Freelance Pricing Part 1 - Set Your Rate!

To determine how much to charge for your services is often one of the biggest challenges for a new freelancer. If you charge too much you'll have trouble landing a job, but if you charge too little you'll starve.

If you're a new freelancer, you've probably scoured the Internet in search of the average rates of professionals in your field. Don't even bother. I'll let you in on a secret... now that the Internet is here, there aren't any "average" rates, because the demographics are too widespread. Furthermore, in the United States, it's now illegal for competitors to discuss rates amongst each other in light of antitrust laws, which explains the absence of rate survey information online. Instead I'll show you how to figure out what rates you should charge by using a formula.

How much do you want to earn?

To begin, figure out what you want your annual salary to be. You might want to pay yourself what you earned as an employee, or take a look at salary.com to find out what the average salary is for your profession.

Next, you'll need to figure out what your overhead is. Overhead is an expense that can't be found billable to a client -- it's simply a cost incurred in running a business. Fill out the following form to work out your overhead. If you aren't sure of the figures, simply look back on last year's bills and bank statements.

Monthly Overhead

Nonproductive Time

There are duties that must be completed for each client that are not productive towards completion of the project. Figure out the actual work hours that you spend on the following duties. You'll need this total later, so keep the number handy.

Profit

Next you'll need to figure out how much profit you wish to make. Profit is the amount that you make after expenses. I'd suggest that around 20% is an acceptable profit margin. Profit is necessary for a successful business, so make sure to factor it into your formula.

Variables

There are always variables that you will need to take into consideration when you're figuring out what you'll charge. You might consider:

1. What does your competition charge?


2. What's your niche?


3. How many years' experience do you have under your belt?


4. What skills do you have?


5. What types of clients do you want to attract?


6. Are you working online or local?