Do you struggle to price yourself as a freelancer? If you do, then don’t worry, you are really not alone in this.
In fact, setting your rates can be one of the most difficult parts of being a freelancer! Even if you are someone with years of freelancing experience under your belt.
Don’t worry though, I’ve got you covered in this post and regardless of your experience or your industry, if you are a freelancer you can use this guide to work out your desired monthly and yearly income, your day rate, your hourly rate and how you can charge for your services!
Before we get into it though, can I tell you something?
I have been a freelancer for five years now and up until recently I was working for half the rate that I should have been charging. Yup, half!
I was undercharging for two reasons. Firstly, I wasn’t confident enough to charge more and secondly, I honestly didn’t know how to price myself.
Yes, I did my research on my industry but I have found that money seems to be a bit of a ‘taboo’ subject and it can be really hard to find out even what the standard rate of pay is for your industry!
In fact, pricing varies so much that I have met people more experienced than me who charge way less and I have also met people far less experienced than me who charge way more.
Then, I stumbled upon a freelancing guru who showed me how price yourself as a freelancer in a way that makes you feel valued, that allows you to work the hours you want and in a way for you to earn what you need and more!
So, how do you set these rates? Lets dive into it!
How To Price Yourself As A Freelancer
Please use this post as a guide and replace my figures with which figures suit you best! Don’t forget to factor in experience into your figures and also how many hours YOU want to work a week.
Before you price yourself as a freelancer, you need to start by working out your desired income. Doing this allows you to see how much you ‘need’ to be earning in order to cover your living expenses and it also helps you to work out how many clients or projects you need to take on, in order to reach your desired income.
It’s also a great idea to review this figure every year. After all, your experience goes up every year, as does the cost of living, and of course, you are probably looking to continuously grow your revenue too.
To work out your desired income, you can either pluck a figure out of the air (what would YOU like to make?), or you can work it out based on what you NEED to make, aka your life expenditure.
If you’re doing it based on what you need to make, then here’s a really good way to work it out.
First write down the total of all your business expenses (website, domain name, any business tools you use). Remember you can account for some of your house bills, as part of your business expenses (if you work from home). To find out more about this, either speak to your accountant or head to gov.uk to read their guide on expenses (this will differ dependant on your country).
How Much Do You Want To Pay Yourself?
Next work out how much salary you want to pay yourself every month. If you’re not sure what you want this to be, you can start by writing down all of your living expenses.
Ok, lets say your monthly outgoings in your personal life (mortgage/rent, bills, food, petrol etc) comes to £1400. Then say you want to save £200 a month and you need £200 in order to do fun things. That means you need an £1800 p/m salary.
Add on top of that your monthly business expenses. Lets say they are £200 (website, domain name, business tools etc) and that brings you to a grand total of £2000 that you need to earn every month.
Remember these figures are all examples. You can replace my numbers with your own.
Right, before you accept that figure as what you ‘need’ to earn, you should now add 20% tax on top of it (or whatever taxes you pay in the county you live in). With the figures that I’ve used, tax would come to around £400.
Are you still with me?
Now you know you need to bring in £2400 a month in order to cover everything, including taxes!
We are now going to times £2400 by 12 months and that comes to £28,800 a year.
I love to work towards nice even figures so we are going to round that up to £30,000, because unexpected costs happen all the time!
Now YOUR desired income might be a lot more than this. Remember, this is just an example!
Work Out Your Day Rate
Ok, so now you have your ‘desired’ income, lets work out your day rate. This will become the basis of how to price yourself as a freelancer. Even though I’ve mentioned above to try and avoid being paid hourly if possible, it’s still good to give yourself a basis of what you do charge per day or per hour.
I tend to charge hourly, or give a day rate for any medium term projects I pick up, but I stick to packages for long term work.
Ok, are you ready for my day rate formula? It’s time to do more calculations.
So, there are 261 working days in a year (taking in account that there are 365 days and you are taking off two days a week). Lets start with that figure.
Or you can use your own figure here if you want to work less days!
Now, lets take away holidays. How many days holiday are you going to take a year? Lets say 25, then lets also throw in another 10 days to accumulate for potential sick leave (especially a good idea if you have kids!).
That brings our billable working days down to 226. Again, you can change these numbers to fit with what suits you.
Now you need to grab your desired income figure! I’m going to use the £30,000 we used above just as an example.
To work out your day rate, you need to divide your desired yearly salary by your desired billable days. Based on the numbers I’ve used, this will give you a ‘day rate’ of £132.
Are you with me?
30,000 / 226 = £132
Now it’s time to work out your hourly rate.
To work out your hourly rate, simply divide your day rate of £132 by the number of working hours in the day.
Lots of people class a ‘working day’ as 7.5 hours, whereas some people class a working day as 8 hours, but this is entirely up to you! I’ll show you an hourly rate based on a working day being 7.5 hours.
So, 132 divided by 7.5 comes to £18 an hour.
132 / 7.5 = £18
Before we accept this figure though, I am about to throw in a curveball. As a freelancer, it’s highly likely that your working day is ALSO going to be made up of tasks that are ‘non-billable’.
What do I mean by this?
