This article outlines proven strategies to help you understand how much to charge as a freelancer and make sure you are all set for success!
Being a freelancer gives you the freedom and flexibility to work on a variety of projects. However, as a freelancer, you might often find the topic of pricing perplexing. Setting an appropriate rate for your work is one of the most crucial aspects of being a successful freelancer, and helps you present and sell your services with confidence. Here’s a comprehensive guide that will help you figure out how to price your work taking in various factors into account, so that you can support the lifestyle you want while doing meaningful work.
Table of Contents
The freelancer pricing formula: What to keep in mind
There is no set, one-size-fits-all pricing formula for freelancers. However, there are ways to calculate your pricing in a realistic way, which also allows for some flexibility to be built in. Here are a few things to keep in mind while you go about figuring out a rate for your work:
- What is the size of the market and what’s the demand for my expertise?
This is the most crucial thing to ask yourself before you set out as a freelancer. Are there people looking for your skills? Do you need to build on your experience before you start out as a freelancer?
- Are there other freelancers offering similar/the same set of skills on a freelance basis? How much do they charge?
It’s a good sign if there are other freelancers offering the set of skills that you are: it validates the market to some extent. However that does not mean that businesses aren’t looking for your niche skill set: in fact, if you’re among a handful of people offering a service, then you’re already at an advantage!
- How much money do I need to make per month/per year to support my lifestyle?
A good reference point for this is to use your last salary as a guide (if you’ve worked full-time) or read up on full-time salaries for similar roles and use that to direct your pricing. Set some goals and use benchmarks to keep track of your progress financially. Constantly evaluate and re-evaluate this plan as your understanding as a freelancer improves.
- What kind of value do I offer to the client? What do they achieve once they use my services?
Don’t just think in terms of YOUR work, think also in terms of how your work helps the client achieve their goals. This will help you understand the real benefit you’re offering in a way that can be communicated to the client clearly.
- What industries are my skills relevant for?
Your skills (as a data analyst, for exampel) might be applicable across a wide range of industries such as healthcare, banking, IT and life sciences. Think about which one are most likely to use your skills based on your expertise.
- What are the hiring trends in those industries and how accepting are they of freelancers/consultants?
This is crucial as companies debate over remote work and sourcing freelancers. Make sure the industry you’re targeting is leaning towards hiring freelancers/virtual employees.
- How many hours am I willing to work per week?
Many freelancers struggle with working unrealistic hours to meet their financial goals. It is useful to think through this carefully before you set a freelancer rate. Plus, keep in mind that it’s easier to lower your rates than increase it dramatically, especially if you have worked on projects already at those rates.
- What are my expenses?
A freelance job does not come with the perks that a full-time job might offer such as insurance or an office space. In this case you are responsible for your own expenses such as medical facilities, your work set up, furniture, electricity, gas, internet bills, rent and office space, subscriptions to tools/software, and so on. Also take into account the amount of tax you might pay as a self-employed person in your country.
Ultimately, these questions will help you build confidence that your services are in demand, and more importantly, companies are willing to access those services from freelancers (as opposed to full-time, in-house staff).
It’s also useful to reach out to experts for tips and advice on how they work. Freelancers worldwide are typically happy to support fellow freelancers and share their experiences!
Note: Typically, a freelancer hourly rate is higher than that of a full-time office employee. Don’t worry, this is expected and normal.
The challenges in setting freelancer rates
It can be tricky to arrive at price that clearly communicates the value of your service, while also being realistic and in line with market rates. In global competitive marketplaces, freelancers often struggle with losing projects to others who may charge a lower rate. On the other hand, pricing your work too low means that you are not only making a loss, but also underselling yourself and your skills.
It’s useful to keep in mind that your price might wary from project to project, depending on:
- The scope of the project
- Amount of time/effort/research involved
- Timeline and urgency
However, as a subject matter expert, important factors to take into account is:
- How niche the demand of the project is
- Why you are the best person to fill the gap (your expertise, qualifications, etc.)
One of the major factors that experts often forget to take into account while figuring out how much to charge as a freelancer is:
- How the deliverables will be used
For example, if you are a food scientist providing a formula to a food entrepreneur, you should not only take into account your time and effort, but also the fact that your formula will likely become the foundation of a successful business or product.
Use the above factors as a cheat sheet that you can refer to repeatedly to be 100% comfortable with the price you’re charging. Websites like Glassdoor can help you understand industry rates, while calculators such as The Salary Calculator (UK) can help you work backwards from an annual salary.
