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.
Example
$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.

Comments

[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

[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..