How to Set Your Freelancing Business Rates and Not Get Fooled

How to Set Your Freelancing Business Rates
A freelancing job can help you earn a good income which can be at par with a regular job, provided you have the right pricing policy. This BusinessZeal post will tell you how to set your freelancing business rates.
BusinessZeal Staff
Last Updated: Feb 10, 2018
Tip
Include a clause in your agreement saying that up to 3 edits in the article will be free, and anything above that will be charged on an hourly basis. This will help deal with difficult clients who suggest too many changes.
Freelancing as a photographer, writer, proofreader, graphic designer, web designer, etc., can be a lucrative as well as self-satisfying job. One of the perks of this kind of job is that you get to be your own boss. You also have the liberty to work from anywhere. However, for this job to click and run the revenue mills, you must have the right pricing format. While undervaluing your work will make you run into losses, overvaluing it will act as a client 'repellant.' Hence, having the right pricing policy for your freelancing business service is critical for its success. This BusinessZeal article will guide you for setting your freelancing business rates.

Note: An example of a freelance writer has been taken into consideration while explaining the following points and concepts for the convenience of the readers.
Factors Determining Your Business Rates
Here are a few factors which may affect you while making a decision regarding the rates for your service.
Market Rates
Your fees are subject to change based on the market fluctuations. Hence, you will have to evaluate and adjust them from time to time. Too many writers and less work means that you will have to reduce your charges, and increase them if the circumstances change. You can even study the trends of this fluctuation and adjust your sails accordingly for surviving competition. You will have to keep up with the various innovations in the freelance market and keep honing your talent from time to time.
If market demands that you graduate into an allied field of freelance writing, you must be able to do it easily in order to retain your clients.
Competitor Rates
While the rates of your competitors will not define what you intend to charge for work, they can definitely act as guidelines. You must know what your competitors are charging for similar jobs. You may be overvaluing or undervaluing your work. Studying competitive rates will definitely give you an idea about fixing your charges such that they are not too high or low. Many freelancers often mention their rates on their websites, so study a few leading websites to know the charges.
Non-monetary Benefits
Writing Freelancing Business
Many times, working with a client offers many non-monetary benefits. He may be a very reputable client who gives your contact to many of his friends. He never gives his work to anyone but you. He quotes you as a seasoned writer on his website. Your work on his website also diverts traffic to your blog. He gives you a freehand for writing without much editing. All this definitely works in your favor, and you may be willing to adjust the financial compensation a bit for this client.
Your Affordability
Freelancing Writing business
Freelancing is kind of owning a business, where you will also have overheads along with income. You will have to spend on computers, Internet, electricity, reference books, various software for checking grammar, spellings, etc. You may also have to outsource certain work as you will not be able to do justice if you have a jam-packed schedule. You will also have to pay for the necessary taxes.
Apart from this work-related expenditure, you will also have to pay for your living expenses like rent, food, traveling, family requirements, etc. Hence, you should analyze your monthly expenditure and then fix charges for your freelance work. Only you will be able to judge better about the affordability of rates.
Freelancing Income Survey
Freelancing Income Survey
Many professional organizations and websites conduct freelance income surveys for various branches. This may include freelance photography, writing, graphic designing, financial services, proofreading, etc. Find out about the pay scale of your category by visiting their websites. This will also help fix your own price structure.
Scope of Work
If the client himself is not clear about the brief, it may lead to a lot of rework and wastage of time on your part. This may cause you to lose out on other work. Hence, you should put your foot down and explain to the client about the situation. If he was giving you $20 for this work, request him to put in a little extra to compensate for the lost assignment.
However, if the mistake was on your part, you will have to keep doing rework till it is acceptable to the client, i.e., if you do not want him to move to your competition. So, decide your prices accordingly.
Find the Full-time Equivalent Salary (FTE)
Glassdoor Website
You must find out how much in-house professionals earn for the same job which you are doing. You can log on to various websites like BLS, PayScale, Indeed, Salary, Glassdoor, etc., to find the average yearly salary for the profile. Then calculate the FTE. You can calculate it using the following formula:
Yearly Salary/ 52 weeks / 40 hours = Hourly Rate
Include any kind of bonuses, financial perks, etc., to the yearly salary. This can help calculate the hourly rate which you can charge to your clients for a comfortable living.
Urgency of the Job
Imagine that you get a frantic call from your client, who wants you to roll out an urgent press release. He gives you the brief and wants you to send him the first draft within the next 30 minutes. You work hard and complete the job in time. Your charges for a complete press release are $200, which the client will not mind paying at all, as you had to keep aside your scheduled work and take up his press release. Under other circumstances, where you had time on hand, you would not have commanded this kind of money. But if you are working on something urgent, don't forget to demand more.
Value Required for the Job
Multitasking woman
If you are indispensable for the client, probably you will be able to command a good price. If he considers you as the only source for quality writing, he may be willing to pay you well. However, you will have to build this image by delivering good quality work within a stipulated time frame. If you are adding value to the work, your client will not mind a higher rate. However, a single mistake can also shake his trust and make him move to your competitor, so beware.
Supply and Demand of the Industry
Let us face it, there is no dearth of writers who would be willing to work for a lower price. Also, it has been observed that the complexity of the subject of the article is directly proportional to the pay. So, if your freelancing work is similar to hundreds of others, you lose your bargaining power.
If you are into writing critical body of works like a press release, speech, or in your niche content, only then you seem to stand apart from the rest. As the work you do will be unique and important, you will be able to command a good price for the same.
Few Ways to Evaluate Price Rate
Here are a few methods which are used to calculate the rates for their services by the freelancers.
Project Completion
Some people also charge clients on a project completion basis. Here, they allot a lump sum amount for handing over a complete assignment. This is a good pricing policy as you can determine your charges based on how critical the assignment is. However, this works more for the benefit of the client than you. If he keeps suggesting changes or additions to the article, it will only mean a lot of rework for you. You will have to incorporate all this for a fixed amount. You will not be able to finish the work till the customer is satisfied.
Hourly Rates
One way to charge for services is to follow an hourly rate pattern. You will have to decide a fixed cost for every billable hour of work you put in. By billable, I mean the time that you actually spend working on the assignment. It does not include the hours you allocate for a power nap, creative recreation, food breaks, invoicing, networking, calculation, etc. You will be able to make a good amount a day if you work for 8.5 hours every day and charge about $12 an hour. This is how you can calculate your hourly rate.

