Tips for Calculating Your Freelance Rate

When you begin your career as a freelancer, one of the most challenging decisions to make is setting your rate. If you’ve worked in a studio, you may already have some insight into pricing, but if you’re completely fresh, you may not know where to start. It’s quite a dilemma. You don’t want to set your rates too high and risk losing jobs, but you also don’t want to sell yourself short just to get your foot in the door. When you set out to work for yourself, it’s important to understand that you are now a business, and in situations like these, you need to think like a business.

First, you need to take a look at your expenses. You need to understand how much you spend in order to decide how much you need to make. Are you working from home or are you renting a space? Are there any transportation costs involved? What tools do you use and how often do you replace them? Create comprehensive lists of any and all business expenses. When you’re first starting, trying to imagine potential expenses can feel like a guessing game, but this step is critical, so take your time and be thorough.

You’ll next take a look at the total available time you can devote to working. Maybe you’re just dipping your toes in the water and only have 5 hours a week, or maybe you’re diving right in and going full-time. In either case, we are only talking about billable hours, so you need to be realistic with your estimate. Weeks spent on vacation and hours spent doing personal work do not contribute to this figure. Do the math and determine how many total hours in a year you’ll have available.

With your total expenses and total billable hours figured out, you should now have a decent idea of the price range you’re working with. But you’re not in this just to break even, right? So go ahead and choose a profit margin. When you’re starting out, 10% is fine. Your freelance rate is fluid and can evolve over the course of your relationship with a client. It should adjust to changes in your experience level as well as respond to competition from other freelancers. If your work becomes sought-after and you have more offers than hours, you can increase your rates and see who sticks around. You’ll be left with higher-quality clients and a lighter workload. On the flip side, maybe you’ve just made contact with a client you’d really like to work with, and money isn’t tight. You might consider lowering your rate to secure the job.

Another approach is to charge on a project basis rather than an hourly rate. In this case, you’ll want to have a solid idea of how long it takes you to complete said project. For example, say you’re going to develop the branding for a local cafe. They’re expecting a logo, stationery, and a style guide. From experience, you know this type of project will take about 120 hours over the course of 4 weeks. Multiply your hourly rate by 120 and there’s your price. As you gain experience and get faster, you can shave hours off of the process or charge more. Either will equate to a higher hourly rate.

It’s important to remember that rates aren’t set in stone. If you feel like you want to change them for any reason, the choice is yours.