The freelance life is all about freedom: the freedom to work when and where you want, choose projects you enjoy, and set your own salary--however, the majority of freelancers under charge for their services.
Even if you are just getting started, you deserve to earn a livable wage.
But how do you know what to charge? More importantly, how do you make sure you can cover business expenses like taxes, insurance, and time off?
This post will walk you through everything you need to know to calculate your freelance rates and — even more importantly — how to raise your freelancer rates.
Note: Clarrow is an all-in-one business tool designed just for freelancers. Sign up for free.
1. Freelance Rates Pricing Structure
The first step in calculating your freelance rates is deciding what pricing structure to use. Unlike a standard job (where your options are pretty much salary or hourly), freelancers can use several pricing structures.
Here are a few of the most common freelance pricing structures:
- Hourly: Bill clients directly for exactly the amount of time you spend working on their projects.
- Flat Fee Per Project: Charge a set rate per project. This rate should be calculated based on what you want to charge per hour but keeps you from having to track your hours.
- Per Word or Page: Charge based on the number of pages or words for written projects. Writers and editors often charge per hour or per word.
- Retainer: Charge a flat fee for a specific number of hours or projects a month. Essentially, the client pays to reserve your time.
The freelance pricing structure you choose might vary based on client, industry, and your skills. For example, most writers charge per word, but flat fees are also common. Freelance graphic designers often charge per project or per hour.
2. Calculate Your Hourly Rate
Even if you don't charge per hour, you will want to know your hourly rate. This will help you calculate the cost of projects or retainers.
Remember to build in the costs of doing business, including:
- Payment processing fees
- Paid Time Off
- Higher Freelance Tax Rates
Start by calculating the salary you want (or that your industry supports), then add 20% for taxes, 2% for processing fees, the cost of insurance, and the cost of at least two weeks off.
For example, if the annual salary you want to earn is $50,000:
- $50,000 X 20% for taxes = $12,500
- $50,000 X 2% processing fees = $1,000
- $50,000/52 (number of weeks in a year) = $961 per week X 2 (for vacation) = $1922
Then add up all your other expenses for insurance, marketing, etc.
So, to earn $50,000 a year, you should charge a total of:
$50,000 (base salary) + $12,500 (taxes) + $1,000 (payment processing) + $1922 (vacation)= $65,422.
As an hourly rate, that works out to $31.33 per hour — just remember that rate doesn't include other business expenses, which can vary from a few hundred dollars a year to several thousand.
But, there's one issue — you won't be working on client jobs 8 hours a day.
Most freelancers spend 10 to 15 hours a week on administration tasks like email, billing, and finding new clients. So, multiply your hourly rate by 35% (the percentage of your week spent on admin tasks) to get the hourly rate you should charge clients or use to calculate project fees.
To earn $50,000, your hourly rate should be $42.33, plus the cost of business expenses, so we'll round it up to $48 per hour.
Note: The business expenses we're referring to here are the cost to run your business, not client expenses, which you should be billing to each client.
3. Make Sure to Track All Your Hours
Tracking your hours is crucial to running a successful business — even if you don't charge an hourly rate.
Consider how many times you get sucked into social media, get distracted by laundry, or talking with a friend.
You might think, "Oh, I can whip up that graphic in 20 minutes, so I'll charge $25!"
But how long does it take you to log in to your email, find the client's order, download files, format it correctly, and then send it over? Then you have the time you spend in the client's project management tool, reading emails, and making adjustments?
That time eats into the time you could have spent on other client work.
Note: Clarrow offers a free time tracking tool so you never miss a dollar.
4. Don't Reduce Your Rates; Reduce the Scope
We're often told everything is negotiable. While that might be true at a garage sale, it isn't when it comes to your freelance rates.
You've spent months or even years learning your craft, your industry, and finding the right freelance tools to help your business grow. Don't lower your rates for a client; instead, offer to reduce the scope of the project.
They'll spend less, and you will have more time for other clients.
- You quote $400 for a 2,000-word blog post, but the client wants to pay $300. Offer $300 for a 1500-word post instead.
- You quote $1000 for an infographic; the client says their budget is $800. Ask them to do the research in-house, so you spend less time designing and writing the infographics.
- You quote $2500 for a monthly social media package that includes graphics, writing the post, and engagement for three platforms; the client offers $1800. Cut the scope to manage just two of the three social platforms.
This strategy works incredibly well because it shows the client you are willing to be flexible — but you don't devalue your time or expertise.
5. Charge More For Quick Turnaround
Ideally, your clients will give you two to three weeks to turn around projects. (That can vary by industry, of course.)
Sometimes, however, clients need work done faster. If it is a one-time ask for a long-time client, you might just get it done. Just don't let it become a regular occurrence or you will find yourself overwhelmed.
As the saying goes, a lack of planning on your part does not necessitate an emergency on mine.
If clients need a quick turnaround, charge a rush fee of 25%. This does two things — it prevents clients from asking for shorter turnaround times unless they need it, and it makes up for you having to restructure your work week (or even work overtime.)
6. Raise Your Rates Regularly
At a standard job, you would get a raise at least once every year or two. As a freelancer, however, the only person who can give you a raise is you!
As your skills increase and you gain more experience, make sure to raise your rates to match your new skillset. Most traditional jobs offer a 3% cost of living increase each year, so don't let your rates stay stagnant. Once a year, review your rates and business expenses to see if you need to raise your rates.
Have you taken any courses, increased the quality of your work, or have any clients expanded the scope of their projects? It is time to raise your rates.
Are you drowning in work? It is time to raise your rates. (You'll increase your salary and likely work fewer hours even if you lose a client or two.)
Has it been more than a year since you raised your rates? It's time to raise your rates.
Did you get a new client? It is time to raise your rates.
Here's a customizable email template to let current clients know you are raising your rates:
"Hello <client name>
I have so enjoyed working with you over the past <time>. It's been a pleasure to help your business <add results —- increase online visibility, drive more traffic, etc.>
To continue providing my clients with the best <service you offer>, I am increasing my rates from <current rate> to <new rate plus 10%> as of <date at least 30 days out.> I would like to extend a current client discount of <new rates> starting <date at least 30 days out.>
Thanks so much for your continued support, and please let me know if you have any questions.
Remember to tell them your rates are increasing, not ask. You are your own boss, which means you set the rates.
What if a client says no to a freelance rate increase?
Don't offer a discount; instead, offer to reduce the scope of your work. Instead of four blog posts a month, offer three. If you deliver 25 blog post images a month, lower it to 20.
Keep in mind that freelance rates vary by industry, location, and expertise. Look for professional organizations in your industry to determine what rates the market will support, and make sure to consider all the expenses that go into your business.
And remember to raise your rates regularly! It might feel uncomfortable, but it is the best way to ensure you charge what you are worth as a freelancer.