Table of contents
- How to create a decision frame for charging hourly or per-project
- How to determine your hourly rate as a freelancer
- How to estimate a project rate as a freelancer
- Is it worth setting up a freelance client on a retainer?
- A/B test your freelancer pricing strategy and rate
- Know your industry: there’s no one-size-fits-all approach
- Don’t lock in your rate for too long of a time period
- Give options to your clients (but not too many)
Congrats on starting your journey of being a freelancer, which is one of the biggest trends in the world of work right now!
I’ve experimented with a lot of different pricing strategies along my journey as a freelancer and I’m happy to share some of the tips, knowledge and experience that I’ve learned.
Without any more fluff, let’s get started* on discussing how to properly price freelancing services for your clients.
How to create a decision frame for charging hourly or per-project
After talking with a lot of different freelancers, and thinking back on my experience with freelance web development, I’ve found that there’s a time and place for hourly work and a time and a place for per-project work.
I believe that perfecting your time estimates will help you become more efficient in your pricing journey.
We’ll touch on how to determine your hourly rate and how to estimate a project rate later in this article. In this section, I want to go over some of the high-level methods for deciding how to choose between the two.
Is charging hourly for freelancing a good idea?
I would stay away from quoting your hourly rate as a method for billing if you can.
The primary reason for this is that the value of your time increases with the more experience you have in a specific skill set.
Sure, you can increase your hourly rate when you feel that the time is right. And you absolutely should.
However, it’s not going to make financial sense for you to charge a client for 30 minutes when someone else could have taken three hours for completing the same task. Instead, you should have a general sense for what things cost, and price a flat rate accordingly, but there will be more on that, later.
I don’t charge hourly very often. Instead, I use my hourly rate as a constant to help better inform how much a task will cost for the client.
Depending on the client, this might not be negotiable. I’ve worked for some clients in the past who have requested that freelancers keep a record for how many hours they’ve spent on particular projects.
I think this is the only time that I would be okay with setting my hourly rate. With the way this is set up, an agency subcontracts me to fix small bugs or set up small features. There’s not really a market rate for this type of work because it’s generally fixing something “broken,” in a website. Instead, my clients are essentially booking my time for a cost.
I think this transitions into another great example of charging hourly, and that would be for consulting calls. Let’s say that you’re an expert in flipping houses. You’ve spent a good amount of time researching the markets and have even flipped a few houses on your own.
Some may say that you’re an expert. If this is the case, other people starting their journey may want to learn from you. You can charge a flat fee for a 30-minute or hour-long call, and you can help set someone up on the right path. In this case, this particular freelancer is making money for a certain amount of his or her time. Cool!
Why charging a freelance project rate makes more sense than charging hourly
I briefly mentioned above how if you’re an expert in some particular subject, it may take you a specific amount of time to accomplish a task, and another freelancer might take twice that amount of time, or more.
For example, let’s say that you’re a freelance resume writer. You’ve written hundreds of resumes and you understand what is effective. It takes you 30 minutes to produce a resume that you know will help someone find a job.
Someone starting out in their resume-writing freelancing journey may spend two or three hours accomplishing the same task. Their hourly rate is $60/hr and maybe the project total comes out to $120.
For their invoice, they’ve billed $180 and you’ve billed $60.
If you charged a per project fee, you could optimize how much you make per hour on a project for which you know the market rate and value. In your experience, let’s say that you’ve seen most people are okay with (or expect to be) paying about $200 for their resume.
Now, instead of quoting a new client an hourly fee, you can quote them a flat fee of $200. They don’t need to know how long it took you, as long as they’re getting a level of quality that is worth the price.
There is a famous saying in the freelancing world, and it goes something along the lines of, “I only can do this three-hour job in one hour because I have 20 years of experience.”
What it means to say is that sometimes quoting an hourly estimate and an hourly quote can backfire, especially if someone’s long tenure in an industry helps them perform work twice as fast as a newbie.
If you want to become more of an expert in your skills as a freelancer, jump on those gaps between freelance projects to hone your current skill set and learn new skills as well.
How to determine your hourly rate as a freelancer
Your hourly rate is going to be very different based on your industry, your level of experience and maybe your location.
If you’re coming from a place where you already do your freelance skill as a full-time employee, you can use your salary as a reference point.
