in Business

How Much Should You Charge For Freelance Work?

Jixee-blog-ChargeSo you want to be a freelancer. You’ve got a great skill set. You put together a portfolio and resume. You’re on your way to booking your first client, and then bam! That terrifying, cold-sweat inducing question comes in:

“So, how much do you charge for this stuff?”

For many, one of the biggest hurdles to contract work is determining how much should you charge for freelance work. Quote too high and you risk losing the prospective client completely. But if you start too low, and you may come to feel like you’re working for free.

In a typical full-time job, you’re offered a salary and then either accept or negotiate from there. But in a freelance position, you’ll often be setting your own rates. Where do you start? How do you know what is fair?

Why Your Cost of Living Isn’t a Good Metric

Misled by deceptively simple rate calculators, new freelancers will sometimes try to use their own living expenses as a basis for how much they should charge. But don’t be fooled—although this might seem like a simple and logical method for calculating your freelance rate, it’s simply bad economics.

Clients don’t care about your internet bill or your monthly rent—they care about your value and ability to get the job done. Your cost of living has no bearing on the quality of your work or the typical market value of your industry. So by calculating your rates this way, you risk either shortchanging yourself by working for far less than you’re worth, or scaring clients away with a number that is dramatically out of line with your competitors.

So just how do you figure out how much to charge?

If you’re moving from a salaried position to freelancing in the same field, the small business administration offers a great metric: calculate your annual salary into an hourly rate, then mark it up by 25-30% to account for administrative costs, health insurance and tax obligations. This calculation is ideal because it’s based in fair market value while also accounting for your added expenses.

But what if you’re just out of school, moving into a new field, or know that your previous salary wasn’t in line with the going rate? Here are a few additional factors to consider as you prepare your first quote:

1) What’s Your Experience Level?

Jixee-Blog-Square-ReaderAs with any job, this will be your first and most important question. If you’re new to the field, you obviously won’t be able to charge the rates of seasoned pros. Consider the portfolio and resume of successful launches/projects that you have to offer. If you can provide the client with a ton of examples of your work, great! Your rate will understandably be higher to match that level of experience. But without a strong portfolio, you’ll need to start with great rates for small clients at first—then you can slowly charge more as your portfolio and reputation grow.

2) Will You Charge Hourly Or By The Project?

There are opposing schools of thought among freelancers about how to structure rates of payments. Some are adamant that contractors should never charge hourly, citing that clients are more comfortable with an upfront quote and more likely to balk at the seemingly high price of an hourly figure.

But depending on the client, project rates can sometimes leave inexperienced freelancers feeling overworked and underpaid. Frankly, some clients are just high maintenance. A seemingly simple project can easily morph into a lot of reporting, waffling back and forth and custom requests for changes. In these situations, programmers who are eager to please can wind up doing a lot of extra work for free.

One solution is to charge a project rate with an hourly quota attached. In this case you would quote the client with a rate for the project along with an estimated number of hours expected to complete the assignment—along with an additional hourly rate for any time spent above and beyond the quoted hours.

3) How Much Do Your Competitors Charge?

This is the area where it will benefit you to spend the most time doing your research. Look for other freelancers who match your demographic in terms of location, experience level, training and specific expertise. It’s important to be sure you’re comparing apples to apples, here, since any one of these factors can have a big impact on a freelancer’s rate. You’ll feel nosy asking so many questions, but it’s worthwhile to be sure you’re charging a competitive rate.

4) How Big Is The Client?

Especially when you’re first starting out, the size and type of client will have a big impact on the rates you’re able to charge. Typically, smaller startups have less budget to work with—so they’re willing to take a risk on a less experienced freelancer in order to save on expenses. Larger corporations, on the other hand, are more likely to spend more on a known entity in order to ensure that projects will meet quality standards and be delivered on schedule.

This isn’t to say you should dramatically inflate you rates for bigger companies, but do keep your long term interests in mind. If you’re working with a startup that has limited capital but big potential, it may be worth smarting small or even offering a discount in order to get in as their “go-to” person in the future.

[Featured Image Courtesy of Alec Perkins]

[Second Image Courtesy of Shardayyy]

  • Moppers

    In my experience it is a bad idea to charge different rates depending on the client. Imagine if I call a workman to do a plumbing job. He turns up, sees I have a large house, and suddenly his rate doubles. I’d throw him out.

    You could however justify -additional- services for larger clients like CMMI compliance and ISO certification. Then it’s N hours for the job + Y hours for the mountain of enterprise paperwork that goes with it. You get more money from the big guys as they have to do all that paperwork, and no-one thinks you’re price gouging (should they find out – and they will if you’re good as they’ll recommend you to others).

    • http://jixee.me/ Jesse

      Thanks for reading. This is great advice.