How to Decide on Your Freelancing Rate
Intro:
Since freelancers set their rates, they have freedom to explore the possibilities. Keep in mind that the rate sets the tone in business relationships with clients.
Clients understand the marketplace too. Many know what it costs to receive completed work by a veteran or expert in a niche. They also know what entry-level fees look like.
Several strategies for establishing charges exist. For example, sometimes it’s necessary to charge hourly. Other times it’s best to bill per project. Using the market rate to establish a starting point is a smart strategy. Then, increase it based on your skill level.
We look at seven factors on the topic of how to decide on your freelancing rate.
1. Check the Market Rate
The average or median rate helps freelancers determine the current market asking price. Freelancers should avoid underpricing their services, especially with long-term clients.
When you finally have to raise them to correct the error, it will shock them.
Therefore, complete some market research first.
Let’s say that you decided to start a freelance mechanic business. One way to check the market rate is to visit the Bureau of Labor Statistics and their outlook for the mechanic field.
In 2021, the BLS shows that an employed mechanic earned just under a median hourly wage of $23. Thus, the statistic provides a starting point for self-employed mechanics.
2. Assess Your Skill Level
Successful freelancers understand that their income depends on their credibility. Therefore, remain honest about your skill level. If you’re an entry-level content writer, that’s OK. The more you write, the more experience you will gain.
However, it’s not wise to charge expert-level fees for entry-level output. Your clients have expectations. If they pay $25 or more per 500 words, they will expect error-free, grammatically-correct, and optimized content.
Moreover, they will expect content that’s readable and positions them as an authority in the subject.
3. Build a Portfolio
Another way to establish your freelancer rate is to build a portfolio. When you look at it, the portfolio should back up your asking price.
If the portfolio lacks entries or it doesn’t showcase your talents, fix it. In the meantime, charge the median or average amount for a few projects.
As you accumulate portfolio entries, collect feedback and reviews from your clients too. Rave reviews and a packed portfolio help you increase your fees to the expert level.
4. Understand Your Expenses
If freelancing income is your only income, you must make enough to cover your expenses. Even if it’s a side-hustle or temporary, freelancing should not become a losing proposition.
Rideshare drivers are among the freelancers who benefit from meticulously documenting their expenses and income. Expenses include:
- Vehicle maintenance
- Lease payments
- Gas
- Smartphone usage
- Insurance
Drivers can break down these costs into daily and hourly. Then, take a look at the amount earned for the same parameters.
Ideally, the income will surpass the costs at all levels. If it doesn’t, change your strategy.
5. Research the Cost of Living
Now take a look at your cost of living.
In 2020, the following cities saw a significant jump in self-employment rates:
- Long Beach, California
- Portland, Oregon
- Tucson, Arizona
- Las Vegas, Nevada
- Fort Worth, Texas
In 2022, the states with the lowest cost of living include:
- Mississippi
- Arkansas
- Alabama
- Oklahoma
- Ohio
The states with the highest cost of living are:
- Hawaii
- California
- Massachusetts
- New Jersey
- Connecticut
California falls into several categories. It maintains a high cost of living and it provides entrepreneurs with several opportunities.
Thus, if you decide to base your freelancing business in the Golden State, ensure that your rate earns you enough to cover your living expenses too.
6. Set Financial Goals
Some professionals move into freelancing to earn income on their terms. Data shows that freelancers work more hours than employees. However, this nets them more revenue too.
Those who set financial goals can establish balanced rates; it also prevents them from overworking.
For example, some entrepreneurs want to cover their expenses, cost of living, and save for a down payment on a house. When they meet their daily, weekly, and monthly financial goals, the goals allow entrepreneurs to turn off the clock and rest.
7. Complete Some Math
The last strategy is the salary or 40-hour week approach.
Take 52 weeks and 40 hours. How much would you like to earn annually, monthly, or weekly? If you imagine yourself making $1,000 in a 40-hour week, how much do you need to charge per hour? $25.
Does that match your skill level? If it does, you found your current rate. If it doesn’t subtract a few dollars for beginners. Veterans can add a few.
Conclusion
If you don’t know where to start when setting your freelancing rate, start by checking the market for your niche. Then, take into account your expenses and cost of living requirements. In most cases, freelancers can find a healthy balance between covering their costs and netting an attractive amount of disposable income.