Well, being a freelancer means that unless we have a team of people working for us, we are the ones that have to do all the ‘back-end’ jobs for our business. Here are some of the ‘non-billable’ things I do in my working day:
- Social Media
- Learning new skills
- Tweaking website
- General admin work
These tasks are all non-billable!
I tend to set aside two hours a day to deal with all the ‘non-billable’ things I need to do for my business. This means that I try and only do ‘5 hours a day’ client work.
You don’t need to factor this into your pay if you don’t want to, but I think it is a great idea to account for these hours when you are working out how to price yourself as a freelancer.
So, how many hours of ‘non-billable’ work do you do a day?
Because of this, I work out my hourly rate based on working a ‘5 hours day’ and not a 7.5 hour day. So my hourly rate instead looks like this:
132 / 5 = £26.40
I actually usually charge £25 an hour. This figure is partially based on ‘hours worked’ and it’s also based on my experience.
This hasn’t always been my figure though. For the first few years as a freelancer I only charged £15 an hour but I didn’t use any of the above formulas to work out my pay and I was always highly overworked!
Apparently, even £25 is still quite low for a freelancer who has my experience, so I am gradually trying to increase this to £30 p/h. That all comes down to confidence though.
Guide To Setting Your Rates
If you are unsure about the ‘average’ rate for you industry, ‘Major Players’ offers a really helpful ‘salary survey’ guide that is very worth looking at.
They’ve surveyed thousands of freelancers in a whole range of industries and have worked out the average day rate and salary for each one. You can download 2019’s survey here: Salary Survey 2019.
In the guide, it actually says that the average day rate for a freelance social media manager (as of 2019) is £250 which is about £33 an hour.
Keep in mind that this will also factor in the experience of these social media managers, so your rate might be a lot lower or higher than that. Regardless, this is a great guide to look at when trying to work out how to price yourself as a freelancer.
If you’ve used your own numbers in this formula, what was your day rate outcome? What was your hourly rate outcome? How do you feel about this figure? Is it too low for you? Do you feel more experienced than that or does it seem perfect?
Remember, this is all just a guide. You need to charge what works best for you!
Ok. so now you know your day rate, your hourly rate and you have your ‘desired salary’, it’s time to talk packages.
As a freelancer there are two main ways that we can charge for our services. The first way is to charge for ‘hours worked’. The second way is to charge based on packages.
I love offering packages and I think that they are so beneficial not just to you as a freelancer, but also to your clients. With a package you are charging them for the ‘transformation’ that you are going to give them, not the ‘time’ spent.
One of the main reasons I don’t like charging per hour is because what you can get done in one hour might look a lot different than what another freelancer can get done in one hour – even if you have similar experience.
Instead you can price each project and give a fixed fee based on the value your client is getting by buying your services. Having packages also lets clients see what they can expect from you and makes it easier for you when you are marketing your services.
Price for transformation not for hours!
Creating packages also allows you to work out how many clients you need to serve each month, which makes it so much easier for you when it comes to managing your time and reaching your salary goals.
This is also especially good if you work in an industry where you aren’t always going to have the same clients each month.
To work out what you can include in each package, write down a list of things that you can offer your clients and then ‘package’ it up in different levels.
Things to consider when pricing your services:
- the transformation you are offering
- costs incurred (e.g. if you are a wedding photographer; travel costs, if you are a website designer; hosting fees) etc etc
- back and forth communication
- the value and experience your client is getting by hiring you e.g. the time you are saving ‘them’ through your services
Remember, every client you meet will likely need something completely different from you so your packages might just be used as a ‘guide’ when you first start negotiating your fees.
As a freelance social media manager, I offer three packages.
- Community Management
- Social Media Management
- Social Media Strategy
For example, my community manager package includes;
- Replying and engaging with current community members
- Finding new users and answering their questions
- Creating and implementing strategies for developing and growing the community
- Back and forth communication with clients etc etc
Whereas my ‘Social Media Management’ package includes all of the community management elements but I also add in things like content creation (captions and visuals), monthly strategies and goal setting, creation and management of ads etc etc.
If you are a web designer, a photographer, an illustrator, your ‘packages’ might also work in ‘tiers’.
Working Out How Many Clients You Need
If I want to earn £30,000 a year aka £2500 a month then how many clients do you need to serve every month to reach this?
Say you are a web designer and you charge £1250 for a web design package. You need two clients a month!
Say you are a social media manager and you charge £500 for one of your packages. You need to book 5 clients a month in order to reach your income goal.
Does that make sense?
Now you need to work out what is doable and sustainable for you! If you find that you are feeling overworked, it might be time to offer a ‘more valuable package’, up your rates and take on less clients!
Books To Read
I hope all of this has made sense and that this gives you a great guide to work from when setting your rates as a freelancer.
One thing I have noticed in my time as a freelancer is that most people don’t charge what they are worth because of confidence around ‘asking’ for money. This was certainly one of my reasons too and one thing I have struggled with throughout my life is my ‘money mindset’.
This is something I have been working on for a long while now and if this is something you too need to tackle, then I cannot recommend reading the following books enough;
If you are still really stuck on pricing yourself and setting your rates, feel free to message me. I’d be happy to help you with it further.
- Related post: Where To Find Freelance Work
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