As a freelancer, you are a business. Businesses need to make enough money to survive, so you need to figure out ahead of time if you can charge enough to survive full-time on freelancing right now, if you should do part-time for now, or if you can even make enough for the jump to be worth it.
The first step is knowing your worth in whatever situation you find yourself in. Here’s how you can figure it out for yourself.
Dispelling Freelancing Myths
Payment is always a delicate matter. Money is at the heart of your relationship with your clients, but that doesn’t mean you want to talk about it all the time.
Before we get into how you can learn to value your time, let’s cover a few myths you may have heard about how payments should work.
Myth #1: Freelancers Should be Paid a Similar Rate to Full-time Employees
People often make this assumption. They are incredulous that you ask for $100 per hour for a project when their full-time employees get paid only $50 for the same job. This is an incomplete way of looking at the situation.
Freelancers give their full attention to the job at hand, have no company perks or other such benefits to fall back on, and are aware of the stiff competition that constantly keeps them on their toes.
An average freelancer will go above and beyond the call of duty to deliver the best job: researching, learning new skills, maintaining responsiveness, and seeking new ways to impress their client. This manner of dedication should be well rewarded.
Freelancers should include this detail in their marketing strategy to potential clients: You pay a fair amount for a better outcome.
Myth #2: You Have to Compete with the Average Market Rates for Your Service
This sounds like good advice until you look at it more closely. Average pay doesn’t always reflect what your skills, abilities, and experiences are worth. Maybe the average for a one-page responsive website from Upwork is less than $500, but that doesn’t mean that’s what you should be charging.
Look instead at averages of other programmers with similar resume skills as a way to get a better idea of your worth.
Myth #3: You Should Do Free Sample Work Before Getting Paid
Never do free work. Even if you charge a reduced rate for your first small test project (emphasis on small tests), that’s better than doing anything for free.
Most expert tips on time management are about valuing your time. And clients who are asking you to work for free to show them your capabilities before they hire you will probably not pay you well in the end because they don’t understand the value of the time you spent on that “free” test.
Myth #4: It’s Up to You to Justify Your Payment Rate to Every Client
You charge what you charge. If clients want you to explain your rates, you can have an itemized invoice ready for them, but you don’t have to explain why you charge a certain rate for your work.
Myth #5: You Can’t Negotiate What the Client Offers You
Always negotiate if you’re not happy with what they’re offering. You don’t have to accept any projects; you have the freedom to say no.
Exercise that freedom if a client is unwilling to budge on a bad quote, no matter how much “exposure” or “further opportunities” they’re offering.
Myth #6: You Should Expect Your Full Payment After Completing the Job
Unless you already have a good relationship with a client, you should make a point of requiring a deposit before you start working. Get paid as much as possible upfront so you can protect yourself against people who want to steal your code. Guard your time!
How Much is Your Time Worth?
With those time payment myths out of the way, let’s look at how to determine your rate.
Calculating Your Value
There’s an abundance of rate calculators online, but they rarely give you a realistic picture of what you can charge. The truth is that clients don’t really care how long it takes you to do the work; they just want the job done well.
They are paying for value, so if you’re asking to be paid for your time, then you’re negotiating two different things!
You have to charge for the value you offer, which is a bit harder to calculate than your time. A simple way to do this is to know the industry rates and benchmark yourself against the level you think you are.
Say, for instance, that freelance writers charge between $0.03 and $0.35 per word. If you know someone who does the same quality of work as you and who charges $0.18, then it’s OK to raise your fees to this level.
Sometimes, the key to calculating your value is benchmarking your work against others. You’d be surprised at how low you’re charging for your value. If you’re consistently working at the right rate, it should easily cover your expenses.
Just like any other business, you have to charge what the market thinks you’re worth. You can’t charge what you want to earn and expect people to pay if it’s too high above what they would normally pay for someone with your resume skills. That is unless you have something to justify the extra cost. Do your research to find your ideal rate.
Ask Around, talk to as many professional programmers as possible, specifically freelancers or the people who hire them. Look at agency websites that connect freelancers to clients. Go everywhere you can, and search for people with similar experiences as you. Ask about the rates freelancers charge and how much clients usually pay for what you’re offering.
This might be more difficult in some programming fields than others. Consultants will have trouble finding people who will open up to talk about rates, but developers and other online-focused workers are usually not opposed to discussing rates.
What’s the average price for the services you’re offering in the market today? Being in a common enough industry such as programming, you can probably find a solid average figure with a little research.
Google it and see what comes up. Note that you can approach it as if you’re a client looking for the service, and you might find more reliable results and figures.
Accounting for Your Expertise and Experience
Soft skills add to your rate just as much as your technical skills. While it’s wonderful to be fluent in multiple programming languages (the more, the better!), you can also charge more for your experience in the industry and the delivery speed you offer.
