What do freelancers even charge per hour? If you’ve ever asked yourself that question, this article is for you and will help you figure out your hourly rate.
Lots of freelancers choose to charge by the hour. However, it can be difficult to work out an hourly rate that both attracts clients and is profitable for you. Here are some concrete ways to work out your ideal hourly rate.
This article is part of our pricing series
Make sure to check out these articles too:
Who uses an hourly rate?
Charging an hourly rate can be a good idea if you’re not sure how long a project is going to take. Or, if you provide services, how long it’s gonna take to deliver that service.
Examples of freelancers that use hourly rates are consultants, accountants, virtual assistants, graphic designers, software developers, marketers, content creators and more.
You can also consider a project-based or service-based pricing strategy. This means that you charge a fixed sum per project or per service you provide. However, you should still work out your hourly rate so that you can specify what you’ll charge for additional work that’s not included in the scope of the project or service.
See also: How to set the selling price of a service
Figure out your costs
No matter which pricing strategy you’re going for, you need to figure out your costs. Why? Well, to put it simply: if you don’t know how much money you’re spending, you won’t know how much you need to earn to be profitable.
When your business is making a profit, it means that you have money left over after covering all your costs and paying taxes.
To figure out your costs, you should set up a budget. The budget will include your fixed costs—ongoing costs that aren’t impacted by the rate of production. In other words, the fixed costs don’t increase when you produce more goods or sell more services.
Examples of fixed costs include insurance, salaries, company vehicles and so on.
The budget should also include your variable costs. These costs increase or decrease depending on the rate of production. For example, if you provide a lot of services, you might need to hire more third-party suppliers, travel more, or purchase more software or hardware.
Once you know your costs, you can figure out the minimum you need to earn to make back that money. This is called reaching the break-even point.
Download a free budget template to get started.
Use the freelance rate calculator
Once you know your costs, you can use the freelance rate calculator to figure out how much you need to charge per hour.
Just enter the yearly salary you’re looking for. Then add how much you’ll be working in a year and how much tax you expect to be paying. Finally, enter the costs you just worked out.
The rate calculator will suggest an hourly rate for you. It’s that easy!
You might need to adjust this price to align with competitor pricing and customer expectations, but this is a great starting point.
Do some market research
Finally, you should look at what freelancers in your industry are charging. You might be able to ask people that you know, otherwise you can research articles online, look at statistics databases, or you can even ask on Reddit forums.
You should also look at what bigger companies are charging for similar services. If you can outperform them by offering a lower price for the same service you’ve got a great selling point for your pitch.
But remember, it might not be price that sets you apart from your competitors, maybe you have a stellar track record, unique experience, or other incentives that’ll convince someone to hire you.
Don’t forget about pricing strategies when you set your hourly rate
Our last tip is to consider different pricing strategies when you work out your hourly rate. At the start of your freelancing career, you might want to offer discounts to secure regular clients, or offer an initial consultation for free, just to get a foot in the door.
