Since the inception of freelancing, a persistent question has troubled both novice and seasoned freelancers: What should I charge? No matter the nature of your work, there isn’t a definitive method to calculate a billable rate, as long as it respects your expertise. Even in situations with a strict budget and no room for negotiation, you retain the option to decline an unjust rate.
This encapsulates the true allure of freelancing: freelancers and independent workers possess the power to dictate their own achievements. Nevertheless, various tactics exist that you can apply to optimize the value you receive from each project you undertake. To explore some of these tactics, we consulted with Alan Weiss and Rafael Espinal, both of whom are authorities in the freelancing and consulting domain.
Establish your freelance rate on value rather than time
Weiss is well-versed in independent consulting, having authored over 60 books on the topic, with Million Dollar Consulting and The Consulting Bible being among his most recognized works. Throughout his writing, Weiss stresses the significance of charging based on the value you provide instead of the time invested. This method guarantees that you are rewarded for the effectiveness of your work rather than just the time expended.
To assess how to set your rates, Weiss advises looking at your services through three lenses: objectives, metrics, and value:
- Objectives: Identify what the client strives to attain and quantify those goals. For instance, if a client is seeking to boost sales, minimize costs, or enhance team productivity, request that they assign a dollar figure to each target.
- Metrics: Establish how you and your client will evaluate progress and success. Clear metrics aid in justifying your rates and showcase the concrete benefits of your services.
- Value: Assign a monetary figure to the value of reaching these objectives. Weiss recommends aiming for a 10-to-1 return on investment (ROI). For example, if your services could conservatively create $400,000 in value for the client, a $40,000 fee is quite reasonable.
By centering your focus on the value provided, you present yourself as a strategic partner instead of just a service provider, which can result in higher rates and improved client relationships. Weiss also advises securing advance payment whenever feasible so that the client cannot attempt to alter the agreement or abruptly cancel the project.
Re-educate your clients
Weiss notes that pricing based on value comes with challenges, the primary one being client education. Many clients may be very familiar with hourly or project-based charges and will need assistance in grasping value-based pricing and the importance of upfront payments.
Helping them understand the worth you bring can shift their perspective from expense to investment, making them more amenable to paying premium rates for the results you achieve. If you deliver well-defined proposals, consistent status updates, and examples of your previous work that emphasize your value, they are much more likely to accept your pricing model. Here’s a deeper insight into these three components:
- Clear proposals: Offer comprehensive proposals that delineate your work’s objectives, metrics, and value. Demonstrating potential ROI can strengthen your justification of rates.
- Regular updates: Keep clients apprised of your progress and milestones. Frequent updates reinforce the value you provide.
- Case studies: Present case studies or examples of previous projects that demonstrate the effectiveness and value of your contributions.
Utilize industry standards and community resources
Rafael Espinal, a former New York City council member, has devoted his career to championing the rights of freelancers and gig workers. As the executive director of Freelancers Union, Espinal emphasizes the importance of utilizing community resources and industry benchmarks to determine your rates.
The Freelancers Union and organizations like Freelancing Females provide valuable tools, including rate sheets, which compile data from freelancers in various sectors. Additionally, Weiss’s website houses a vibrant community of independent consultants who share insights and advice drawn from their experiences.
By engaging with these resources, you can gain a better understanding of fair market rates and avoid underpricing your services as you establish your freelance rate.
Take your experience and skills into account
Your level of expertise and professional background should play a substantial role in shaping your rates. For instance, an experienced professional with a robust portfolio and specialized knowledge can typically command higher fees than someone who is new to the field.
Espinal urges freelancers to appreciate their own value and confidently set higher rates if their experience supports it. Remember, confidence in your abilities and the worth you bring is crucial when negotiating with clients.
Consider all costs
It’s essential to factor in non-billable hours and all related expenses when determining your rates. This encompasses administrative tasks, marketing efforts, and ongoing education. Include overhead costs like software subscriptions, equipment, and office space, and don’t overlook health care expenses and taxes.
By considering these elements, you can establish rates that accommodate all dimensions of your work, not just the time dedicated to client projects.
Strategically approach pro bono work
Both Weiss and Espinal recognize the merits of pro bono work, but they emphasize the necessity of being strategic about it. While working for free can aid in portfolio building and generating referrals, it should also serve broader objectives:
- Cause alignment: Select pro bono projects that resonate with causes you are passionate about or that offer substantial exposure.
- Networking: Use pro bono opportunities to connect with influential individuals or organizations that could lead to paid projects.
- Referrals: Ensure your pro bono projects reflect your best work, as pleased clients can provide critical referrals and testimonials.
Thoughtful pro bono work can bolster your reputation and open doors to more profitable prospects. Nonetheless, it’s vital to ensure a balance with paying clients to maintain financial stability.
Establishing your rates as a freelancer or gig worker requires a comprehensive approach that takes into account your value, industry standards, experience, and expenses.
By concentrating on the value you provide, tapping into community resources, and educating your clients, you can set rates that truly reflect your worth and pave the way for a thriving freelance career.
