A More Realistic Way To Set Your Freelancer Rate As Your Career Advances
If you’ve ever thought about becoming a freelancer, one question always comes up: “How high should my tariff be?” Aside from figuring out which leaf silhouette to use for your logo, this is probably the most important decision a freelancer will stress in the process.
A google search comes up with dozens of items that offer a general formula to find your price like I wrote earlier:
(Cost of Living + Labor + Profit) ÷ Billable Working Hours = Estimated Hourly Rate
Some websites may even have a handy rate calculator if you don’t want to do the calculations yourself.
But in practice, these estimates are unlikely to give you an approximate number, and only if you are very aware of your freelance business’s spending and the hours you actually want to work. Especially if you’re just starting out as a freelancer, these calculators won’t help you.
Let’s get to freelance work.
Trying to figure out your plan likely means you are just beginning your freelance journey. So it’s pretty unrealistic to work backwards from your desired annual salary. It’s like planning a route across the Pacific before learning how to sail a boat. In reality, when people start freelancing they are in transition. They often come from school or a 9-to-5 job, or are trying to make a career change. Let’s take this in stages.
A friend knows you’re good at video editing and offers you a paid project. “What is your price?” he asks. You don’t know, but you are a smart cookie so head over to a website like Upwork and see what the general hourly rates for video editors are. It’s a pretty wide range: between $ 30 and $ 100 an hour. You think $ 40 is fair, but you really have no idea. Maybe 50 € would be okay?
Here’s a better approach: ask for a project fee.
For a budding freelancer, an hourly rate can be dangerous. If the project is taking longer than expected, your first customer may be upset about the rising costs. If the project is too short, you haven’t made a lot of money at all. Instead, it is a safety net for both parties to release a project in advance so they can feel safe, and is especially good for the freelance newbie who is still learning how long the real work can take.
So how do you set a project fee? Well, you still need to have an idea of how long you think the project will take and estimate an hourly rate. But we didn’t just go in circles; Again, a project fee on your first few freelance jobs is the best way to get what you’re worth and protect the customer if you’ve misjudged yourself. This phase of your freelance career, which probably isn’t about money, is all about keeping your customers happy.
You now have two or three customers. It’s not just beer money; You almost pay the rent for freelance work. You are considering quitting your main job, quitting your other part-time jobs, or making this your full-time career. You could even change your LinkedIn job title to Freelance Video Editor.
You’re seasoned too. You have a good idea of how much time and effort a given project will take. You get follow-up orders. You even become the point of contact for some customers on their projects.
Now is the time to move to an hourly rate.
The benefit of working hourly is really evident when you have lasting relationships with your customers. Negotiating fees on a per-project basis quickly becomes tedious, and as the size and complexity of the projects increase, it becomes more difficult to assess their value. Working by the hour can also mean paying more regular paychecks instead of waiting for a big project to end with invoicing. And perhaps most importantly, when you bill by the hour, your customers respect your time. If they want to add an extra tweak or put you in an hour-long call, they’ll have to pay for it.
Here this equation above makes sense. With a little experience, you will now know much better what your monthly expenses are and how many hours you can realistically work. Taking health insurance, taxes, equipment, software, and taxes into account, $ 40 an hour appears to be on the lower end of the spectrum if that’s your only source of income.
At this point, you don’t need to read this blog anymore. You juggle six to ten customers and actively reject work. You live the dream! But I have one last piece of advice for you.
Go back to a project fee or use tiered package pricing.
Why? Hourly works great. However, as Lindsay Van Thoen of freelancersunion.org puts it, “You shouldn’t be punished because your skill level allows you to deliver great value quickly (it takes two hours) when they accept an offer for $ 100 / hour would. Hourly rates have an upper limit. “
It’s true. Once you are an expert, going back to project-based contracts can maximize your income and gain time at the same time. This model can be difficult to switch customers to once they’re used to your hourly rate (this is a topic for another blog post), but it’s a great way to get new customers at this stage of the game.
With tiered package pricing, this is a great way for you, as a seasoned freelancer, to work with a wide variety of clients with different needs and budgets, and to devote more time to the aspects of your job that you enjoy most. Keeping video editing as an example, maybe $ 500 is your fee for an editing project, but it’s $ 800 if you want post-edit color grading. The ability to stage these projects is definitely a luxury in getting to this point so take advantage of it.