Deciding how much you should charge for the work you do is one of the hardest parts about going freelance. There are three approaches you can take.
Charge the same as the competition
Do some market research, see how much everyone else is charging and set your price around the same mark. The temptation is to price yourself slightly lower than the competition, especially when you are first starting out, to build up your client base.
There are a number problems with this strategy:
- The sum may be too low for you to live on, which means that to be able to feed yourself and pay the bills you will have to put in extra hours. When you’re first starting out putting in extra hours seems ok, but as the months extend into years this is a strategy for burnout and frustration.
- The people who opt for the cheapest price are people who always opt for the cheapest, quality be damned, so if you put up your prices later they will simply switch to someone charging less than you. So you’re either stuck with your initial low price, or you have to build an entirely new client base.
- You are susceptible to anyone undercutting you. You set a slightly lower price, then someone else who is starting up sets an even lower price, so you cut your rates again to keep your clients, and so it continues and you’ve got yourself a race to the bottom.
Many of the freelancing websites have garnered criticism for undermining freelancers wages for this very reason, each person has their hourly rate on display allowing people to instantly compare one freelancer against another and for freelancers to compare prices and set a low one to compete. The problem is everyone’s living costs are different so if you are living in London your living costs will tend to be higher than someone living in Wales. This isn’t even taking into account the global market and the people sitting at their keyboards from Berlin to Bangalore who could also do what you do.
Work out how much you need for a decent income and make that your hourly rate
Review your monthly outgoings and see how much you need to live on per month (or take your current monthly income if you’re still in work, you don’t want to take a pay cut just because you’ve gone freelance). Work out an hourly rate that will cover all your expenses and then multiply that rate by 3. Doing this will take into account that you won’t be working 7-8 hours a day on projects. You will also be doing marketing, admin and taxes, and you will have peaks and troughs of activity and some times of the year when your services are less in demand.
This is not a recommendation to cut your costs to the bone, to work out the bare minimum of what you need to survive and only charge that. This is partly why I recommend using your current or most recent salary as a guide. You know whether that level of income is comfortable, or whether you’d like a bit more or would be fine with a bit less and you can tweak that. Be realistic, you don’t want to pitch too low and regret it in the months to come.
As part of a sanity check you should always be clear how much you need to earn per month before you become a freelancer, and you have to be confident you can bring in that sum within a reasonable number of hours a week. If you can’t realistically make what you need to cover your bills, you need to rethink your freelancing strategy.
Charge what the work is worth
You are a skilled person with knowledge and expertise that other people don’t have but need. You should have sufficient confidence and pride in your work that you can be comfortable saying, this is what I am worth, you will get the best from me, and it is worth your while paying for it. If you’ve never done it, it can be daunting to try this for the first time, but there are plenty of professionals in the freelancing/ consulting sector who work this way and charge considerably more than the ‘what I need to live’ hourly rate.
To charge what you are worth, and be comfortable asking for it, you have to know that you are good and that the client is lucky to have you. If you are confident in your own knowledge and ability to deliver, and you know you will be giving them the best, there is no reason not to charge what the work is worth. How much is that per hour or per project? That is entirely up to you to decide.
This may take some time to figure out, so you could start off on the low end when you first set up. As you gain in years of experience and you get feedback from clients it will be easier for you to judge your abilities and feel confident to increase your charges.
You don’t have to charge the same amount of money for each job or advertise a fixed daily/ hourly rate. Many freelancers will vary the amount they charge based on the clients ability to pay, so they may charge a charity or community group less than they would a corporate client. If possible ask whether they have a fixed budget for the project, that will give you a guide on how much they could afford to pay you. You might also consider lowering your price if a project is particularly appealing or will bring in additional clients or gives you a chance to learn new skills.