How To Set Your Freelance Rate and Project Pricing

How To Set Your Freelance Rate and Project Pricing
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Are you looking for the perfect formula that will tell you exactly how much to charge as a freelancer? Everyone knows that time = money. But, what is your time worth? How do your experience, skills, location, value, industry, etc., impact the amount of money you can charge?

In reality, the perfect freelancer pricing formula doesn’t exist. You’ll have to pick a rate, and then you can see how potential clients are reacting to this rate and raise or lower it to match your needs.

This guide will review pricing strategies and share best practices to help you set your freelance rate with confidence.

We’ll cover:

Setting your rates: hourly, project or value-based pricing

As a freelancer, how you price your work can have a huge impact on your business. So before we get into the strategies for pricing your freelance services, let’s look at the three most common pricing models: hourly pricing,  project-based (fixed) pricing and value-based pricing.

Hourly pricing

Hourly pricing is the most common way new freelancers set their rate because the model is quite simple. With this method, you come up with an hourly rate for your work and multiply that by the number of hours spent doing the work.

Examples of projectsFreelance jobs that can work well on an hourly basis include customer service or virtual assistance.

Project-based (fixed) pricing

With this model, the freelancer charges a fixed rate for the entire project. Instead of basing your fee on the number of hours spent working, your payment is based on the result you deliver. This option is ideal for projects with clearly defined deliverables. It also helps clients know exactly what to expect a project to cost and helps the freelancer better anticipate their expected earnings.

Examples of projects well suited for fixed-price contracts include web design and mobile app development.

Value-based pricing

With a value-based pricing model, the freelancer charges a rate based on the perceived value their service brings to clients. Implementing this strategy requires a deep understanding of clients, their needs, budgets and expectations. Then you set your price based on the impact you have on their business, how you can alleviate pain points. For example, do you drive more efficiency? Will your work result in more sales for the business?

For example, a digital marketing freelancer could adopt this model by demonstrating the impact their marketing campaigns can have on the client’s revenue. This isn’t a one-size-fits-all model and is usually best suited to more experienced freelancers who can confidently demonstrate the value they bring to client projects.

Step-by-step guide to setting your freelance rates

Setting your rate as a freelancer can feel confusing, exciting, overwhelming and confidence-boosting all at the same time. You’re excited to have your freelance business going but you also want to make sure you don’t put clients off with your rates. Regardless of the pricing model you choose, this straightforward guide will help you arrive at a rate that makes you feel good and is fair for you and your clients.

1. Ask yourself these basic questions before you start

Consider the following questions when thinking about setting your freelancer rate. Reflecting on the answers can help you identify the factors that will define your pricing strategy:

  • How much money do I need to make to support my lifestyle?
  • How much money do I want to make as a goal?
  • What do other freelancers charge for similar services?
  • How much money would I make as a full-time employee?
  • What expenses do I have as a freelance business owner?
  • Are my skills in demand?
  • How much value am I bringing to the client?

 2. Set your annual salary goal

Are you supporting yourself or a family? Do you have money saved up, or do you need your income to pay for your living expenses? Freelancing can supplement an existing income or provide a full-time income.

By understanding how much you need to make and how much you want to make, you’ll work backward to find your freelancer rate. Pick a yearly salary, and then you can use this to calculate how many working hours you’ll need to get to that salary.

For example, a $50,000/year salary breaks down like this:

  • $50,000/year (before taxes)
  • Working 40 hours/week (5 x 8 hour days)
  • 4 weeks off for vacations, sick days, and unexpected absences

= 48 working weeks x 40 hours week = 1920 working hours

= $50,000 / 1920 hours = $26 per working hour

But, this rate considers all of your working time as billable hours. In reality, many activities require time that you don’t get paid for, such as administrative tasks, invoicing/billing, replying to emails, prospecting and finding new clients, marketing, and more. That leads to the next step.

3. Consider the number of billable hours you need to work 

While each situation is different, freelancers’ average hourly breakdown is 60% billable hours and 40% non-billable hours. When calculating your freelancer rate, you can adjust this ratio to match your expectations and processes. 

