating freelancer rates. Determine your total monthly expenses, including your personal and professional expenses (food, rent, working material, internet expense, taxes). Do not exclude anything that matters.
How to calculate working days?
Next, calculate how many days you plan to work in a week, month or year. Make sure you have time to socialize and rest. Set a few days aside for sick days and vacation. Do not overwork, as it kills your productivity and quality of work. See how many days you can work out of 365 days and calculate how many hours you can work every day.
Your calculations may not be perfect. However, it must be practical. Remember that you still need to pursue new clients, manage phone calls, and do administrative work as a freelancer.
For example, you plan to work for 6.4 hours a day for 220 days (out of 365 days), then your will be working for:
220 days X 6.4 hours/day = 1.408 hours
How to calculate the Minimum Acceptable Rate (MAR)?
MAR is nothing but the lowest hourly rate you are willing to work. Analyze the costs and working days to calculate a MAR that works for you. Developing skills and experience can increase MAR.
MAR = [(living cost + business cost + salary) / (yearly working hours)] + tax
Consider the above factors to calculate your rate.
Pricing options for freelance projects
There are many strategies to set a price for your services. As a freelancer, you have the freedom to set your rates by understanding based on the pricing strategy that works best for you.
This type of pricing considers the number of hours you work. However, it is not the best option if you can complete a task well before the deadline. Also, experienced freelancers find hourly rates unjust considering the years of expertise and skills spent in their respective fields. If at all your client insists on time-based billing, then go for daily billing. That way, the number of hours you work does not matter.
2.Fixed charge per project
Most freelancers favor a fixed charge per project since it gives more value to their work than the time spent for its fulfillment. Furthermore, you can justify the payments to the client by explaining the importance of the work instead of saying – I have spent so much time on this project.
If the above options do not sound good and you are looking for consistent income, then having a freelance retainer agreement with your client may be a good option for you. This agreement guarantees a certain amount of work for a certain amount of time you have to do for the client.
Work to be done will be discussed earlier so that you can plan your working hours early. It is a good arrangement if the client wants a longtime commitment from you.
Similar to fixed charge per project is the value-based pricing. However, the difference lies in how you arrive at that price. In this strategy, corresponding rates are set based on the value of your deliverables to clients. For example, a project that you work for a client might lead them to incur $100K sales. So, you charge 25% ($25K) of that.
The completion time of the project is another consideration in setting your price. However, even this type of pricing poses some challenges, like knowing the monetary value of your ongoing project.
These are some of the pricing options that can guide freelancers in setting their rates. It is also essential to note that each strategy has pros and cons, and rates may vary according to projects’ nature and freelancers’ experience, so you can negotiate your way to arrive at an acceptable rate. And always treat every client and every project distinct from one another, and work on them accordingly and professionally.
- Use different pricing strategies for various clients.
- Always ask for an upfront fee or a fixed deposit before starting the project.
- Keep your rates flexible and adapt to changes when needed.
- Value your skills appropriately.
- Keep track of working hours even if you are not using an hourly-based pricing method.
As a freelancer, you will need to understand the nuances of setting the freelancer rates. However, it takes time. So have patience and keep working. As you are working on the rates, consider signing up with 24Task to work on exciting projects. We will connect you with the right clients who pay well.
Mallikarjuna is a Search Engine Optimization specialist at 24Task, a leading online freelancing platform. Mallikarjuna is a search engine enthusiast and a specialist in Digital Marketing who has helped businesses reach their audience digitally through his expertise in Inbound Marketing Techniques.