The number one question freelancers ask when first starting out is, “How much should I charge my clients?”
If you ask any freelancer–new or old–they’ll all likely tell you something different. This makes the process of finding an hourly rate difficult for the newbies.
Then if you Google stats regarding the average freelance rates, you’ll find the average hourly rate at $19. And the overall range from $11/hr to $28/hr, depending on the industry.
Of course, this survey only consisted of 21,000 freelancers, so this rate can change drastically. For example, you may find some freelancers charging as high as $300/hr or more.
But whether you’re new or an experienced freelancer, setting a solid rate that you and your clients are happy with isn’t always simple.
So in this guide, we’ll cover everything you need to know about setting your freelance hourly rate.
Let’s get started!
Clarifying Your Expectations as a Freelancer
Why did you become a freelancer? If you’re like most, you decided to go this route to gain more freedom and earn a decent salary.
Others do it to travel or to fire their boss.
Not answering to anyone is great, but letting go the security of the corporate world can be scary, especially if you’re struggling with making ends meet. This is why it’s important to know your expectations as a freelancer.
At the end of the day, it comes down to two options for getting the salary you want – working harder or working smarter.
With the former, you can set competitive rates and spend 16 hours a day slaving away to make ends meet.
Or you can do the latter and charge a higher rate so you don’t have to work as hard to make ends meet.
Either way, there needs to be a balance that accommodates your lifestyle. Let’s take a look at how you can do just that.
Determine Your Experience Level as a Freelancer
Are you just now becoming a freelancer with little experience or samples under your belt? Or are you a seasoned pro looking to earn a better income?
The answer will help determine how high of a freelance hourly rate you can charge and get away with it. For example:
- Beginner/Entry level: You have little to no experience
- Intermediate: You have a few years of professional experience (paid work) under your belt
- Expert/Pro: You have 10+ years of experience in completing complex projects
Once you identify your level of experience, it’s time to see what others in your experience level are charging. You can either ask other freelancers their hourly rate (not as offensive as asking their annual salary).
Or you can go to sites like Upwork, Guru, and Freelancer and see what others charge for similar work.
Also, be sure to have a portfolio that demonstrates your skill level, whatever that may be. Clients today aren’t interested in how many years you’ve been in the industry.
They want to know how great you are at what you do.
Calculating Your Monthly Expenses
There’s a misconception circulating the web that all a freelancer has to do to determine their hourly rate is to think of their desired annual rate and use this formula: desired salary / 2080 = hourly rate.
*2080 is based on 40 hours a week X 52 weeks.
So if you wanted to make $80,000 per year, then it would look something like this: 80,000 / 2080 = $38/hr.
If only things were so simple.
The only thing this helps is identifying your base hourly rate.
The reality is there are so many factors that play a role in how much you save from your freelance income.
If your hourly rate is only paying expenses and not leaving much left over for your savings and retirement, then you’re not charging enough.
The first step is to determine your “take home” pay. You do this by calculating all of your monthly expenses and tack this onto your base hourly rate to get your true freelance hourly rate.
Some of the expenses you want to include in your calculation are:
- Rent, internet, phone, utilities
- Office supplies/equipment
- Legal and accounting fees
- Professional memberships
- Continuing education
- Software/service subscriptions
- Advertising/marketing costs
- Retirement savings
Then look at how many billable hours you have per week. Now, each hour you’re sitting at your desk doesn’t count.
We’re talking actual hours worked. If you have a lot of interruptions throughout the day, there are time tracking apps you can use to assist with calculating this.
You can replace the 2080 hours with your actual billable hours. Then add up all of your expenses and combine this with the annual salary you want to earn.
Divide this by your billable hours and now you have a more accurate hourly rate. This is your minimum – any time you can charge more, great!
If this sounds like too much math, there are freelance hourly rate tools you can use.
Estimate What Your Work’s Worth to Clients
Now, the above is a simple way to determine what to charge for general projects. But depending on your field, you may feel the need to charge a bit more.
For example, say you’re a freelance copywriter who charges $35 per hour. You may feel the need to charge higher for a client that’s looking for a tagline or a jingle for a commercial.
Jingles and taglines help consumers remember their brand and potentially earns them millions in revenue. This is why you’ll find jingle writers charging as much as $10,000 per song.
That’s a small price to pay for corporations that make millions off of your ad.
So in a nutshell, consider what your project’s worth to the client and charge accordingly. Don’t be afraid to charge more and always do your research.
Hourly Rate vs Project Rate
Then there’s the age-old debate among freelancers – charge by the project or by the hour? Again, different freelancers will tell you different reasons for choosing either.
There are pros and cons for each.
For example, if you charge $500 for a project that ends up taking 35 hours to complete, you’re only clocking in around $14/hr.
Then if you’re charging $35 an hour for a project that takes 3 hours to complete, you may feel ripped off. This is especially so if it turns out to be great quality and yields high profits for the client.
This can also become an issue if you’re juggling multiple projects with a set project rate. It would be better to charge hourly. This way, it’s easier to track and you can ensure you’re paid adequately if it takes you longer than expected.
Then as you gain more experience, the clients you get will have bigger budgets. And these companies aren’t worried about how long you spend on a project.
All they care about is the quality. So if you’re capable of pushing out a beautiful website in two hours, you’re still paid $2,500. This means you made an astounding $1,250/hr.
This alone is enough to convince expert freelancers to charge by the project vs by the hour. All you have to do is calculate how long it should take you, along with what the project’s worth to the client to determine your project rate.
For example, say your hourly rate is now $60/hr and you expect to take 10 hours on a project. The project’s worth to your client is pretty high, so you tack on an additional $500-1000.
This totals to a project rate of $1,100 to $1,600. If you actually take 10 hours, you earn $110/hr to $160/hr.
Things to Consider When Setting Your Rate
Whether you decide to charge hourly or by the project, there are several things you want to consider. For instance, if you worked with the client before, then you can get a good idea of how difficult they are.
Do they require a lot of edits, adjustments, and so on? If so, then you may want to charge this client a higher-than-usual rate.
On the other hand, if you come across a project that you find personally riveting, then you may not mind charging a lower rate. The same goes for an easy-going client with on-going work.
Don’t forget to consider how much the client is capable of and willing to pay. For example, say you have two clients needing similar projects with the same scope.
One client is a startup with a $4,000 budget. And the other client is a major corporation with a $10,000 budget.
It seems right to charge the corporate client the same $4,000 rate you’re charging the startup. After all, the projects are practically the same.
But if you go to your corporate client and offer to drop the price from $10,000 to $4,000, this will give them the impression that your value is lower. Remember, big companies aren’t spending their own money, like in the case with smaller clients.
They have big budgets and are willing to pay top dollar for top-quality work.
Getting Paid as Freelancer
Once you figure out your freelancer hourly rate, it’s time to ensure your projects are paid for on time. One way to do so is to use a platform like Invoicely to send professional invoices via email.
This will give your clients a great impression of your brand.
Becoming a freelancer is a great way to start your own business and enjoy a more balanced lifestyle.
Already a freelancer? Let us know in the comments which you prefer to charge clients – hourly or by the project?