When starting out as a freelancer, it can be difficult to understand how much to charge clients for your services. Having the freedom and flexibility to determine your rates comes with its own rewards and challenges.
With so much to consider, it can be hard to know where to begin and easy to get lost. So, with that in mind, we’ve put together this simple guide to run you through the key points.
Knowing your worth
When considering your rate, the best place to start is by understanding your worth within the market. Are your skills in demand? Is there a lot of competition in your field?
The value of your specific skills is a great starting point to help you determine the price point to charge your client. Your qualifications, expertise and experience all make you unique, and help you stand out from the crowd.
If you can demonstrate the proficiency of your skills (perhaps through a portfolio of past work or positive reviews from previous clients), you will be able to prove your worth and justify charging your clients a higher rate.
Always remember what keeps you in demand with your client. You have a lot to offer – don’t sell yourself short. Remember, your years of experience and knowledge are reflected in the fee.
One of the many benefits of being a freelancer is that your rate is never fixed. Always be aware of growing trends in your industry. Regularly re-evaluate your own rates to reflect the industry standard.
- How much does your competition charge?
- Are they cheaper or more expensive than your own rates?
- Perhaps most importantly, have they changed their fees recently?
Remaining competitive is important, but it can be a difficult balance to strike, especially when competitors regularly change their pricing. Try not to undervalue yourself. Charging lower rates can lead to missing out on potential earnings, and might even put some clients off if they think you’re not good enough.
As a rule, clients normally expect to pay more when using freelance services. When proposing your rate to a client, communication is key and their feedback is important. Listen to what they say and pay close attention to your pricing.
When freelancing, no two projects are ever the same. Each job is unique and brings its own trials and tribulations. Always consider any additional specifications of a project in your fee. If there is a strict deadline or greater complexity required, this will naturally demand more effort from you.
Your time is precious, and so the projects you work on need to be worth the effort, whether that’s financially, or in terms of growth and opportunities. Don’t be afraid to reflect this in your fee.
Should I charge per hour or per project?
When determining your rate, there are a number of pricing models to consider, such as charging an hourly rate, or quoting a project fee. The difficulty is that:
- Clients usually want an idea of how much something will cost beforehand
- You don’t want to undersell yourself
- You don’t want to price yourself out of the job
It’s a balancing act, and there are pros and cons to every charging method.
Charging an hourly rate has the benefit of simplicity. You only charge your client for the hours you work to complete the project. This pricing model is common among upcoming freelancers and ideally suited for service-based projects. You’ll still need to give clients an idea of how long you expect something to take, though! Plus, if it looks like you’re going to significantly go over the time quoted, tell them in plenty of time.
Charging per project
Alternatively, some freelancers prefer offering a fixed rate per project. For long-term assignments with clearly defined client goals, this can be a perfect fit. When you can’t provide a definitive timeframe for a project’s completion, offering a fixed rate to clients can be more appealing, as it helps them manage their budget more efficiently.
There is no right or wrong method, so experiment and find which pricing structure works best for you.
Paying your bills and covering costs
Another important consideration in deciding your rate is the cost of your bills and outgoings.
- How much money do you need to earn to support yourself and your family?
- What is your annual salary goal?
- Will the project require any supplies, equipment or specialist software?
It’s your responsibility to ensure that your hard work empowers your lifestyle and that you are able to keep your business afloat.
Always factor in the cost of running your business, and check your financial reports to make sure you’re on track. Every freelancer has their overheads, whether it’s purchasing new hardware, renewing a software subscription, or marketing. These necessary costs need to be accounted for, and factored into your rate.
Don’t forget your tax bill
If your self-employed income goes above £1,000 in a tax year, you will need to report this to HMRC. An important point to note is that this is based on income. You’ll pay income tax and national insurance on your profits. Keep this in mind when you’re working out what to charge your clients!
You can make the most of your profits by hiring an accountant to assist you with claiming expenses, improving your tax-efficiency, and paying your tax bill on time; but you will need to pay for their services too. Even so, finding an affordable and skilled accountant can be a real boost to your take-home pay.
In life and business, preparation is the key to success. Having a solid cashflow strategy is essential to support your business and a keystone in setting your freelance rates.
How much you charge determines your ability to prepare a financial safety-net for those quieter months. Business costs can arise at any time, and you need to be prepared for when they do.
To keep your cashflow running smoothly, always ensure you have a written contract with your clients. This helps prevent miscommunication and, if you include payment terms, gives you a time-frame within which you can expect to be paid.
After completing a project, invoice your clients correctly and on time. It is your responsibility to ensure you are paid correctly and in a timely fashion, and communication is key.
To avoid anyone forgetting to pay you, send payment reminder letters or emails when the agreed payment deadline is near. If a repeat client is proving difficult, you can always withhold your services until any outstanding bills are paid.
Factor in the hours you won’t get paid for
When you are a freelancer, you don’t have a team to fall back on, and the success of your business rests solely on your shoulders. We don’t mean to sound scary, but like all good things, running a business takes time.
To keep things running you’ll inevitably find yourself spending a lot of time sending out invoices, building client relationships and replying to emails. Whilst this administration is important, it’s also non-billable time.
With each project, do your due diligence. Consider how many non-billable hours will be required to complete a project and factor that into your rates. It might be worth looking at tools or software which can help automate some of the more time-consuming aspects.
Life can be unpredictable, too. When you run your own business, factor in the possibility of sickness or other unexpected absences. On the days you are feeling worse for wear, you might need some downtime to recover. It’s sensible to account for several sick days in a year, as its better to have them and not need them, than to be stuck working when you’re feeling run down.
One of the biggest advantages of being a freelancer is you have the freedom to take time off whenever you wish. You don’t need to request it, but this flexibility comes at a cost.
You might not get paid holidays, but taking some time away from work is well deserved and essential for your health and mental well-being. So don’t forget to factor this into your pricing, either!
Find more guides and resources for freelancers in our online hub.