How to set your rate as a freelancer?
This is a very controversial topic, as well as salaries: everybody talks about it but nobody actually says anything.
I don't say I have THE answer for you (unfortunately 😞), but I'll try to give you some starting points and tips that will help you get started. As well as driving a car or running a business, you'll get better at this over time, as you get more experience.
I've been freelancing for 4 years and some simple but very important things I learned about rates are: you need to be comfortable with it (don't blame yourself that you work for too little or always be afraid that you ask too much) and you have to be realistic about it (we all want to earn more but if I'm going tomorrow and ask a client to pay me $1000 per hour he'll most probably ask me if I'm ok 😂).
Now, that we created a bit of context around this subject, let's see how you can get started and have some actual numbers.
Use your salary
This is a very simple technique that I present to all people asking me how to set their rate when starting freelancing. If you had a job recently, this might be a good starting point for you.
Let's assume you'll work 8h/day. Take your annual gross salary (NOT net salary) and divide that by 40hours/week 52weeks/year. Example $100,000(salary) / (40(hours/week) 52(weeks/year)) = 100,000/(40*52) = 100,000 / 2080 = ~$48/hour
I've made a very simple rate calculator starting from this formula on my website.
After your first year as a freelancer, you start having some numbers that you can use to improve this rate. You can see how much money you made, how much you paid in taxes, what other expenses you had (bills, subscriptions, equipment, etc).
Take those numbers, determine how much you need to make this year, and input those in the rate calculator to see your hourly rate.
As you start freelancing, you might now see many expenses but let me tell you some common ones:
- Bills for telephone, internet, utilities
- Software and service subscriptions
- Marketing costs
- Legal and accounting costs
If you want to reach me, check out my website.