Setting your rates as a freelancer
Making sure you’re making what you deserve!
Once you’ve found your first client, you need to give them an idea of how much you charge.
In general, for negotiations, you don’t want to set the anchor point and instead get a ballpark figure of what they’re looking to pay.
To do this, I would ask what their budget is for the engagement or where the funds are coming from (e.g., which department, which part of the budget).
For instance, if you’re working with early stage companies and they’re paying directly, you likely need to cap your engagement at around $5,000. If their investor is paying, you can charge multiples of this, easily tens of thousands depending on the type of project.
What you’re really trying to get at is an approximate spend figure and whether or not the decision maker on price is responsible for the profitability of the unit that the funds will be coming from. On the second question, if the answer is no, you can usually charge more.
Often, clients or companies new to working with independent contractors will not have a ballpark figure. In this case, you will need to propose a price.
To do so, first state that you need to agree on a very specific scope of work before you can agree on the price. If you name a price then negotiate the scope of work, you’ll end up doing a lot of work for a low price. If the scope of work involves editing material the client has already developed (e.g., a grant proposal, photos, etc.), then agree to sign a NDA and ask to see the raw product before setting your price.
When it comes time to set your price, I would recommend pricing based on deliverables in the scope of work rather than hourly. If you price based on deliverables enumerated in a clear scope of work, it should be binary as to whether or not the work was completed and when you should submit an invoice. Setting hourly prices also creates an adversarial relationship with your clients: they are nervous that you’re not using your time efficiently and that this inefficiency will cost them more money. Also, it is difficult for budgeting — will a project cost $2,000 or $3,000? Hard to tell when you’re charging hourly. Also, for you, it’s just a total pain to track your time and prove that each documented minute was spent efficiently. In a way, your deliverable pricing should be based on an hourly rate: take the amount of hours you expect to spend on a project and multiply it by your hourly rate. A good place to start if you’re starting your freelance business in a major city is an hourly rate of $100-$200 an hour, depending of course on industry and years of experience. To get an idea of a ballpark hourly rate, you can use Bonsai’s great tool here.
Also, when figuring out hours, charge as if you were to start from scratch, even though as time goes on, you will be recycling material you have done for other clients, which means that actual amount of time required to execute the engagement will be less than the projected time you use to calculate the deliverable price.
I would also talk to at least two other independent workers in your city and industry to gauge their hourly rates just so you’re not totally out of the norm.
A final strategy to set pricing is to keep upping the price until the client yells “Stop!” For instance, if you agree to take photos for an e-commerce site, you could quote $5,000. If they agree, add on — for women’s only. If they agree, add on — for women’s apparel only. If they push back at this point, you know you’ve found the right price.