In this example, look at your paycheck. See what your gross income is, per month or per week. It’s important to know that your employer pays some of your taxes and some or all of your benefits. By “benefits,” I mean that things like health insurance, paid time off, quarterly company stipends for work-from-home essentials and related things are “built in” to your actual paycheck from the employer.
When you’re determining your rate, you should include those figures because that is a cost that you now have to pay.
In my guide to becoming a freelancer I discuss in depth about how to “reverse-engineer” your salary and figure out how to price yourself further.
But wait a minute, let’s do a quick reality check.
Your hourly rate is good to know to use as a reference. Someone may ask you, “What is your hourly rate?”
It’s easier to answer them instead of giving a five-minute speech on why you don’t charge hourly or this and that.
Now that we’re aligned, let’s move on!
If you’re unsure of how to price your skills, you can use a salary range of a similar profession to get started. Look for full-time positions that have a responsibility to pick up the skill that you’re interested in providing as a freelancer. I think that should give you an idea how much your skill set is worth.
How to estimate a project rate as a freelancer
Now that you’ve determined your freelance hourly rate, you can apply that to your project rate. Your hourly rate is a great tool to help gauge if your time is worth taking on a particular project.
A freelance marketer may make $75/hr, let’s say. If this is you, and you’re talking with a client who only has a budget of $150, and the task at hand will take you five hours, then you can determine that this project might not be ideal for you.
Your actual estimations now become straightforward. Multiply your hourly rate by your estimated hours. Cushion in some time waiting for your client and some extra time for any snags along the way.
After you’ve done enough projects, your initial estimates help inform you about the market prices for specific services and requests.
Is it worth setting up a freelance client on a retainer?
A retainer is one of the best things that you do to set for yourself up as a freelancer.
You’re guaranteeing yourself a certain amount of money per month, every month (or rather, until the retainer ends).
There are a lot of ways to swing this, but I always like having one big client that pays the bills and all of my expenses, and then fill my time with more regular and spontaneous types of clients.
Setting up a client to pay you a certain amount of money each month helps prevent you from having any $0 months in succession.
Speaking of setting yourself up with a flow of freelance clients, try these ideas for finding your next freelance client through networking.
A/B test your freelancer pricing strategy and rate
If you’re unsure how much a freelance service is worth, or aren’t sure how a client will like to receive your pricing structure, A/B test it.
A/B testing in this context means taking your proposal and a specific scope of work and experimenting with providing different pricing options to two different clients.
After you get enough data and enough clients with which to test your pricing structure, you’ll have a better understanding of how much to charge for a specific task.
This only really works if you have a really specific skill or service that you offer. If you’ve established your hourly and project rate from above and it’s working, I wouldn’t mess with it too much other than to increase your rate.
If you’re on the hunt for some new work opportunities for contract or freelance roles, check out our favorite list of remote job boards.
Know your industry: there’s no one-size-fits-all approach
What works for me when I’m freelancing might not work for you, when you’re freelancing.
What works for you might not work for someone else. It’s important to network with other professionals in your industry and get a sense how other professionals are pricing their services.
Don’t be afraid to talk shop and bring up your rates and the type of work that you’re doing. If you’re transparent and if you open up the lines of communication, others are likely to do the same.
And also, networking is a great way to meet other people and possibly exchange work with each other, which is an added bonus. You never know if someone you meet while networking will turn into your next freelance client.
Don’t lock in your rate for too long of a time period
For longer projects and repeat clients, I think it’s important to increase your rates or create shorter contracts that will allow you to raise your rates.
Instead of some corporation dictating your take-home pay, you can adjust this yourself. One of the benefits of being a freelancer is that you can determine when you believe you are getting a raise, and not someone else. Well, sort of, because a client has to approve it.
Give options to your clients (but not too many)
Clients, especially new clients, may have hesitations to pay a certain amount up front before you’ve established a working relationship with them.
This is your opportunity to be creative.
In certain situations, I’ve sold a client “10 hours” to trial what it’s like to work with me. If everything went well, we’d sign some sort of a longer contract to lock in our professional relationship and not let any paperwork get in the way.
I think this is a slippery slope. If you are too flexible, you may be providing your client with too many decisions and it can be confusing to choose just one. A good approach can be to give a client two options that will satisfy your needs no matter the outcome.
I hope you now feel a little more confident in how to price your freelance projects. I know the topic can be a little daunting at first; however, the more practice you get in the field, the easier it will be to understand how to master the art of pricing yourself as a freelancer.
Last updated on March 9th, 2021