How much to charge as a freelancer for a specific project
1. Scope of the project and deliverables
The first thing to do while setting a price for a project is to understand the project scope clearly. If this is not clear, ask the client questions that will help you get a clear picture of the size of the project and what exactly is expected from the freelancer. Apart from understanding the scope of the project, make sure you discuss upfront what format the deliverables have to be in. Do you have access to all the tools you might need for working on the project? Are some tools available to enterprises and universities only? Would you have to pay to access a specific database or literature online? Take all this into account while proposing a fee.
2. Understand the value of what you offer
Think in terms of what you help your client achieve and the larger picture. For example, if you were to write a scientific research report: ask how will the report be used? Will it be used to position a product or apply for funding? Thinking through these questions will help you clearly understand not just the service you’re offering but the benefit you’re selling. Make sure you understand the end goal of your client.
3. Your unique position
Why are you in the best position to offer this service? Think about what sets you apart from other freelancers who offer similar services. This might include your:
-How rare your skills are
-Proficiency (which you can prove with examples)
-Certifications or publications
For example, if you’re a scientific writer, identify your niche/core set of skills, and list out your strengths in terms of experience and qualifications. Pick the top 2-3 skills that you are best positioned to offer. If you have 20 years of experience in grant writing, you can charge more for your services as a grant writer, than you might as a research paper editor.
Your value proposition might also differ from project to project, based on the requirements. Build a strong case around why the client should hire YOU as opposed to other similar experts.
You cannot price a project that needs to be done in 3 days cannot be priced the same as if you had 2 weeks. Make sure you charge a fair price based on how quickly the work needs to be done. Also identify the opportunity cost: what projects or potential opportunities will you miss because of your unavailability to other clients for the next 3 days?
It is useful to regularly keep an eye on competitor rates to make sure that you are on the right track. On Kolabtree, it’s easy to look up experts in your industry or subject specialism to see what their hourly rates look like. This will help you fine-tune your rates as you go along.
Fixed price vs hourly rates
Freelancers are often confused whether to offer a fixed, per-project price or whether to charge by the hour. There’s no hard-and-fast rule. Remember, the advantage of being a freelancer is that you are in full control of your rates and pricing model. It is perfectly okay for that to change based on the demands of the job.
Fixed rate: This is the best way to go when the scope of a project is clearly defined and the deliverables are clear. For example: it might make sense to charge an fixed rate for writing a blog post of defined scope and a defined word limit.
Hourly rates: A good way of pricing your work for projects that are large or complex, or where the scope isn’t entirely clear. An example might be: working on a product development project which might involve various iterations to arrive at the perfect formula.
Note: It is always useful to have an hourly rate in mind even if you go the fixed price way. It serves as a good mental reference point and safeguards you from underselling yourself.
What to do when clients don’t meet your expectations
One of the most important things to keep in mind while working as a freelancer is to always communicate clearly with your client to understand their requirements and project scope. Sometimes, clients set a low price for projects because:
1. They do not know what a realistic budget is or don’t have a well-defined project scope
2. They are limited to that budget (especially in the case of entrepreneurs and small businesses)
It is easier to navigate the problem in case 1, as you have the power to communicate the value of your service to the client. In many cases, clients are happy to revise their fee once they understand the time, effort and complexity of a project. They need to understand what value you add to their business and how you help them achieve their goal. At Kolabtree, we’ve seen clients rework their fees and rehire freelancers at the same rate on an ongoing basis.
In case 2, there might be situations where you might feel tempted to work on a project because it’s unique and adds something of value to your portfolio. For example, a fairly low-budget project from a PhD student at Kolabtree was featured on CNBC. In this case, the freelancer’s profile got a boost due to visibility on national media and he is now one of the highest-paid experts on Kolabtree! However, this is a one-off case.
Note: Do not hesitate to SAY NO to projects that do not meet your expectations. As a freelancer, your responsibility lies not just to yourself but also to the freelancing community. On Kolabtree, you can also report clients that charge unreasonable rates or make unrealistic demands. We strongly discourage a ‘race to the bottom’ approach.
Use the points outlined in this article to arrive at freelancer rate that you can charge with confidence. Remember, you chose to freelance for greater flexibility and freedom. Now that you took this brave step, do not compromise for a life in which you are overworked and underpaid. As subject matter specialists, you can make a major contribution to research and innovation through the projects you work on. Being aware of your value will help you navigate pricing issues better.