Dylan Smith

What should your hourly rate be as a freelancer?

Regardless of the work you do, this is the general rule of thumb for working out your freelance rate:

  1. Decide how much you need/want to make annually
  2. Divide that number by 2,000 (for the approximate working hours in a year)
  3. Double the result to account for non-billable time like admin and sales

Example: $50,000 / 2,000 * 2 = $50/hour

Now that you know the justification behind the math, you can skip a step and just divide your desired annual salary by 1,000. That should get you in the right ballpark.

Then there’s the question of what the market will bear. If the going rate in your area is a little lower that the number you came up with, you may need to adjust your expectations. If most people are charging more, get yours! Do some research on what rates are being charged wherever you might be competing for work, whether that’s locally or online. Think about how your skill levels, years of experience, and specialisations might affect what you can demand.

If you’re freelancing part-time and aren’t reliant on the income, you might consider undercutting the market rate to win work. (Be careful with this as people can have a psychological aversion to the cheapest price.) Or, if you can afford to and risk losing contracts, you can try charging a premium for your time.

You don’t need to charge the same rate for every client or project. Experiment. Push your luck sometimes. Remember, if clients are always agreeable, your rate probably isn’t as high as it could be. But if the work is something you’re really excited about, consider slightly decreasing your rate to secure a contract. The same might be good when facing long-term commitments. After all, good clients, fun projects, and guaranteed cashflow beat sitting around chasing after work.

Conversely, if you’re approached for a project you don’t want, one known strategy is to quote an unusually high rate to have the would-be client turn you away instead of the other way around. Another tactic and generally good piece of advice is to quote enough that you’ll be happy doing the work; what you might dread at $50/hour could become tolerable at $150/hour.

Worth being familiar with, many experienced freelancers and consultants use a method called “value-based pricing”. It breaks the direct correlation between your income and your time, allowing your earnings to scale even after your schedule is full. The gist is that if you know your work will make or save a company a lot of money — and you can convince them as much — you can use that to leverage a higher rate on a project than you would charge for just your time spent.

Example: Billing hourly, a project would work out around $2,000. But you know the work is worth $100,000 to the company. Maybe you can negotiate for a five-figure fee.

It’s hard to pull off but the most successful freelancers will tell you that’s how to unlock the really big cash.

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