Your freelancer rates are incredibly important: Here is how to set them right
As a freelancer it can be daunting to know how to set your rates. Finding the right balance between profitable and attractive is a good skill to have. Your prices shouldn’t be too high as this might deter some clients. Equally your prices shouldn’t be too low. Know your value and ensure you aren’t selling yourself short.
In this blog we’re going to explore how to set your rates as a freelancer.
What is a freelancer?
A freelancer is self-employed, offering services to clients without a long-term commitment. They work on a project-by-project basis and have the flexibility to choose their clients and projects. Freelancers often work from home and have a diverse range of skills and specialities.
The top six factors freelancers should consider when setting their rates
So what are some criteria you should consider when setting your rates?
1. Know the value of your specific skill set
The first step in setting your rates is to do research. Look at what a full-time employee would earn for the same task or job description. Work backwards from there based on your hours and expertise. Take into consideration how much experience and education you have. How diverse your experience is will also add value, and increase your pricing.
Also consider what market your client is in. What is charged in South Africa might not be the same as in Nigeria, China or the UK for example. Make sure your rates are competitive to the market.
Some useful sites to research salaries are glassdoor.com and payscale.com.
For help with setting your rates clockify.me or freelanceratecalculator.com.
2. Decide on the best pricing model for you
As a freelancer, deciding between hourly or project-based rates can be tricky. It all depends on what kind of work you do, as well as how you prefer to work. The two most popular models are hourly and project-based pricing.
Let’s look at Hourly pricing:
Hourly pricing charges your clients for how much time it takes you to complete a project.
Hourly pricing allows you flexibility on what you charge at the end of the project. It also ensures that you get paid for all time spent. If you tend to work fast, hourly charging might not be the best option for you. But it’s important that you factor your experience into your hourly rate.
When calculating your time make sure to include:
- Research and interviews
- Sourcing materials
- Editing and QA
- Your qualifications and experience
Project based pricing charges a set amount for certain deliverables. This is good if you work quickly, and the project has set parameters. Be sure to include the time it will take you in your calculations.
You have two options for project-based pricing: cost-plus pricing or value-based pricing
Cost-plus pricing is when you charge based on the end result, plus a profit margin. Value-based pricing is based on your unique selling points, like experience and skills. You can also use a combination of these to calculate your prices.
When calculating either approaches remember to factor in:
- Software subscriptions
- Tax services, and
- WiFi or data.
You’ll also have to pay for health insurance, life insurance, and disability insurance. Plus, you need to save for retirement and won’t have access to an employer-sponsored retirement savings account.
3. Decide on upfront payment and retainers
A retainer is a fee paid in advance by a client to secure services for a specified period. Retainer fees ensure that you will be available to provide their services when needed by the client.
Retainers can work in different ways depending on the agreement between the client and the freelancer. Typically, the client pays an upfront fee to the freelancer for a set number of hours or a specific period, such as a month or quarter. In return, the freelancer is guaranteed a certain amount of work and income from the client during the specified period.
Retainers can provide benefits for both the client and the freelancer. For the client, they ensure that the freelancer will be available to provide services when needed. They may offer a discount on the freelancer’s hourly rate or project fees. For the freelancer, retainers provide a reliable income stream and a predictable workload. This can be beneficial for managing cash flow and scheduling.
The amount of a retainer for a freelancer can vary widely depending on the industry, location, experience level, and specific services. Research industry standards and negotiate with the client to determine a fair and reasonable retainer amount for the project.
4. Set an annual salary goal
One of the challenges of freelancing is not having a stable income. Freelancers can set annual income goals by following these steps:
- Determine the amount of income needed to cover your expenses and reach your financial goals. Establish how much you want to earn and work backwards.
To determine your hourly rate, start by dividing your desired annual salary by the number of weeks you are likely to work. Factor in holidays and sick leave. Don’t dismiss the need for breaks and to look after your mental health.
That will give you an idea of how much you need to earn each week. Then divide that by 40, or however many hours you want to work in the week. This will give you a benchmark of the average you should be earning each hour.
- Research industry standards and rates to determine a competitive hourly or project rate.
