Setting Your Hourly Freelance Rate: 4 Things to Consider
Photo credit: Keira Burton via Pexels
“How much should I charge?”
When you’re setting out on your own as a freelance professional, it’s one of the most important and straightforward questions you can ask yourself, but it can also feel like one of the most challenging to answer.
While it’s somewhat easy to figure out salary ranges for full-time roles via job listings and online career resources, freelance rates can seem much more mysterious.
That’s why, at The Creative Ladder’s recent virtual event, “5 Ways to Optimize Your Income.” we invited two financial experts to share some tips to help you set your freelance rate without feeling like you’re taking a shot in the dark.
As part of The Creative Ladder’s free virtual series, “Survive + Thrive: Financial Education for Creatives Today” created in partnership with Robinhood Markets, Inc., the newest session on optimizing your income was hosted by Gabe and Laura Walters, co-founders of Steadyworth.
Packed with an hour of valuable information for freelancers and full-time employees alike, the one-hour virtual event—which you can watch for free below—covered topics including budgeting, managing invoices, gross versus net income, and understanding the differences between tax documents like W-2s and 1099s.
Here’s a look at the full talk, followed by a breakdown of Laura and Gabe’s advice on setting the right rate for your freelance work:
1. Understand yourself
“This is the most important part,” Laura says. Each freelancer’s skills, experience and education are different, so determining the appropriate rate for your work requires looking at a variety of factors unique to you.
Laura and Gabe have developed a formula of sorts to help you bring some structure to the process of setting a rate for your services: Skills + Education/Credentials + Experience + Buffer.
Skills: “What skills do you have that people pay for? What are you good at? What do you love doing?”
Education/Credentials: “What education level do I have that supports my skills? What credentials have I earned?”
Experience: “How many years have you practiced your craft? What positions and past work can you show to demonstrate your proficiency?”
Add a Buffer: “How much more can you add to your rate, given what you’ve come up with? This should make you uncomfortable. No matter what your experience is, you’re always testing the market and making sure.”
2. Do your research
While there might not be one simple resource for finding the right freelance rate for you, Laura and Gabe shared multiple ways to get some intel about what similar professionals are charging:
Call a mentor. Having access to someone who knows both you individually and your industry can be a vital shortcut for learning about appropriate hourly rates.
Check online: Searching Google and prompting ChatGPT can provide some information on rates in your industry.
Call a competitor or headhunter: Other freelancers might be open to sharing their rates, and headhunters or recruiters could provide some information on what they’re seeking from freelancers in terms of hourly charges.
Ask a friend: Don’t skip this simple step of talking to people in your professional community!
Check LinkedIn: The professional social network has added some features to check hourly rates and salaries of different position types, so it’s worth browsing roles listed on the site.
3. Use full-time salaries as a starting point, but multiply them
Freelance rates are generally higher than what you’d be paid to do a similar role for a full-time employer, which is because running your own business requires many more tasks, such as invoicing, sourcing new customers and managing client relationships.
Looking at what you might be paid at a salary-based job, Laura says, you could multiply the amount you’d make per hour by five or ten “and it would probably make good sense.”
4. Find your place in the market
Just as there is no perfectly “right” answer for what you should charge, there’s also no “right” answer for whether freelancing is the best fit for you.
As you consider your rate, Laura and Gabe say, it’s also a good time to think on the pros and cons of each, such as the consistency of full-time income and the flexibility of freelancing.
“One is not better than the other,” Laura says. “What aligns with your personality? What aligns with your values? Sometimes it can be a combination of both.”
To learn more on optimizing your income, be sure to watch the full video of Laura and Gabe’s presentation above. And here’s a helpful worksheet they provided to help you think through your finances.
Disclosures:
The information provided here is for general informational purposes only.
This should not be considered tax advice. For specific questions, you should consult your tax or investment professional.
Robinhood Markets, Inc., is not affiliated with Steadyworth or The Creative Ladder.