If we are allocating a total of 1920 work hours from the calculations above, how much of that time will be billable vs. non-billable time? Using the 60%/40% as a baseline, we can recalculate the hourly rate using only the billable hours:

= 1920 hours x 60% = 1152 billable hours (+ 768 non-billable hours)

= $50,000 / 1152 billable hours = $43.40/hour

As a freelancer, you'll have to balance the best way to use your time. Do you want to pursue a larger number of projects at a lower rate or a smaller number of projects at a higher rate? Understanding the amount of billable time for a project will help you calculate if it makes sense relative to the number of non-billable hours required to get that project. You can also increase your rate for smaller projects and provide a discount for more significant or long-term projects.

4. Incorporating freelancer expenses into your price

As a freelancer, you'll have business expenses that must be accounted for in your rate. List out all of your costs and total them up. You will need to add this number to your salary goal and increase your hourly rate to cover these expenses. Below are some of the standard costs that freelancers should consider:

  • Insurance and licenses
  • Taxes
  • Examples of projects
  • Equipment
  • Office space or rent
  • Software subscriptions
  • Marketing and advertising costs
  • Freelance platform fees

If these expenses total $10,000/year, your annual goal needs to go up to $60,000, and your hourly rate increases to $52 ($60,000/1152 billable hours).

If your freelancing hourly rate is higher than you would be paid for a regular salary, that’s OK. Clients typically expect to pay a little more for freelance services because many other costs shift to the freelancer. As a freelancer, you’re responsible for the additional expenses associated with running and growing your freelance business. Plus, your client doesn’t pay for employment taxes and benefits as they do for full-time employees. 

5. Know the market rate for your services

Now that you have a rate that covers your salary goal and expenses, it’s time to compare this hourly rate to the market. What are other freelancers charging for a similar service?

To find this information, do some research and look at your competitors’ rates. On Upwork or sites like Glassdoor, you can get an idea of freelancers’ hourly rates. You can also check out this article to learn how much freelancers make in various industries. 

If your rates seem consistent with the other freelancers in the market, you have a good starting place. If the rate you are looking to charge is too high, you may need to reevaluate your expenses or salary goals. If the rate is too low, then you may be undervaluing your skill set. 

6. Understand your value

You should know your value to make sure you’re charging a reasonable price for your services. Anchor your price point based on the value you provide to the client. How do you put a value on the knowledge you’ve learned, the skills you’ve developed, and the services you offer to clients? One way to determine your value is to reflect on your experience, skill level, and past work portfolio. 

Expertise is an investment, not an expense. Naturally, the more experience you have, the more you can charge for your time. A freelancer with 10 years of experience as a web developer will be able to charge more than a freelance web developer with two years of experience.

The rarity and complexity of your skill set will play a role in your pricing strategy as well. A freelance programmer proficient in three different coding languages will be able to charge more than a programmer with the same level of proficiency in a single coding language. If you can demonstrate the level of quality and return on investment, you’ll be able to set a higher price for your services.

Bonus step: Use Upwork’s Freelance Rate Calculator

If you want a straightforward starting point to help you figure out your hourly freelance rate, take advantage of Upwork’s freelance rate calculator. The calculator is designed to help you build a base rate that considers your estimated monthly expenses and your desired hours to work.

This tool is intended to help you calculate a minimum freelance hourly rate based on the information you provide. The estimation is meant to be an initial step in your journey to determining your rate.

Why is setting freelancer rates and prices so difficult?

All freelancers face the question of how much to charge. But setting prices isn’t a challenge exclusive to new freelancers. Your pricing strategy is a delicate balance that requires understanding your value, target clients, and the larger competitive market. If you set your rates too low, then you could be leaving money on the table and not getting paid for the value that you offer. In contrast, if you set your rates too high, then you may lose projects to other freelancers with a lower rate.

Thankfully, as a freelancer, you have the freedom and flexibility to change your rates. It’s essential to occasionally reevaluate your rates to ensure they stay consistent with the value provided while remaining competitive within the market. You can even include an automatic scheduled rate increase in your project proposal on Upwork.

So, don’t overthink it. The price you set isn’t written in stone. Throughout this article, you’ll learn strategies and tips to help you identify a price that you’re comfortable charging.

What is the average freelancer rate?

As you already know, the average freelancer rate varies greatly depending on your area of work, experience, geographical location, and many other factors.

