3 Ways To Define Your Freelance Rates
And how to raise them later on
Numbers are starting to roll in on how freelancers have adapted during the pandemic, and the data is more promising than expected. According to the U.S.-based Freelance Forward 2020 report commissioned by freelancer platform Upwork, 59 million Americans freelanced last year, 75% of freelancers say they earn more than they did at their 9-to-5, and 58% of non-freelancers who are new to remote work due to the pandemic are now considering freelancing in the future.
It’s an exciting time to dive in to BYOB life (That’s “being your own boss”, obvs). And whether you’re new to freelancing or just ready to kick things up a notch, one of the trickiest details to establish is your rates.
- What price will be worth your time?
- What price is actually way too high?
- And when is it time to increase your prices?
There’s a saying in business — “The premium you charge is the value you create” — but it helps to have at least an idea of an appropriate, worthwhile starting range. As someone who’s freelanced for years and also hires freelancers often, I’ve made plenty of mistakes along the way. So in this article I’ll give you a few quick ideas for both setting your prices and also raising them later on.
Don’t Overdo It
Freelance prices are all over the place these days. For example, a few years ago a client of mine wanted to hire out a videographer. She’s a coach who wanted a simple 90-second welcome video she could put on her website. She met someone at a happy hour (Back when in-person events like that existed) and asked him to send over a proposal and a quote.
I’m all for freelancers making money. But the quote was… $13,500. For a 90-second video. The quote was so exorbitant that she no longer took that freelancer seriously, even though his work was pretty good. The risk with setting your prices too high is that you’ll leave a lot of client work on the table. And we all already know the challenges that come with setting your prices too low: Long hours, resentment, and burnout.
You want to be paid what you’re worth, and it’s good to have different ways to research appropriate freelance rates. Let’s go through a few of those options now.
Related: Download the author’s free toolkit of 9 article templates right here.
3 Ways To Determine Your Initial Rates
#1: Figure out your “happy price”
I’ve written before about this essay in Forbes from contributor Michael Ellsworth about finding your “happy price”. Your happy price is the price point at which your energy shifts from “not worth it” to “Yeah, I would happily do that”. Don’t be cheeky: A million bucks would obviously be a happy price for all of us! Your happy price tends to rise with experience.
When you charge your happy price, you protect yourself from becoming resentful or burnt out about the work there is to do, which is key. Take some time to really determine what this happy price is, especially if your freelance pursuits are as a side hustle at first.
#2: Research freelancer forums
If you still feel completely in the dark, go look at what others are charging in your field. I like Upwork because it has a wide variety of freelancers, from side hustlers just getting started to agencies and high-end professionals who use the platform to source potential new clients.
Screenshot from the author. Various results from search term “blog writer”.
As you do research, look for subtle differences between the profiles of freelancers who have higher rates versus lower rates. Here are some questions I like to ask myself:
- What language do they use to project authority?
- How do they showcase being a professional?
- Do they specialize in certain fields?
These clues will help you discern what it takes to be at or near the top of your field with regard to rates. You’ll also get some great ideas on how to position yourself.
#3: Use lifestyle goals to calculate your hourly rate
A third approach is to take a personal finance angle: Define the salary you want, then reverse engineer your hourly rate. A tried-and-true formula to identify your hourly freelance rate is to take your desired salary and divide it by 2,000 hours/year (This accounts for two weeks of paid time off). Be sure to budget for taxes and any expenses.
If you’re a writer and you’re producing actual content for your clients, I recommend you avoid quoting this hourly rate to prospective clients. Instead, quote a package price or project price. To find your package price, add up the number of hours you expect the project to take.
Quoting your services as a package or project allows you to highlight the transformation you are promising your clients, and customers buy transformations. Also, how long it takes you to write an article is none of your client’s business; since they’re paying for a finished product, quote your rates accordingly.
How To Ethically Raise Your Rates
Over time, it will be appropriate to incrementally raise your rates. There are a few reasons for this:
- Your services become more refined.
- You gain more experience.
- You gain more education.
- Your offers become bigger or more involved.
This doesn’t need to be an extravagant lift. Here’s some quick math for perspective: If you were to raise your rates by just 10% every 60 days, your rates would double in just 18 months.
Should you raise your rates with existing clients? It’s up to you. You can choose to grandfather existing clients into their old rates. If you want to move your clients into new rates, a good way to position this is that you’re not increasing your rates; you’re adjusting them based on the new resources, experience, and insights you bring to the table.
Charging money for what you love to do can be scary at first, but it doesn’t have to be a total shot in the dark. Do some research, define your happy price, and define how your services help create a transformation for people, and you’ll be well on your way to living a more fulfilled freelancer life.
Thanks for reading. 🙏🏼
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