Freelance work is a great way to earn a living or make money on the side. But life as a freelancer is more complicated than a traditional 9 to 5 job. As both the employee and the boss, you’re in charge of finding clients, promoting your services, and — perhaps most challenging — setting your rates.
How much are your services worth? What should your profits look like? Are you charging too much?
Appropriately pricing your services can feel overwhelming for new and seasoned freelancers alike — but it doesn’t have to. Here’s everything you need to know about setting freelance fees that maximize profits while remaining tolerable to clients.
Why are fees so crucial for freelancers?
First, there’s the obvious answer: your prices determine your earnings. Unlike a traditional office job where an employer determines your salary, you control what you make based on your fees. You need enough money to keep your freelancing business afloat and support yourself.
It’s also important to remember that, as a freelancer, you don’t receive the same employee benefits as a worker at a company. If you freelance full-time, you need to set aside enough money for additional expenses, such as personal health insurance and a retirement plan.
Setting the perfect rates is a delicate balance. If your prices are too high, you risk losing clients — but if they’re too low, you miss out on valuable income. Finding that sweet spot is crucial to earn what you deserve while keeping customers happy.
Typical freelance pricing models
Did you know there are different models for setting your rates? Here are the most common freelance pricing strategies:
An hourly rate is the most intuitive pricing model for most freelancers because it’s similar to earnings at a traditional job. In this model, you’re paid for every minute of work you perform for a client at a fixed per-hour rate. Charging per hour may require support from additional tools (like an app that tracks your hourly work), but the pricing system is simple and familiar to freelancers and clients.
Some freelancers prefer not to track every second they work for their clients. These people opt for another popular pricing strategy: a daily rate. Like the hourly model, freelancers charge clients a flat fee. However, instead of pricing based on time spent per day, the fee encompasses every day they work on the project. This model is ideal for full-time freelancers who take on one client at a time rather than splitting their days into work for multiple clients.
This model is the typical pay structure for freelance writing or editing fees. Freelancers charge a small amount for each word in their finished product (usually in cents). The amount they earn depends on the length of the project rather than the time spent on it. A per-word rate ensures freelancers are compensated fairly for high-quality work, even if they’re speedy writers or editors. For example, a freelance writer with a per-hour rate of $25 may only earn $50 for a 1,000-word blog post. However, if that same writer charges $0.15 per word, they make $150 for the same project — a far more typical rate.
Some clients may not want to worry about the variable rates that come with per-hour, day, or word work. In these cases, freelancers can charge a fixed price for the project. This pricing model is great for the client, as they know what their project will cost from the moment they hire you.
Once you establish a regular working relationship with a client, you might choose to shift to a retainer pricing model. This method is similar to an annual salary — you charge a monthly rate in exchange for a set number of projects or hours of work.
Freelancers with many years of experience — and a portfolio of work to show for it — can price their services through value-based pricing. This pricing strategy depends on your client’s pitch. To determine your rate, you assess the client’s project, determine the value you can deliver, and ask for a price that coincides with this value. Each new task has a unique rate based on the quality and expertise you bring to the table.
7 steps for pricing your freelance work
Settling on a pricing model and rate is a challenge — particularly if you’re starting from scratch. Fortunately, our guide to freelance fees can help you set a price that makes your clients happy and yields the income you deserve. Here’s what you need to do:
1. Research rates in your area
Location is one of the most significant factors influencing your freelance fees. In metropolitan areas with significant competition, rates tend to be higher. Research your area to understand the average earnings for work like yours, including what your competitors charge. If you freelance online, the same logic applies — check out what other remote workers make in your field.
2. Consider your costs
What does running your freelancing business cost? Sit down and review all your business expenses, including any equipment or software purchases, insurance payments, and taxes. Remember: as a freelancer, you don’t have an employer withholding tax money for you. When setting your rates, you must remember to set aside the appropriate amount from each project and factor in these losses.
3. Determine your working hours
Freelance work allows you to work as much or as little as you’d like. However, the amount you want to work will influence the prices you charge. Do you want to work full-time, or is your freelance work only for the weekends? Deciding how many hours you can dedicate to your business is important. For example, if you run a costly freelance side hustle, you may need to charge more per project than someone working full-time.
4. Find your MAR
Before deciding what to charge clients, you need to know your baseline needs — known as your minimum acceptable rate (MAR). Here’s how to calculate this figure:
- Multiply your monthly expenses by 12
- Calculate 25% of your annual expenses (this figure will represent your tax costs)
- Add these two numbers together
- Divide the sum by the number of hours you expect to work each year
The resulting figure is the minimum amount you must earn per hour to cover your expenses. Even if you don’t use a per-hour pricing model, your MAR still helps inform your prices. For instance, if you write blog posts and charge per word, you must earn at least your MAR for every hour spent writing.
5. Factor in your value
Your MAR is an excellent place to start when pricing your work, but it shouldn’t be where you stop. If you only charge the MAR, you won’t make any profit — meaning you can’t provide for yourself. Next, consider the value you bring to your clients. Your services are worth more than the product at face value. A post from a freelance blogger might increase brand awareness, drive sales, and inspire conversions. Whatever your niche, ensure your rates reflect the added value your work provides clients.
6. Assess the client or project
Some freelancers choose to charge clients on a case-by-case basis. If a client asks for a particularly lengthy or labor-intensive project, you can set a higher rate than you would for a more straightforward task. Don’t be afraid to ask questions and evaluate the reasonability and ease of a request before landing on a fee with a client.
7. Re-evaluate as you gain experience
Just as salaried employees earn promotions as they gain experience, freelancers can “promote” themselves by raising prices over time. Make sure to re-evaluate your rates at least once a year to ensure you’re charging an appropriate amount based on your costs, expertise, and the work’s value.
Tips for setting your fees
Pricing “your value” as a freelancer is a challenging step in the rate-setting process — it’s difficult to define exactly what your skills are worth in a dollar amount. Here are three tips for creating a fee that reflects your expertise and caliber:
1. Set clear boundaries with your clients
Freelancing is a nebulous industry because every worker offers different services. As a result, some clients don’t know what’s involved in freelance work or how much they should pay for a project. Ensure your clients know what the scope of your work entails so everyone has clear expectations for the process and final result. When your clients understand what they’re paying for, they can be more comfortable paying a higher fee.
2. Be confident in your worth
As a freelancer, you must advocate for yourself. You bring something unique to every client — and you deserve compensation that reflects it. Confidently tell your clients your rates, knowing you deliver work that will benefit their business. Sometimes, that confidence is the key to landing a new contract.
3. Upskill to earn more
If you want to raise your prices but don’t know if you can reasonably justify the change, you can continually “upskill” — learn new skills — to become more competitive. Consider taking an online class to hone your craft or earn a certification. Then, factor this new knowledge into your added value. While raising prices can be delicate, clients are often willing to pay more for experienced freelancers with refined abilities.
Learn more with Practice
Whether you work as a content writer, virtual assistant, web developer, or any other type of freelance service, price setting is an essential part of your business. Your rates will help you attract the right clients to meet your financial goals — but with an influx of customers, managing your client can become overwhelming.
Let us take some administrative work off your plate so you have more time to dedicate to your craft. Practice’s client relationship management platform was specifically designed with freelancers in mind, allowing you to safely and securely communicate with clients, file important documents, receive payments, and more — all in one convenient location.