As a freelancer, waffling on your pricing is practically a rite of passage. Unless you’re hyper-comfortable with putting yourself out there, valuing your own services is rarely a breeze. It can be hard. And scary. And uncomfortable. And that discomfort can lead you to lower your pricing over and over until you’re charging far less than what you actually deserve.
If that is where you are at right now on your freelancing journey, we feel you. We’ve been there too. Asking people to pay you for your work can confront you with all sorts of false (but convincing!) stories about your own skills, experience, and worth. And if you get caught up in those stories, you may undervalue your services so much that you end up working longer hours, taking on cheap clients, and, eventually, burning yourself out.
It doesn’t have to happen this way, though. We want to help you move through the sticky, scary stuff that comes up when you’re on the brink of professional growth. When you set your freelance prices according to the real value that you offer, you tend to attract clients who are willing to pay you what you truly deserve. And those clients are typically easier and more fulfilling to work with.
So… where do you start? Let’s walk through the basics of how to price your services correctly as a freelancer, so you set yourself up for success.
Step 1: Get to know the market.
When you’re setting freelance prices, it’s important to consider what the going rate is for other freelancers who offer comparable services. The easiest way to do that is to talk to the people around you. Chat with other freelancers on social media. Post a story on Instagram or tweet at the freelance community and ask them to chime in.
You can also explore online databases like Freelancing Females and The Freelance Creative, where people can post their rates publicly. This is a great way to compare rates by industry, service, and region in order to figure out what the ballpark range is for the work you’re doing.
Step 2: Set your salary goal.
Next, it’s important to decide how much you want to make annually. If you’re a sole proprietor, it’s easy to take this part lightly. But before you jot down a pretty number and move along, try pausing to consider how seriously you would take this step if you were paying someone else. Yep… It’s just as important when it’s you.
Setting financial goals as a freelancer isn’t just about intention. Your target income determines how many clients you’ll need and what prices you’ll charge them. So as you consider your freelance salary, be sure to account for freelancer taxes, business overhead, and any other fees or expenses that will reduce your take-home income. Make sure you’re happy with the number you see after you shave those off of the top.
Step 3: Calculate your working days per year.
What do you want your average week to look like? Will you take days off? (Please do!) If so, how many? Will you go on vacation? (Please do!!) If so, how often and for how long? Will you plan for sick days? (PLEASE DO!!!) If so, how many?
These questions are super important as you’re setting your freelance rates. Unlike a salaried position, where you can count on a consistent payment no matter how much you’re actually working, freelancing income depends on… how much you’re actually working (and, more specifically, how many billable hours you’re working. See Step 4 for more on that.). So, it’s helpful to first calculate your total number of working days per year before you can set your freelance pricing. Here’s the equation for that:
Working Days Per Year = 365 – weekend days – vacation days – sick days, etc.
So, say I plan to take two days off per week (104 days per year), 15 days of vacation, and 10 sick days per year… That leaves me with 236 working days per year (365 – 104 – 15 – 10 = 236).
Step 4: Calculate your billable hours per year.
How many working hours do you want to max out at per day? What commitments and personal time will you need to figure in when planning your weekly schedule? And how much time will you devote to non-billable work, like business operations?
Since you’re a business owner on top of a business doer, it’s critical to think about all of the hours (and dollars) you put in behind the scenes to make your freelance business run. That includes the work you’re not explicitly charging clients for (AKA your non-billable hours), like marketing your business, handling the bookkeeping, managing technology, and so on. Once you figure out your average non-billable hours per work day, you can then calculate your billable hours per work day. Here’s how to do that:
Billable Hours Per Work Day = Total Hours Per Day – Total Non-Billable Hours Per Work Day
For example, if I plan to work an average of 6 hours per work day, and 1.5 hours will go toward non-billable work, that leaves me with roughly 4.5 hours of billable hours per work day (6 – 1.5 = 4.5).
From there, you can multiply your total billable hours per work day and your working days per year to arrive at your billable hours per year:
Billable Hours Per Year = Billable Hours Per Work Day x Working Hours Per Year
Using the examples above, I would end up with roughly 1062 billable hours per year (236 x 4.5 = 1062).
Step 5: Calculate your hourly freelance rates.
Once you’re clear on the market rates, your yearly income goals, and your billable hours per work day, you can do the math to figure out exactly what you should be charging your future clients. Here’s what that looks like.
Freelance Rate = Yearly Income Goal / Billable Hours Per Year
For example, if I aim to make $100,000 per year, I would need to charge my clients around $94 an hour ($100,000 / 1062 = $94). Does that roughly align with the market rates for the work I offer? If so, great! I’ve just landed on my freelance pricing. If not, is it higher or lower than average? And is the rate I’ve come up with reflective of the real value of the work I offer?
If your rate is on the low end, consider upping it until you reach a number that feels genuinely uncomfortable. That’s probably closer to your true value! If your rate is on the high end, consider sleeping on it before you start reducing the number. You could run it by friendlies in your industry to see how they react, too. If the rate still feels too high after that, then try reducing it by no more than 10%.
Pitch clients on the true benefits of the work that you deliver, as opposed to selling the services themselves.
Step 6: Name your rate and sell your value.
Finally, when you’ve landed on a freelance rate that you’re (at least sort of) comfortable advertising, you can practice selling your value. What does that mean, exactly? It’s pitching clients on the true benefits of the work that you deliver, as opposed to selling the services themselves. When it comes down to it, this is all about simple and compelling packaging.
When you package your work up in a way that is attractive and easy to consume, you’re likely to convince potential clients that you’re more than worth your hourly rate. In practice, this means describing the true business value of your services. For instance, if you’re a marketing consultant, instead of talking in-depth about the technical improvements you’ll make to their website, try focusing on the improved user experience, increased conversion rates, and higher revenue that your work could produce.
If a prospect pushes back on your pricing, remember: You don’t have to negotiate if you don’t want to! Your prices are your prices. If you don’t feel comfortable lowering your rate for someone, then don’t. But if it makes sense for you and the client, you can consider decreasing the scope of the project to lower the overall costs, especially if they don’t have the budget to pay for what was originally outlined.
The Takeaway: Know. Your. Worth.
Of course, the monetary value of your work has nothing to do with your value as a person. (You’re priceless, BTW.) But those of us who work for ourselves know that naming our prices can easily get mixed up with our own sense of personal worth. So if you must put a price tag on yourself, make it a damn good one. Stand tall. Connect with other freelancers who cheer you on. Share your fears and your struggles. And most importantly, celebrate your wins—including the moments when you swallow back your discomfort and send a proposal with an hourly rate that makes you proud.