Being your own boss in the freelancing world is what everyone wants today. The numbers speak for themselves; more than 58 million freelancers only in the USA love the idea.
Still, many people enter the freelance world without actually knowing what it means. It's not all fun and games from the comfort of your home; it's also about structuring your business.
Setting up reasonable freelance rates is a significant part of it.
But who wants to talk about money, right? Most people aren't comfortable talking about money.
Because of that, many freelancers don't know how to charge their clients or how to price their freelance work.
We're here to break the chain - let's talk about money!
In one of our latest blog posts, we talked about how to price yourself as an influencer.
Today, we've created a guide to help you come up with the ideal freelance price for your services.
First, let's check the factors that may impact freelance rates.
4 Factors That Impact Freelance Rates
Here are the common factors that may affect your freelance rates.
- Location - Although somewhat discriminatory, location can play a significant role in your freelance pricing. What one person considers a low payment might be a one-month salary for other people. However, you're the main part of your life, and where you choose to live should definitely influence your freelance rates.
- Experience - As in every other market, freelancer rates also depend on your experience. You have to strive to improve all the time, not only by building experience but also by trying to be a top-rated freelancer for your clients. More experience - higher freelance rates.
- The difficulty of the task - A more difficult task requires more time and advanced skills, therefore, more money. One can argue about the challenges of tasks and their pricing, but if there's one general rule in the freelance world, it is this one: harder the job, bigger the payout.
- Qualification and education - One of the biggest perks of the freelance world is that it's open to everyone, regardless of your background, education, or qualification. If you can prove that you can do the freelance work for your client, no client will ask you for your diploma or certificates - unless, of course, they're somehow crucial for the job.
These aspects seem pretty logical, don't they?
Now, let's see the types of pricing for freelance work.
Freelance Work: Price by the Hour
One option is to price yourself by the hour, which is the most common type of pricing for any freelance work.
A curse because there is a lot of competition and it's difficult to set the price for an hour of freelance work, but a blessing because experienced freelancers are expensive and you can charge less. Although low prices can seem demotivational at the beginning, it's a perfect way to attract clients and build your freelance portfolio.
But how to calculate your hourly freelance rate?
Always start with your expenses.
For instance, if your expenses are up to $3,000 a month, and your goal is to make 20% more of your current salary, here’s the math behind it:
$3,000 x 12 months = $36,000
20% of $36,000 = $7,200 for your salary.
So, your desired payment for a year would be - $36,000 + $7,200 = $43,200.
Now, subtract weekends, 25 days of vacation, 10 days of statutory holidays, and around 5 sick days, the total number would be 221 working days.
A regular workday is 7.5 hours, but in most cases, you spend 60 to 80% of it working.
In essence, you work 6 hours per day, 1,326 hours per year.
Therefore, you should divide the amount of money above by the number of working hours: $43,200 divided by 1,326 hours = $32 per hour.
Not so complicated after all, right?
Start with your expenses, calculate your desired goal in it, and voila, you have your ideal rate per hour.
Fixed pricing is not as popular as pricing by the hour, but it's also used in a great manner.
It's the act of setting a particular price for a fixed scope of freelance work. Fixed pricing is mainly determined by the time needed to complete the task.
The good thing about fixed pricing?
You know the price before you start, which in many ways, can be beneficial both for you and your client.
Plus, you can always choose a project with higher fixed pricing, if that is your goal.
For instance, let's say a client hires you to build five new landing pages.
You'll need two weeks to finish the entire freelance work.
Instead of charging $25 per hour for 84 hours of work, which is $2,100, you can sell the entire project for a fixed price of $3,000.
You're accounting also for the revisions and any unexpected changes that may happen during the project that may require additional money.
But doesn't this have a flip side to the coin?
Yes, it does. If you finish the job quickly, in fact, you are increasing what would be your effective hourly rate. If it takes you longer to complete it, your hourly rate decreases.
Therefore, in the first case, you make more money for less work, but in the second one, you can't ask the client for more money for your extra time since you already made a fixed pricing deal.
That's why it's essential to work on your negotiating skills as a freelancer so that you can learn how to assume and adapt better to all possible situations and set reasonable prices for fixed projects.
Pricing by Value
One crucial reason people leave full-time jobs and start freelancing is the need to be valued for their work. Astonishingly, the percentage of adults in the USA who have worked independently or still work this way is expected to be 54% by 2025, which means that freelancing is a way to find value in what you do.
And since we're on the subject of value, let's see what value-based pricing is about.
In essence, value-based pricing is the perceived value of your job to your client's business for a longer period of time. It's usually calculated in accordance with the first year of realized revenue for the company, and your price would be up to 25% of that.
For example, if the estimated revenue for the first year after the project is finished is $50,000, they are expected to give $12,500 to you. The best thing about value-based pricing is that everyone gets exactly what they deserve.
Whichever method you choose to price your freelance work, you'll be fine. These methods are proven, tested, and have been working for years for freelancers all over the world.
But, you should always consider your expenses, personal life, financial goals, and career choices. And, if you ever need top-rated freelancers, you know where to find those - at Brybe Marketplace!