How to figure out your first freelance rate and get paid what you’re worth
So you’re working for yourself now, congratulations! You’re the boss, meaning you have all the power to set your workload, schedule, and most importantly, salary. As a freelancer, you’ll still rely on clients to pay you, and you’ll want to make sure you’re being compensated fairly for the work you’re putting in — you’re not just doing a side gig, this is your career, and you’re a professional. So how much should you charge? Asking for money can feel foreign, especially if you’ve always had your salary predetermined for you at previous workplaces, but don’t be afraid to talk about money, you’re doing a job after all, not volunteering.
“I hire freelancers and actually prefer when they aren’t afraid to talk about their payment agreements, it’s a sign of confidence and shows they know what value they’re bringing,” says former freelancer and current business owner Brianna Brannan. Ready to start working for yourself at your highest earning potential? Follow these tips to kick off a freelance career.
Getting started determining your rates
Decide on your hourly and per project rates and see how those align. If you aim to make $25 per hour and take on a project that pays $100, you should spend four hours on it. To figure out what your target rate is, and what’s reasonable for your industry and area. Sites like Ziprecruiter, Indeed, Glassdoor as well as industry-specific Facebook groups can help you determine what your rate should be. Brennan also reminds freelancers to calculate all the time required to work on a project, including correspondence, research, travel and more that may go beyond the time you’re actually doing the specific work you agreed to.
Remember that a $100 project is not truly $100 in your bank account — not only will you have to pay federal taxes (and likely state taxes, unless you live in the few states that are exempt), you’ll also owe self-employment tax. As a freelancer, you’re also missing out on the benefits of a company-sponsored retirement package, health insurance, paid days off and more benefits traditional employment typically offers. Cushion your rate for these expenses, especially if you can bulk up your bills to afford to take some much needed time off at some point in the year.
“I like to tell clients to ask peers in your industry what they charge. I believe the more transparent we are about rates, the more opportunities we will create for people,” says business coach Vivian Garcia-Tunon.
Terms to use
If talking about money doesn’t come easy to you, remember that negotiation is business, not personal. Your self-worth is not your hourly rate. To start the conversation, Garcia-Tunon recommends asking a potential client what the budget is for a specific project. “That way, you have a better understanding of what they can afford to pay you,” she says. “Once you have a full understanding about the project’s scope and total budget, that’s when you can discuss your rates. It’s important to go into the conversation being very comfortable and clear on your rates and target range. If you’re passionate about the project and the budget is in range, then you’re set up for a more successful negotiation.”
Terminology isn’t necessarily as important as building a case for your business and services, but rehearsing a few specific phrases can help build confidence negotiating. “You can be transparent and firm about what your other clients are paying you by saying, ‘My market rate is X,’” suggests Garcia-Tunon. “When people know that other people are valuing you at a specific rate, there is less room for subjectivity. More than saying the exact right term, you want to have confidence and conviction in how you are saying it. When people are timid and insecure about the ask, that’s where the negotiations for a lower rate come in.”
Secure everything in writing
“Make sure the agreed-upon services are clearly outlined in a contract,” Brennan says. “Make sure to state what the cost is if the client wants to add additional costs. Make sure all payment communication, especially anything that’s final, is written in a contract, email or something that can be easily referenced later on.” If clients are individuals, you can draw up a contract yourself, but if for some reason a formal contract is impossible, make sure you at least have everything in writing via email, so you can refer back to your agreement when necessary. Anything discussed via phone should be recapped in an email following the conversation. This writer, and many, many freelancers, have learned that the hard way — memory can be tricky, keep a written record. You’ll also want to record the terms of payment, that is, the method and currency you’ll be paid in, as well as the timeline. Many freelancers charge clients late fees for delayed payment, which you can include on an invoice as well.
Bonuses and concessions
Is there a way to earn more from a single project? That’s a question you should always be asking yourself as a freelancer. Perhaps you can contribute another skill, like photography, language translation or social media to the project for an additional fee, or perhaps you can negotiate some type of bonus structure depending on the success of the project. For example, if you earn a brand more social media impressions than ever before, you are entitled to a certain dollar amount or percentage of earnings. If a client asks you do to something above and beyond, like prioritize their project in a hurry or work beyond your typical geographical or time limits, consider adding an additional fee.
On the opposite end of the spectrum, you also want to make sure you aren’t putting in unpaid work, or fronting money for supplies, on any project. For major projects, set up a payment timeline, perhaps with an initial, nonrefundable deposit, to ensure you’re not wasting your time. Set up terms for if the project is cancelled, delayed or changes direction — how will you be compensated for the work you put in? And when will you see that money?
Maybe you underestimated how much work a project would be, or perhaps just the cost of living and maintaining a business have increased so much that you need to up your costs of operation in order to continue providing excellent service. Good news, rate increases are standard practice for freelancers.
“First off, know that it’s completely normal for your clients to expect increases over periods of time,” says Garcia-Tunon. She recommends clients be consistent with their rate increases, perhaps sending out an annual reminder that rates will increase and why, if you feel these details are necessary. “Make the communication matter of fact versus personal. Start out objective and then reevaluate from a subjective lens based on each client or project. For instance, if the client that makes up the majority of your business can’t commit to your new rates, that’s definitely a time to negotiate versus drop them,” she advises.
Beware of exposure and promises
You can’t pay the bills in exposure. If a low-paying gig is offering “exposure” or other intangible forms of compensation, be wary of taking on the work and evaluate how this will work for you financially. Garcia-Tunon agrees that business isn’t black and white, and though 90% of the time when clients can’t afford her rate she offers to refer them to someone else within budget, there are exceptions. Will a gig that’s less than your typical rate earn you the connections or credits to quickly elevate your career and perhaps even ask for more? If so, try and get the promises in writing, and never stop evaluating if a less-than-market-rate paying gig is worth your time and energy. “Staying firm on your rates and prices will also open up more of the opportunities you want,” says Garcia-Tunon.