It’s one thing taking the brave step into self-employment, but knowing how much to charge as a freelancer is a question that everyone making this move will ask.
Unfortunately, there is no straightforward answer since a lot will depend on the industry you work in, your experience and qualifications, and how much competition there is for work.
Despite this, freelancing and contracting offers a great opportunity to earn more than you would do in a 9-5 job.
And while most of us do not like talking about money, it’s important to have this conversation about how much you can charge early on, since it will have a big impact on whether you succeed or fail in freelancing.
Set a freelance hourly rate
So, how will you set a freelance hourly rate to attract clients?
One of the big issues for freelancers and contractors when they set out is not to underprice themselves because they may be worried about attracting clients.
However, it’s also important to understand that potential clients may question the quality of your work and your pricing will help appreciate your business because if your freelance rates are too low, a potential client will question why.
Setting a contractor or freelance hourly rate
The best way of setting a contractor or freelance hourly rate is to begin with the salary you would like to earn.
Then you will need to factor in the costs of running your business, including office rent, capital expenditure, utilities and travel expenses.
Don’t forget too that you will have a tax bill to pay so you’ll need to account for this and set money aside.
These figures will need to be added to your target income to give you a clear idea of what you should be charging.
However, this process does not end there because you will need to consider the amount of time you will work – most contractors and freelancers will generally assume that they will work for 75% of their time plus they will need to factor in holidays.
Calculating a freelancer’s hourly rate
An effective way of calculating a freelancer’s hourly rate is to divide the potential salary you have in mind by the business costs and then by the potential billable hours you will work.
This is a straightforward way to set your hourly rate for freelancing and you should appreciate that the average salary in the UK is £26,000 and you may work for 225 days of the year, not including weekends and still enjoy 28 days holiday every year.
This means that the simple calculation is £26,000 divided by 225 billable days, which equates to a day rate of £115.55. You can then break this down for your hourly rate.
Having explained the best way of doing this, offering an hourly rate to a client may not be the best business move – and this issue can be illustrated by a web designer.
While you can offer an hourly rate, you should research the market and offer a project rate which is usually much higher – and still land the work.
Finally, it’s important that you never work for free for a potential client regardless of any tantalising prospect of further well-paid work; not only are you selling yourself short but you will also damage the market for other freelancers.
Essentially, when you are working out how much to charge as a freelancer, you will need to:
- Research your market:understand what others are charging
- Ask high:you can always negotiate downwards with a client if they want you
- Value:the client will pay a high rate if there’s value in it for them
- Creativity:be a successful negotiator when offering a service to a client
- Get an accountant!An accountant who specialises in freelancers and contractors will help with taxes and paperwork – and save you money.
