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Realities of Freelancing: Setting Prices

Since I’ve been freelancing for over a year now (and continue to do consulting jobs even now that I’m working full-time), I’ve started writing reflections on my first year in freelancing. If you’d like to read more of my thoughts, check out this interview with the Financial Wellness Project.

Just as I was starting out, I wrote a post that you are not on sale. But because I was starting out, I did a lot of work that I under-charged for. Even now, I’ve had a number of people tell me that my rates are low, but I feel they’re fair to me…which is what matters.

So how do you set prices for freelance work? I charge in two ways.

Setting an Hourly Rate

You’ll want to do this first, not just for clients but for you. What do you think you’re worth per hour? How much are others in your field making? (What will clients pay?) How do your skill-sets compare to theirs? What do you need to make per hour?

Remember that you’ll have to pay taxes and possibly PayPal fees (depending on how you’re being paid).

Don’t be afraid to set the bar somewhere reasonable. While people hire freelancers in other countries for wages it’s hard for an American to live on, that doesn’t mean you have to charge the same rate they do. There are plenty of people who hire American/Canadian/British workers because they find it more convenient on a number of levels.

I thought about coming up with a way to set your hourly rate, but I’m afraid it varies too much by field and person.

Using Your Hourly Rate

Once you have an hourly rate, pricing jobs becomes fairly straight-forward. If I’m doing with which has specific parameters, then I charge based on how much time/work it normally takes me to get it all done. So if I think it’ll take about 3 hours, I charge 3 x $hourly rate.

If I have no idea, I tell clients that I’m willing to work on it at my hourly rate and give them a general estimate (unless they’re retaining my services and giving me a series of small tasks to do).

When to “OverPrice”

Sometimes, basing prices on the amount of time it takes you feels ridiculous. For example, just because a task might take me 20 minutes (if nothing goes wrong), that doesn’t mean I should charge 1/3 x $hourly rate for it. Learning to do this took a great deal of unpaid time and it would take the client hours or days to figure it all out.

In those cases, price the job based on the skill-set you’re bringing and on what it’s worth to them. Don’t get greedy and charge $100 for changing a light bulb. But don’t be afraid to ask a fair price even if it’ll increase your hourly rate.

Settling for a Lower Price

I’m not talking here about discounts, which I give to repeat customers or if a client engages me for a series of jobs. I’m talking about thinking you’re worth $20/hour and then doing work which pays something like $8/hour.

That kind of compromise gives me mixed feelings. On the one hand, I think that people who are out of work should be willing to work for less if they have to. A little money is better than no money and flipping burgers isn’t something to be ashamed of if you’re having trouble finding a job.

But I did some of these tasks when I was just starting out and found them to be a huge time and energy suck. Maybe that’s because I was trying to do them with the same quality that I would have done them if I was being paid a great deal more.

So be careful of these situations…if you’re in desperate need of money, then they’re better than nothing. But don’t let them pull you away from looking for the work you want to be doing. And if a client keeps pressing you to lower what you believe to be a reasonable price (based on what you know of others in the field, experience with other clients, etc,) then pick your ground and hold it. It may be a slightly-reduced price or your own fee. Just let them know that you’d be happy to work for them if paid and otherwise you hope they find someone else.


{ 4 trackbacks }

Ten For Tuesday (December 23, 2008) | AllFinancialMatters
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December 28, 2008 at 7:20 am
Today’s PF Post at The Copyeditor’s Desk: Freelance fees « Funny about Money
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Setting your freelance fees « The Copyeditor’s Desk
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{ 4 comments… read them below or add one }

daddy t December 20, 2008 at 1:29 pm

I enjoyed reading your wise and well-written column today. Also, I somehow logged onto a piece you’d written in Nov. of ’07 (can’t find the link to it now) on Imposter Syndrome. Although I didn’t know this defect had a name, I now realize I have had it all my life. You have amazing insights to the behind-the-scenes involvement of the mind/emotions which are running wild in our daily lives/careers. I also read your interview of Dec. 3, 2008. That was just before you got your present library job. How are things going, in respect to your new job, with your aspirations/comments set forth in that interview? BTW, you mentioned you have mild dyslexia. One would never know it, for your writing skills are excellent! Thanks for sharing!

Dominique December 20, 2008 at 7:29 pm

It is never easy setting rates for freelance. I too had been deliberating on it for a long time before puting up my ” For Hire” page on my site. Great interview you had:)
Good to know that you’re enjoying your library job.

TStrump December 20, 2008 at 7:50 pm

Being a contract accountant, I’m always getting people who just don’t want to pay.
I won’t under price my work anymore – it’s just not worth it.
At some point, you have to fire clients.

Funny about Money December 22, 2008 at 11:33 pm

Good essay.

When I was writing on a freelance basis, I tried to calculate my overhead, add that to what I thought I should be earning, and from there figure a fair hourly rate, remembering that a substantial part of a 40- to 60-hour week is occupied with marketing, essentially an unpaid activity.

As an editor, I aim to earn $60 an hour, which is about what I earn at the university day job if you figure in all the health insurance, matching 403(b) contribution, and the office overhead. Actually…if you figured the office overhead, it would be more than that, but it would be hard for an individual to estimate exactly how much more.

I never tell a client that I’m trying to charge $60 an hour, as this would cause cardiac arrest. Instead I use a page rate calibrated to my estimate of the work’s difficulty. The harder the job, the more I propose to pay per page. If I figure my time right, I can usually get $50 to $60 an hour. The client, however, sees a flat rate, which a) may look fairly reasonable and b) is a lot less scary-sounding than some unknown number of hours at a rate that is more than many of my clients earn.

I try to avoid accepting jobs that pay less than my time is worth…tho sometimes I do miscalculate!

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