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Răzvan Stătescu
Răzvan Stătescu

Posted on • Originally published at

How to set your rate as a freelancer?

This is a very controversial topic, as well as salaries: everybody talks about it but nobody actually says anything.

I don't say I have THE answer for you (unfortunately 😞), but I'll try to give you some starting points and tips that will help you get started. As well as driving a car or running a business, you'll get better at this over time, as you get more experience.

I've been freelancing for 4 years and some simple but very important things I learned about rates are: you need to be comfortable with it (don't blame yourself that you work for too little or always be afraid that you ask too much) and you have to be realistic about it (we all want to earn more but if I'm going tomorrow and ask a client to pay me $1000 per hour he'll most probably ask me if I'm ok 😂).

Now, that we created a bit of context around this subject, let's see how you can get started and have some actual numbers.

Use your salary

This is a very simple technique that I present to all people asking me how to set their rate when starting freelancing. If you had a job recently, this might be a good starting point for you.

Let's assume you'll work 8h/day. Take your annual gross salary (NOT net salary) and divide that by 40hours/week * 52weeks/year.
$100,000(salary) / (40(hours/week) * 52(weeks/year)) = 100,000/(40*52) = 100,000 / 2080 = ~$48/hour

I've made a very simple rate calculator starting from this formula on my website.

After your first year as a freelancer, you start having some numbers that you can use to improve this rate.
You can see how much money you made, how much you paid in taxes, what other expenses you had (bills, subscriptions, equipment, etc).

Take those numbers, determine how much you need to make this year, and input those in the rate calculator to see your hourly rate.

As you start freelancing, you might now see many expenses but let me tell you some common ones:

  • Rent
  • Bills for telephone, internet, utilities
  • Software and service subscriptions
  • Taxes
  • Marketing costs
  • Legal and accounting costs
  • Courses

If you want to reach me, check out my website.

Discussion (4)

lukemiller profile image
Luke Miller

Hi Răzvan. Thank you for sharing your insights.

One important aspect that I would like to point out is the utilization rate. Being a freelancer for many years, my utilization rate is ~60%. I don't have clients all the time and finding clients while dealing with other administrative work also takes up a good chunk of my time.

One important thing I have learned it is to streamline your administrative work in order to spend as much as possible with your clients.

I prefer to use AskFora when freelancing because it does a great job with handling the administrative aspect of freelancing that helps avoid overhead that is unnecessary so that I may spend more time with more of my clients to be focused and innovative

typo3freelancer profile image
Simon Köhler

What if I am 3 times faster than someone else with the same work? When I ask 120 per hour and the competitor only 40, the end result is the same but I will do it in only 1 hour. I might deliver better quality. I personally prefer fixed price based on calculation when possible..

mwellsntask profile image
Maynard Wells

Thanks for providing some interesting insights into calculating the hourly rate.

There are a lot of factors involved in the calculation of your hourly. Ones that come to my mind are following.

  • The market where you are providing your services (If US market high rate - If Indian market low rate)
  • Level of your skill (What kind of benefit can your services bring to the business)
  • Your expenses (Bills, Hardware, etc)
  • Your goals (How much you want to make monthly)
  • Your experience (If you started right now, you'll be working on the low rate)
  • Your experience on a specific platform (If you started on Upwork, you'll earn low)
  • Competition
  • Saturation of the niche
  • The platform (If working on Fiverr, Your competitors will be providing the same services in 5 or $10. It will not be easy to ask $100 for it)
misterhtmlcss profile image
Roger K.

Hi Maynard I think you make some great points and add some nuance to some of the details glossed over in the calculator; which I think is quite a good calculator and nicely done.

Additionally one thing that should be in the calculator is that not all hours are billable. I always feel that I lose about 10%-15% of my income a year on average to unbillable hours and in my first year it was probably closer to 40%. I think that I was lucky at 40%, but YMMV as some are good at closing clients and some are miserable at it. Maynard would you say that 20% is probably a good average for lost billables during a year? Sorry I'm assuming you Freelance btw.

I think @razvanstatescu you might want to consider adding some of the comments you get to web page, so those with dreams of making their millions freelancing in Bali have a little more depth. This isn't all a comment against your work, which I think is fabulous, but mostly a suggestion to help those who would see it and have stars in their eyes of how much money they will make. Just a thought as I think Maynard added some great context to the numbers your calculator produces.