If you communicate professionally and work efficiently and have a reputation for being reliable, you’re likely to get a better rate than others who don’t offer those extra qualities.
This also works in reverse. If you’re just starting and don’t have much to show for yourself, you can’t command as high a rate as your more experienced competitors. Build your soft skills, experience, and other complementary skills to increase your rate. Always calculate these into what you’re charging!
Previous Salary Comparisons
If you’ve been previously or are currently employed as a programmer, the simple thing to do is take your annual salary and divide it by your working hours to get your hourly rate. However, this is more of a baseline to identify how much you need to be earning rather than a good measurement of how much you can charge. Use it as a baseline measurement, not a solid estimate.
Don’t use your previous salary as a benchmark for how much you should charge. This might work in the job market, but it’s not an effective strategy for freelancing. Clients don’t care how much you made at your previous job; they want to pay a fair market rate.
The Cost of Mundane Tasks
Everything you do during working hours has a cost. Every email you send, the article you read for research, or the inspiration site you look at takes up some of your time. Even doing your accounting, website management, and social media marketing takes up your time. While you can’t directly charge your clients for these tasks unless they’re part of a project, you need to include administrative costs.
When you work for yourself, you are a business. Businesses have profit margins on every project covering the costs of maintaining the business in the background. Customers may not directly use the electricity in a bakery, but the bakery still has to pay for it somehow. Administrative costs need to be figured into your rates.
A simple way to do this is to add an extra 10% to what you’ve already calculated as your value. If you were set to charge $50, you’re now charging $55. It should be enough to start you off, so you don’t sink between projects or while on break.
How to Charge For Your Service?
At this point, you may have a preliminary number in your head, a starting point for how much you can charge for your service. Now, think about [how you’ll actually bill your clients. Your options are hourly or per project.
Charging per Hour
Some freelancers prefer to charge a direct hourly rate. This way, you can get paid for every minute you spend on a project. You can give clients a quote for how long you think it will take and charge them that, billing for overtime if necessary or if they add extra time to the project.
Time tracker apps are fantastic for keeping track of when you’re working and giving your client some concrete proof that you’re billing them for legit time spent working. Every hour worked should be paid for if you’re billing hourly, making a time-tracking app a necessity if you choose this billing method.
Hourly has some downfalls for technical workers, however. While it might be appropriate if you were doing customer service calls or simple editing work, it’s not always the best way to charge for technical work like coding, developing, software maintenance, app design, or other technical/creative tasks.
What if your quote doesn’t line up with how long the project takes or you’re working in short bursts on a few different things simultaneously?
Hourly billing also limits your income potential. You can only work so many hours per day, which means you can only earn so much in that time. You’re practically incentivized to work slower because you can earn more. This is how it’s supposed to work for you or your clients.
Additionally, if you are working on bigger tasks that take more then a few days to complete, some freelancers prefer using task management software with a built-in time tracker to prevent back-and-forth communication about time spent on each individual task.
Charging a Fixed Rate
The adage that time is money just doesn’t hold up to scrutiny. If you’re working on a per-project basis, it’s not always about how long you’re doing something. Rather, it’s about what you’re doing. Clients don’t care if it takes you 30 minutes or three hours to get their work done as long as your deliverables line up with their expectations.
This means you can potentially earn a lot more if you work efficiently. You also don’t have to think about exactly how many hours you need to set aside for tasks; you can work sporadically without it coming back to bite you.
In technical fields, per-project billing makes more sense to clients and freelancers. It’s easier for clients to understand and budget for pre-determined costs. Sign a contract for each project, and if they try to add more work as you go, make sure they know you’re going to charge them extra!
It’s easier to ensure you’re getting paid what you’re worth when you charge fixed rates. You can easily make market comparisons and increase or decrease your rate as needed during negotiations.
Ask For What You’re Worth
There are millions of people worldwide looking for the cheapest option that gets even close to getting the job done. You can scrape the bottom of the barrel and race to the bottom forever, or you can start asking for what you’re worth.
It’s as simple as that. Not all clients are willing to pay you a higher rate, but you’ll stumble on some clients who agree with your estimates or offer something close enough. Would you rather work an entire month on five different grueling projects to make $3,000 or do one month-long project with a single well-paying client for $3,000?
The interesting truth is that some clients are turned off by freelance professionals who throw out lowball offers. They know how much the work should cost them, and they’re suspicious if you offer a rate that sounds too good to be true. If your quote is close to what they expect, that makes you a more credible candidate for the job.
Your time is valuable. Treat it as such, and don’t work with people who don’t offer you anywhere close to the rate you deserve to be paid.