Career Q & A: How to Set Your Freelance Rates in 6 Simple Steps
I am starting my own freelance business but don’t know how to price my services. Can you help me?
— Dianna F.
Freelancing is fantastic for moms in a lot of respects. It gives you flexibility, more time with family, less commuting, comfy work clothes (not to be under-estimated), and many creative jobs lend themselves to freelancing. Being a freelancer also gives you greater control and direction over your work, if you want to try out a new career or segue into a new field. However don’t get star-struck by the idea of wearing your fuzzy slippers all day, it is still work and you still need to get paid!
Setting a rate is probably one of the most difficult and nerve-wracking parts of starting off as a freelancer. You want to get paid fairly for your time and hard-earned expertise but at the same time, don’t want to scare off potential clients by setting your freelance rates too high. When I got started, I heard the hourly rates people were charging and thought they sounded exorbitant! But once I started crunching numbers, it quickly became clear there’s a lot more to figuring out your rate than just trying to match your old salary.
There’s no perfect formula for coming up with a rate, however here are 6 tips that I’ve found helpful:
1. Research salaries and freelance rates
If you were previously working in a corporate job, you can use your job as a starting point. However I’d recommend you also do a little research as well — if you were at a company for a long time, salaries for your type of work may have significantly increased while you just plugged along on cost of living increases. For help on researching, see our article How Much Are You Worth?
Be sure to take geography and your level of experience into account as rates may vary wildly. Also, if you’re using this to refocus your career and don’t have the same level of experience in your new field, you might find it difficult to be competitive and need to lower your rate (at least temporarily).
This is a good starting point BUT DON’T STOP HERE!
2. Calculate your expenses
All those free Post-it Notes and unlimited coffees aren’t the only things of the past. Now you have to think about the overhead you’re taking on as a freelancer. A lot depends on your business, but even as a web designer who technically doesn’t need much, I ended up with a pretty long list: computers, software, notepads, stamps, electricity, internet, heating/cooling, rent or a mortgage, and insurance. Please don’t skimp on insurance, especially as a mom — Freelancer’s Union has some good insurance packages for a range of budgets. Like with anything, there’s likely to be unforeseen expenses so be sure to add a buffer.
Also, if you have kids who aren’t in school yet, think about childcare. Being a WAHM (work at home mom) sounds great, because you can take care of your kids AND work, right? Unless you don’t like to sleep or really only work a couple hours per day, you might want to reconsider that. And read Lina’s great article 5 things I wish I knew before becoming a work-at-home mom
3. Estimate your non-billable hours
This is something we creatives often like to ignore when going into freelancing. Remember how you used to blissfully email your expenses and hours to accounting to deal with? Not any more! Whether you deal with it yourself or find someone else to help, you’ll probably send a lot of your time on the non-creative parts of your business. Estimate how long your record keeping, invoicing, proposal writing and all those other aspects of your business which aren’t directly project related will take.
Plus there’s your own business to consider: updating your website, printing business cards, fees for professional organizations, marketing expenses, conferences and networking events among others.
Again, I’d suggest creating a buffer as there’s always something you forgot or that ends up taking much, much longer than you would ever have guessed.
4. Factor in a profit margin
Talk to any freelancer and one of the most common complaints is the unstable work flow. One week you’ll be swamped, the next you’ll wonder if your email stopped working. Depending how how steady and predictable your work is, you’ll also want to add in a profit margin of between 10% and 30%. This helps you build a cushion for when business is slow and, if business doesn’t slow, helps you grow!
5. Get (a little) out of your comfort zone
There’s been a lot of research lately about women and the confidence gap In a nutshell, women tend to devalue their own skills and work. So I’d recommend you try for a bit higher than you feel comfortable with and see what happens. You might be surprised! And while it’s hard to negotiate up from your stated price, if someone turns you down due to price (and you really want the project), you can always use that as a starting point to negotiate. Offer them a lower price for a trial period or reduce the scope of the project to fit within their budget.
6. Find help
Feeling overwhelmed? There are a lot of great tools and websites out there to make your job a little easier. Here are three I find useful:
Your Rate: A no frills approach to get a quick idea of what you should be charging.
Freelance Hourly Rate Calculator: Gets into the nitty gritty of such things as accountant fees and sick days (very important for moms!)
Freelancer’s Union A great resource for freelancers and particularly I’d recommend going into their community boards (called Hives) and talking to other freelancers.
In the end, there’s a lot of give and take on freelancer pricing. You can calculate your rate perfectly down to the last expense but maybe it’s the wrong time of year and demand is low or you get featured on a website and suddenly have more requests coming in than you know what to do with.
Don’t forget to experiment. Have a project come in that you’re just so-so about? Try a higher rate to see if it sticks. Really love a project but know they can’t afford your normal prices? Try to negotiate a reduced version of the project for a lower fee.
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