- Estimate the number of billable hours or projects they can realistically complete in a year. Set a strategy to find enough high paying clients.
- Set a target income based on the hourly or project rate and estimated billable hours or projects.
- Regularly review and adjust the income goal based on actual earnings and changes in expenses or financial goals.
- Find out what other freelancers doing your job are charging
Freelancers can research what others are getting paid by checking online job boards. Some of these are Fiverr and Upwork, freelance marketplaces, and salary data websites. You can also network with other freelancers in their industry to get an idea of typical rates.
Here are some tips for networking:
- Attend industry events, such as conferences or meetups. This is a great way for freelancers to meet others in their field and expand their network. These events provide opportunities to make new connections, learn about industry trends, and find new clients.
- Participate in online communities related to your industry, such as forums or social media groups. Engage with others in these communities to share your expertise, learn from others, and find new clients.
- Ask for referrals: When freelancers complete work for clients, they can ask for referrals to other potential clients. Referrals are a powerful way to expand a freelancer’s network. You can find new opportunities without having to actively search for them.
5. Learn how to negotiate well & be when to be flexible
Once you have determined what your prices are, and you have interest in your services you may need to negotiate. It’s worth negotiating rates to onboard new clients or boost loyalty.
Freelancers can negotiate by following these steps:
- Research the market rate for the services you provide to have a baseline understanding of what your work is worth.
- Clarify the client’s needs and expectations to determine the scope of work required. Ask as many questions as you can to get a clear picture of what is required.
- Determine your own minimum acceptable rate and ideal rate, and set a negotiation range in between.
- Articulate your value proposition and explain how your skills and experience align with the client’s needs.
- Use active listening to understand the client’s concerns and goals, and address them in the negotiation.
- Remain professional and courteous throughout the negotiation. Be prepared to walk away if the terms are not satisfactory. Remember, negotiation is there to meet both your needs, and not for one party to exploit another.
- Get it in writing – once you have agreed on a rate, make sure you get it in a contract. This will ensure you get paid correctly and on time.
By following these steps, freelancers can negotiate effectively. This will help you secure a fair rate for your services and a positive working relationship with your clients.
6. Know when to adjust your rates
And finally, it’s important to know when to increase or adjust your rates.
A freelancer should consider increasing their rates when they have gained more experience, acquired new skills or certifications, or when their workload has become consistently full and they can no longer take on new clients at their current rate. Other reasons to increase rates could be to adjust to reflect a higher level of demand for their services, or to align with market rates in their industry. Regularly evaluate your rates to ensure they are fair, competitive, and reflective of the value you provide to clients.
It’s also necessary to adjust to the rising cost of living. You can do this quarterly or yearly. Raising your rates quarterly helps you evaluate every few months how things are going and where changes could be made, including what you charge. Similar to getting a raise at work, you might consider a yearly review of your freelance rates.
A freelancer should consider decreasing their rates only in certain situations, such as:
- To build their portfolio:
When starting out, you may need to lower your rates to gain more experience and build your portfolio. You should be careful not to lower your rates too much, as this can set a precedent and make it harder to increase your rates in the future.
- To maintain an ongoing client relationship:
If you have a long-term client who is experiencing financial difficulties, consider temporarily reducing your rates to maintain the relationship and ensure ongoing work.
- To remain competitive:
If your industry is experiencing a downturn or a significant increase in competition, you may need to lower your rates to remain competitive and secure work.
It’s important for you to carefully consider the reasons for decreasing your rates. Make sure it is a sustainable decision that won’t negatively impact business in the long run.
Are you freelancing with Nomad Now?
Here are a few things to consider when setting your prices on Nomad Now:
- Take into account the specific service that you’re offering
- Does delivering your Service require extra care, complexity, focus, risk or have a bigger potential impact on Hirers?
- Are you offering a service that is substantially cheaper than its market price? If so, what would the reason be?
- How popular is your Order?
- How strong is your reputation on Nomad Now?
- How much are others charging for the same Service?
- How much are Hirers willing to pay for your Service?
If you’re looking to get started as a freelancer or find more clients.
Sign up on Nomad Now, complete your profile and start matching with clients.