Okay, Gigging Mom, you’re ready to start working as a freelancer. Now, how much should you charge for your freelance services? Setting and sticking to your rate card as a freelancer is probably one of the biggest and most important challenges you’ll face. Let’s talk about your options.
- How Do I Price Myself or Set a Rate as a Freelancer?
- How to Set Your Target Income as a Freelancer
How Do I Price Myself or Set a Rate as a Freelancer?
Here’s a Super Simple Way to Calculate Your Freelance Rates
The simplest way to calculate your rate as a freelancer is by setting a target annual income then dividing that number by the total number of hours you intend to work over the course of your earning year.
So, if you want to generate (not bring home) $80,000 in the next 12 months…
Set a goal to earn more than your target income. The idea here is to aim higher than your actual goal so that if you fall short, you’re most likely to “fall short” by hitting your actual goal.
In this scenario: $80,000 + (80,000 x 20%) = $96,0000
Working 30 hours a week x 50 weeks a year =1500 work hours (because who wants to work over the holidays? Or on Fridays?)
Your Rate per Hour: $96,000/1500= $64 per hour
That’s the simple calculation, but there are caveats to this answer that we’ll get into in this post
How to Set Your Target Income as a Freelancer
The calculation is simple enough, right? The more important thing, I think is figuring out what our target annual income should be. One important thing too many new freelancers overlook is that freelancing is a business like any other.
Freelancer Expenses You Can’t Afford to Ignore
You’ll incur business-related expenses like website hosting, software subscriptions, faster internet service, and a bookkeeping and invoicing subscription with a service like QuickBooks or WaveApps. These are expenses you’ll incur very early on in your business.
But remember, that’s in addition to your regular living expenses, which you’ll also need to earn enough money to cover. You’re well aware that it costs money to be a living, breathing, fully-functioning adult. Here’s a breakdown of a few of the average household expenses for an American according to Fool.com:
- Housing $1674
- Transportation $813
- Personal Insurance and Pensions $608
- Health care $414
- Groceries- $378
- Utilities $167 (according to Rocket HQ)
Added together, even the most basic living expenses can easily exceed $4,000 per month. And we haven’t even factored in the regular expenses that go with working, like:
- Life Insurance
- Disability Insurance- 2%-4% of monthly income
- FICA- 15.3% of what you earn
- Retirement savings >5% of income
- Savings >10% of monthly income
Head spinning yet? I’m done with the numbers, but my point is that the income you generate as a freelancer should be able to cover most of these expenses and still leave enough wiggle room for a little fun.
So, while on the surface it may seem like $25/hour is a solid hourly rate (about $50K a year, if you work 40 hours a week for 50 weeks a year), you have to remember that you’re your own employer, which means the stuff that employers normally helped you with like life insurance, health insurance, FICA, and retirement saving are now solely your responsibility – you foot those costs alone.
If you’re working with an hourly rate of $25/hour, which many new freelancers charge, you will have to sacrifice some things. And probably, you’ll have to let go of important things like life insurance and disability insurance just to cover your cost of living, business expenses, and taxes.
Other Ways to Determine Your Hourly Rate as a Freelancer
#1 Research Market Rates for Your Services
In a pure, practical sense, it will be much easier to figure out your rates if you have a reference point, and the market is a good one. Knowing how other freelancers in the market are pricing their services is a good starting point.
You can check job boards on Upwork, Pro Blogger, and Creative & Cultivate to get a better idea of what clients are willing to pay for different jobs. Another source I would recommend is the Bureau of Labor statistics. Here, you’ll find updated statistics of the average pay for different professions, households, genders, etc.
#2 Scope of Work
Scope of work refers to the amount of your expertise that will be needed to complete a project for a client. Let me give you an example…
During my first few years as a freelance writer, I never thought about how much time and effort it would take to get a job done. I charged the same hourly rate whether I was writing an article about a topic I knew inside and out, or overseeing a brand launch.
I remember once taking a job to write a vegan keto ebook from a client who found me on a gig platform for writers called Constant Content. I finished the job, got great reviews then immediately applied for another gig writing an ebook on the keto diet (back in 2017 when keto was RAGING).
That ebook led to a project management gig for a client who was trying to launch and monetize a website on the ketogenic diet. Managing a project of that scope meant conducting keyword research, hiring and paying writers, creating marketing assets, building the website, building the membership community for the site, handling the social media and a bunch of other little things that needed to get done.
I figured it would require X amount of hours per month of my time, and created a proposal for the project, which was close to $30K, an amount that would scare away any randos who weren’t legitimate companies looking to do business.
Imagine my elation when he sent over the first payment which was more than $7,000. Not a bad payment for a work-at-home job, right? Man, I just knew I was big time. I had arrived. I was a stay-at-home mom and self-taught digital marketer making money as a freelancer.
I took the money, hired a graphic designer to handle the marketing assets and a social media person to jumpstart the social media growth. I knew both contractors really well, so I put them on retainer and paid them upfront.
Can you guess what happened? Yeah. Neither of them ever delivered the stuff they were paid upfront to deliver. Which meant it fell on me to either do the work myself or pay to find other providers.
Here’s what I discovered with that project: after I paid the writers, designers, website fixers (I built the site myself but still had some technical issues to fix), social media manager, I was earning about $1,000 a month for a project that was literally taking ALL of my time.
Now, it’s not that big a deal to underbid a project. Everybody does at one time or another, but the scope of the work – the amount of my time and expertise needed to do the job – put me in a position where I wasn’t making enough money to bring in another expert who could help me out. Neither did I have enough time left in the day to supplement my income of $1,000 (which was gross, not net) with other jobs.
And that’s my story about why scope of work matters. (I also have a story about keeping up with the DOT’s plans for road work when you own a brick-and-mortar that needs foot traffic, ? but that’s a sad story for another time.)
The larger the scope of a project, the more of your expertise a client will require to complete it successfully.
Your expertise is valuable. And you should expect to charge a premium when your clients need you to use it.
#3 The Type Of Work It Is
No one shoe fits all in freelancing. Every project is different, coming with unique requirements compared to the previous or the next. In freelance writing, for example, you’ll find that the hourly rate charged for blog posts won’t be the same as the rate you charge for writing the copy on landing pages, or email-marketing copy.
When writing an article for a small publication, expecting anything from $300 to $1500 per post is reasonable. For such projects, you can set your hourly rate with these estimations in mind. But journalistic articles can get you thousands of dollars per article.
#4 Your Skillset
This blog is all about upskilling, because as Jim Rohn used to say about careers and earning money, it’s a ladder – each year your skill set AND experience (not just your same old experiences) should sharpen enough to warrant you raising your fees.
Thinking of getting that journalism degree? Or maybe you’re more interested in earning an SEO or content marketing certification, maybe?
If you can assess the market from day to day and add skills that will help you better serve your client, you’ll be able to increase your hourly rate.
Setting your rate card for your freelance business is a pretty big deal. You have to make sure that your hourly rates as a freelancer are competitive without forcing you to work at a rate that won’t allow you to properly manage your finances. My best advice is to set a financial goal then go about equipping yourself to be able to command those kinds of rates.