Are You Calculating Your Freelance Hourly Rate Correctly?

Freelancing allows you to be your own boss. You decide when to work, where to work, and even how much you earn. But the latter can be difficult to figure out, and it’s too easy to calculate your freelance rates incorrectly and not receive the compensation you deserve.

Why Is Setting Freelance Rates So Challenging?

Rest assured, you’re not alone. Setting freelance rates is tricky for most people because you must find the right balance between understanding your clients’ needs, the value of what you bring, and the macro market implications. It can be daunting because:

• Rates differ by freelancer and client; each industry or job is unique.

• Pricing yourself too high could scare away potential clients, but pricing yourself too low sells you short.

• You must consider what billing rate/revenue generation you need to live comfortably and if it’s worth your time and energy.

It can be hard to gauge, which is why we’ve created this quick reference to provide some food for thought and help you navigate the process.

How to Calculate Your Hourly Rate

1) Estimate Expenses

• Start with your monthly living expenses. This includes professional expenses (e.g. taxes, equipment, office space) and personal expenses (e.g. food, clothes, rent). 

• Don’t forget your hidden expenses, which are actually your operational or lifestyle expenses, such as software, streaming subscriptions, internet, data plan fees, certifications, training, insurance, and office supplies. Being your own boss as a freelancer means these are things you should be mindful of, instead of relying on a direct supervisor or office manager to provide these basics.

2) Determine Your Desired Dedicated Days

• You’ll need to establish how many days per week (and per month and year) you’re prepared to work and bill:
  • Factor in weekends, as well as vacation days, potential sick days, and days where you might be investing in professional education and training.
  • Remember that not all calendar days will be dedicated to working on billable projects. There are also days when you’ll meet with clients,  perform administrative work, and focus on business development.
  • Freelancermap provides the following as a loose reference for how many days freelancers will commonly work per year:

•  221 work days equate to 1,768 hours/year if we’re considering 8-hour workdays. If you take the 221 and multiply it by your hourly rate, you’ll see what your gross annual revenue could potentially be.

3) Calculate Your MAR (Minimum Acceptable Rate)

Your MAR is the minimum hourly rate you’re willing to accept based on your market value and minimum revenue you need to generate:

• You can calculate your MAR by adding up your business overhead, living costs, and salary for the year, then dividing it by the hours you’ll be working a year + tax. For example:

• Your MAR is often where you start when you begin freelancing. If all goes to plan, you’ll be able to raise that rate with time, experience, client satisfaction, and of course your reputation preceding you.

Additional Considerations for Setting Rates

1) Type of Industry

• There aren’t fixed freelance rates for every role in every category, but there are definitely trends within every industry that determine what freelance services are worth based on experience level.
  • Research or ask other freelancers in your industry how much they charge and what terms they offer to determine an acceptable range that’s fair to you and your potential clients. 

2) Geography

• Freelance rates vary widely based on region, state, country, etc.
  •  If you plan to take on international clients, remember to tailor your rates to the area you’ll be serving.
  • Always research to get a feel for regional billing rates and consider exchange rates.

3) Education/Training/Certifications

• Advanced degrees or certifications that you’ve earned often qualify you for higher billing rates, so don’t forget to factor that in. Again, research and networking with other freelancers is pivotal.

4) Scope of Work

• Not all projects require the same level of commitment and resources. Some projects may be more complex than others, demanding more advanced skills, requirements, and effort. As a result, you can charge more for these types of services. 

• Consider taking stock of all the services or products you’ll be offering and creating a freelancer rate card that you can present to clients to help them grasp the value of what you bring and communicate what you can contribute to the party.

Know Your Value and Charge What You’re Worth

It’s a whole other blog post, we know, but ‘Imposter Syndrome’ is real. It’s not easy sometimes but try to not sell yourself short. Determine your worth and present it confidently to the marketplace.

If you calculate your freelance hourly rate correctly and are fair to your clients and to yourself, you’ll create the always sought-after win-win and everyone will benefit.

May your freelance ventures bring you freedom, contribution, and well-deserved rewards.

Onward…