Here are some rate estimates for popular freelance jobs. All prices are in USD.

Additional things to consider when setting your freelancer rate

In addition to what we discussed above, you also want to consider a few other factors when setting your freelance rate.

Project complexity

Not all projects are equal. A complex project will have stricter requirements and utilize more advanced skills, which means you can charge a higher rate for that project.

Education

An advanced degree or industry certification may enable you to charge more for your services.

Geographic location

Upwork’s work marketplace allows freelancers to connect with clients around the world. But, when it comes to setting your prices, it’s helpful to consider the standard rates in your client’s location. Generally, a client in Venezuela may not pay the same price as a client in Japan, so it’s crucial to tailor your prices to the area you serve.

Talk to your clients

Client communication is crucial. You need to understand the client’s goals and how your project fits into their bigger picture. This will help you set your expectations and know how to tailor your pitch to suit them. Effective communication will help you identify ways to provide more value or expand your service offering.

Don’t forget why you’re freelancing

Your freelancing rates should empower you. If your rates aren’t giving you the lifestyle, freedom, and income you want, it may be time to change your pricing strategy or reexamine how you create value for your clients.

How to raise your freelance rate on Upwork

Every job you complete successfully helps build your reputation as a skilled freelancer. As you hone and improve your skills, make sure your Upwork profile reflects this. As the demand for your freelance services grows, you can slowly raise your rate.

When a client posts their project on Upwork, they evaluate freelancer proposals based on their profile and look for:

Your profile grows with you. If you work hard to make sure your clients are happy, you'll gain positive reviews and talent badges, and your Job Success Score will increase. You'll also have more work samples in your portfolio to show potential clients. All of this helps highlight your value to clients, and can empower you to negotiate better rates for your services.

How do you know when it's time to raise your rates?

Think about supply and demand. As the demand for your services increases, so should your rates because you have less supply (your time). Adding new skills or earning a talent badge can also help justify your rate increase for new clients.

Your rates should be competitive but still fair to you and your clients. You could risk scaring off clients if you get out of the competitive range. Clients expect a freelancer's rate to be justifiable based on their experience and expertise.  

You could start slowly and raise your hourly rate a dollar or two every five or ten client projects you finish (depending on length and complexity). If you find that you don't have time in your schedule for new clients and you have invites to interview clients in your inbox, try raising your rate by five or even ten dollars.

When submitting a proposal, you have the option to include a scheduled rate increase with a specific amount and frequency to your hourly rate. You don't have to worry about asking to increase your hourly rate, which is great for long-term contracts.

Choose a percent increase from the drop-down or set a custom amount along with how often it will automatically increase. If the client extends an offer, they can accept your proposed automatic rate increase, or modify it in their offer. Once you accept a client's offer, the rate increase terms cannot be changed. The scheduled rate increase is only available for new contracts, so you’ll want to add this in your initial proposal or when you start a new contract with a client.

Boost your freelancer income with Upwork

As a freelancer, you’re in control of deciding how much to charge for your time, attention, and skill set. There are many considerations when setting your rates. You can reflect on the questions posed in this article, use the annual salary calculation, review your competitors’ rates, and adjust based on the value you provide. If you need more tips, check out the Setting Your Rate course from the Upwork Academy.

But, the most important thing to remember is that your rate isn’t permanent. Pick a freelancing rate you’re comfortable with, and try it. The market and prospective clients will let you know if that pricing strategy matches your service’s value. You can change your rate as you gain experience, improve your services’ value, and as your income goals evolve.  

Ready to give your freelance income a boost? Thousands of projects are posted on Upwork’s work marketplace each day. Create your profile to get started on Upwork. Then, set your freelancer rate, start applying to projects to see how potential clients respond to your pricing, and go from there. Sign up to Upwork and get started today.

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Author Spotlight

How To Set Your Freelance Rate and Project Pricing
Sean Cope
SEO Writer

Formerly a full-time in-house marketing director, Sean Cope began building an SEO and content creation company by freelancing on Upwork. He has enjoyed working with clients in various industries, leading them to achieve their business goals and higher Google search rankings. Sean is passionate about helping new clients in growing their businesses through search engine optimization, content writing, and digital marketing.

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