How to define my rate?
Kickstarting your freelance career and hoping to land exciting new clients and projects? Yet another exciting aspect of working as a freelance professional is being able to set your own rates. But where to begin when it comes to establishing the fees you charge? Do you charge a day rate? How do you figure out what your day rate should be? How do you ensure that you’re charging the right amount, neither too much nor too little?
There are many different questions to answer here and several different ways to approach your fee structure as a freelancer. In this article, we’ll discuss how you can set up your rates, what to consider before you do, and how to negotiate those rates and increase them over time.
Time-based rates versus project-based rates
When it comes to establishing estimates for clients, freelancers can consider two different models for rates: time-based or project-based.
The former focuses on time spent, and is most often used for long-term projects or ongoing commitments. Time-based projects provide a baseline of stability; you know the duration of the commitment and your client can rely on a certain amount of availability. Often, and especially when the project is for the longer term, you are closer to the client team. This style of invoicing is usually based on daily rates, or day rates, and we’ll get into how to set those up appropriately below.
For project-based rates, the focus is generally on the results or deliverables, which can often be the case with short-term projects. A detailed estimate is just as important for you as for your clients so that you both know the scope of the projects, as well as the limits. Of course, to be able to create a detailed estimate, you will need a detailed brief from the client. To ensure that you cover any unexpected tasks, freelancers may choose to slightly overestimate the time they will spend on a project, within a margin of 30%.
Finding the right balance
One of the main concerns of freelancers when starting and setting their rates is ensuring the right balance. You want to make sure you are charging enough for your expertise, but not too much. If your rates are too high, for example, it might be hard to sign clients. You will also need to be able to justify high rates compared to the competition. Clients will want to know why you’re worth the investment.
You also don’t want to set your rates too low! While it might help you sign a few clients, especially at the beginning, this will likely attract clients who don’t value your work. It will also have an effect on other freelancers in your category, devaluing their expertise, too. Plus, if you start at a too-low rate, you’ll have to work hard and wait longer before you can increase your rates to market standards.
Before setting your rate
We’ve discussed the two primary models for establishing your rates as a freelancer, and we’ve evoked the importance of striking a balance. Now it’s time to take a closer look at how to build fee structures and estimates that reflect your work and expertise. There are three main areas to explore.
Benchmark the competition
As an independent contractor, you will want to survey the competition. You will want to take a look at other freelancers in your category who have a similar set of expertise and provide similar services. Establishing some points of comparison will help you get a sense of going rates and industry standards.
On Malt, when you create your profile, depending on your title, Malt will provide you with a recommended rate. With our Daily Rate Recommendations, you can now gaze into the future of your finances with a tool that's part crystal ball, part supercomputer. By considering your country, experience level, and job category, we provide a personalized daily rate range that's just right.
In France / Spain, you can also use the in-depth Malt barometer to compare freelancers by job family, location, and level of experience. This will provide a baseline for average day rates.
Feel free to do your own research too, and connect with other freelancers in your field. Sharing is caring and the freelance community is an amazing resource to dive into. And if you’re really just starting out, with zero experience under your belt, don’t worry. It’s OK to start out at a slightly lower rate and then work your way up as you gain experience.
Understand and define your workload
You’re a freelancer; your time is yours to manage. Total freedom, right? Right, but you still want to make sure you know how much time you’re spending on work. So consider your workload both in terms of how much time you want to be working each week, and in terms of how long different types of projects take you to complete. In France, for example, the average workweek is 37 hours. Does that seem like the right number for you? And what about when you add in the 27% additional time spent on tasks like admin, training, and prospecting? You want to make sure that you're budgeting for holidays and days off, too. Think about the total number of hours you want to work each day or week, on average, and plan accordingly.
A lot of this will come with experience, but you should start developing an understanding of how much time certain tasks or projects take. While this may start as a guess (for your very first projects), over time, you will learn how to estimate the workload required, and establishing rates will become a piece of cake. For example, if you’re a web developer and you’ve already worked on dozens of sites, you will know exactly how much time that type of project takes you and will be ready to send a quick estimate to your client.
Anticipate your costs
One thing that freelancers have to deal with that most full-time employees don’t: mapping out the costs of doing business. As a freelancer, whether your status is self-employed or you have your own company structure, you’re responsible for paying for any tools, services, and office space that you use. You also need to factor in taxes and any social charges (like health care and retirement), depending on the country you live in and your legal status. Other things to keep in mind would be other professional fees, accounting services, or Malt commissions, for example.
Negotiating and raising your freelance rate
In life, nothing is set in stone. And as a freelancer, you will find that the same is true when it comes to your rates. As we’ve discussed above, it’s important to establish a baseline for your work. Remember, however, that some clients will want to negotiate, and that you will also want to modify your rates with time and experience. You are also free to reevaluate your rates as your experience grows and as the market changes.
Negotiate with clients
While clients may be results-driven, they are often working within budgetary constraints. That means that they may want to negotiate your rates. There’s no need to panic! As long as you anticipate these potential negotiations and know how to justify and explain your rates, you can set up a healthy working relationship. Don’t let a client bully or strongarm you into offering a rate that feels uncomfortably low, but remember that a little give and take, certainly at the start of a working relationship, can go a long way. You might also be willing to offer a lower rate in exchange for some visibility, for example.
Raise your rates
Freelance professionals learn and grow every day, with every new project a new notch in their belt. If your expertise is not stagnant, your rates shouldn’t be either. The more certifications you achieve, the more trainings you complete, and the more projects you execute, the more valuable your work is. And yes, that means, you can charge higher rates. Be sure to communicate clearly with your clients, though, and not to surprise them from one day to the next with higher rates.
Setting your freelance rates like a pro
When establishing your rates as a freelancer, remember that it’s important to take into account both internal factors, like your own expertise, and external ones, like industry standards. You have to do your homework when it comes to defining your skills and your workload and understanding how you fit into the freelance market. Once you have a handle on the basic fee models for freelance professionals, you’re ready to set your own rates. So get out there with confidence in your skills and value.