You’ve finally decided to take matters into your own hands and become a freelancer. Great! But before you can start making money, you need to set your freelance rate.
There are two types of rates:
- Pay per service (PPS)
- An hourly rate
You must have clear prices before you start doing work for clients. In this article, we’ll show you how you can calculate your freelance rate.
There are two ways to calculate your hourly salary:
- The amount you need to cover your expenses and living costs;
- The amount you want to earn.
If you want to determine a price for a service (PPS), time yourself next time you perform this task. Then, calculate your hourly rate with the steps below, and determine the cost for your service.
How to calculate the freelance salary you need
1. Start by writing down all your monthly expenses.
Starting a spreadsheet for this is recommended to maintain a good overview. Make sure you think of all expenses you have and might have.
It’s better to have a too high number than too low. If you’re only calculating the bare minimum of what you need, what will you do when your car breaks, or your washing machine retires?
Tip: For a lot of people December is the most expensive year of the month, so if you want to make sure you don’t set your monthly freelance salary too low, using December as your average is often a good guideline.
2. Add all of your expenses up.
Once you have established all your expenses, add them all up to see what your monthly spending is. In our example, the total is $1799.
To make sure we have enough room for unexpected expenses, we’ll round this up to $2.000. It’s not necessary to round it up, but it is recommended if you want to make sure you have a little extra when you need it.
3. Calculate your hourly freelance rate.
You should now have calculated your needed monthly income. The next step is to transfer this into an hourly rate that you want your clients to pay you.
Let’s assume you’ll have a 40-hour work week, of which you spend 32 hours working for clients, or 6.4 hours per day. In a month there are between 19 and 22 working days, meaning that even if you work only 19 days, you should still be able to meet your monthly minimum income of $1799.
19 days times 6.4 billing hours, means you’ll work at least 121.6 hours in a month. In these 121.6 hours, you need to make at least $1799, though preferably $2000.
Divide your needed monthly income by the amount of hours you can bill to clients and you’ll have your minimum hourly rate!
How to calculate your desired freelance rate
Now that we have established your minimum hourly rate, it might be interesting to calculate your desired rate. It might take some time before you can start asking clients this rate, but it is good to know where you’re headed.
1. Think of how much you want to earn in a year and how many hours you want to work to accomplish this.
It’s easy to say you want to earn $80.000 in a year, but how do you get there? It’s more or less the above calculation in reverse. For this example, we’re using Layla:
As you can imagine, Layla doesn’t have a lot of free time. Thankfully, Symposium allows her to work whenever, and wherever she wants. In order to support her family and her hobbies, Layla wants to earn $50.000 a year. However, as a busy mother, she can only work 5 hours per day. Using the 20-80% working hours, this means she will work 25 hours per week, of which 20 hours are billable to clients.
Taking into account the weekends and school holidays of her children, during which Layla won’t be able to work, as well as national holidays and sick days, Layla will be able to work 220 days out of the year. 220 days spread over 5 days per week, means she’ll work 44 weeks per year.
2. Divide your desired yearly income by the amount of time you want to work.
In these 44 weeks, Layla wants to make $50.000, or $1136,36 per week. Dividing this by 20 billable working hours results in her desired hourly rate being $56,82.
3. Make sure your desired freelance rate is realistic
Check your competition to see what they are charging for similar services to learn if your hourly rate is realistic. When you’re just starting out as a freelancer, your price is an important aspect of your marketing, so make sure it’s fair.
Find the happy medium
Setting your freelance rate is tricky, especially when you’re new to the scene. Besides the methods described above, it is also possible to find a rate somewhere in the middle. This allows you a nice buffer for the unexpected, but doesn’t scare your clients away with unrealistically high rates. But, know your value and don’t go too low or clients might be skeptical.
Let’s get started!
Starting out as a freelancer might be overwhelming, but with the tips and tricks of Symposium and its experts, you’re headed for success! Learn how to get started as a freelancer, set your hourly rate, and start earning money!
Symposium is a free app where entrepreneurs can sell their services, gain advice from others and continue learning as they grow.
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