Total Net Income Per Client / Hours Worked Per Client = Equivalent Hourly Rate Per Client

However, the hourly rate method comes with its shares of cons. If you are fast at your work, you will deliver it earlier and lose out on money. Also, you only get to charge the customer at face value for the hours of work and not the actual quality of work. Some clients may also be skeptical that you are showing a bloated figure of hours to earn more. Hence, you should have a structured calculation as follows.

Time Spent on Research: 2.5 Hours
First Draft Ready: 3 Hours
Understanding Edits: 0.5 hours
Second Draft Ready: 1 Hour
Final Changes: 0.5 Hours
Final Article Ready: 1 Hour
Total: 8.5 Hours x $12 Hourly Rate = $102 Earned
Word Count
One of the less popular ways for calculating the rate is by counting words. The client may give you $2 for 50 words that you write for a subject. This is not beneficial for the writer at all as you may not earn too many dollars for the words written by the end of the day. However, there are clients who will increase the per word value once they are satisfied with your delivery.
Online Calculators
Online Calculator
There are a number of websites which offer online freelance rate calculators. You can check them out and fill in your details to receive a free rate for your freelance work. There are also some mobile and tablet apps which will help calculate the exact rate that you should offer.
Minimum Acceptable Rate (MAR)
Minimum Acceptable Rate (MAR)
Calculating your MAR will help you to consider your overheads and tax in your pricing format. MAR will help you to ask for a rate that will cover your expenditures so that you will be able to charge a fee that is required by you. If you don't use MAR, you run the risk of undervaluing your services.
Following is a formula to calculate MAR.

(Personal Overheads + Business Overheads / Hours Worked ) + Tax = MAR
It is advisable that you make a rate card for the service that you offer and put it on your website. This will help your clients to know about the charges instantly. The rates for freelancing jobs are never fixed, and you will have to adjust them from time to time to meet the market requirement. Always quote a slightly higher fees so that if the client negotiates them, you can give a discount and bring them down to your standard. Also, if the client is not ready to pay you much for a critical job, negotiate with him and leave the job if it is demanding too much hard work and paying you peanuts.
Now that you know how to set your freelancing business rates, strengthen your portfolio and create a favorable reputation for commanding a good price.