Setting a rate – it’s one of the first things all freelancers need to do. If you don’t know how much you want to be paid, there’s no way of knowing whether the work you do will help pay the bills.
Although I’ve written about setting a rate before, I’ve put together a couple of additional resources.
The first is a video that runs through a short presentation. The slides are also available on Slideshare or you can download them as a PDF from Setting an Hourly Rate [1.7MB PDF].
This week, I’ve been thinking about a number of things. At the top of that list is what to charge clients. Although I have a well defined system for setting rates it’s still something that I’m concerned about, particularly as the economy is so uncertain. I’ve also been playing with a new computer, the $50 Raspberry Pi and looking at how to get the most out of social media.
The one topic that gets the most airplay on freelancing blogs, advice sites and discussion lists is rates. How do we set rates? What’s a reasonable rate? What if I quote too high? What if the client rejects the quote?
Pricing for wimps: Be the boss of your price You may be the boss of your business, but are you the boss of your price? For some soloists, clients are the ones that set the rate. So how can you regain control over what you charge? [Flying Solo]
Social media can be quite daunting for freelancers – particular if techie stuff is not your forte. Freelance Switch has a basic guide for getting started with Twitter.
How To Set Up Your Twitter Profile You’ve decided Twitter might be a good fit for your business, and you want to give it a whirl. Here’s a step-by-step overview to setting up your profile and freelance brand on Twitter [Freelance Switch]
Everyone wants to tell the future. Even if you’re not after the lottery numbers, having some insight into what is coming next can be useful in your business planning.
13 Freelancing Predictions It would be great if we could know for sure what the future holds for us, but the truth is that no one knows for sure what changes 2013 will bring. But what we can do is look at recent trends and make some intelligent guesses about what the near future holds for freelancers. [Freelance Folder]
The Raspberry Pi is a tiny computer that might just find a place in your office. Although it’s a little nerdy, the ability to create a basic office computer for about $50 (plus a screen, mouse and keyboard) might be handy for freelancers on a tight budget.
A Beginner’s Guide for the Raspberry Pi The Raspberry Pi is a wonderful little computer that fits in the palm of your hand, yet packs enough power to run your home media center, a VPN, and a lot more. Before you can do anything awesome, however, you need to configure it and install an operating system. Here’s how. [Lifehacker]
Inspirational quote alert! But it’s true. Successful entrepreneurs don’t just stumble into success. They see an opportunity, grab it and believe that they’ll achieve.
You Can Make a Difference Before you can be successful, you must believe you can be successful. [Becoming Minimalist]
One of the most frequently asked questions I hear from new freelancers (and, surprisingly, some experienced freelancers) is “How much should I charge?”. Often, the question is couched with fear that if the freelancer asks for too much that the client will walk away. Other times, there’s almost a sense of embarrassment about asking for a high rate.
When you’re setting your rates, the place to start is the amount of money you need in order to survive. We’ve written previously about how to calculate an hourly or day rate and there are lots of other guides on setting rates as well. You need to balance lower paying jobs with higher paying ones. But how do you know if what you’re proposing to charge is reasonable?
There are two sides to the rate-setting equation. How much do you need or want and how much can the client afford to pay?
The first half is relatively easy. If you need $1600 a week to run your business and pay yourself a salary then, assuming a 40 hour week, you need to earn on average across the week $40 per hour. Did you catch the “on average”?
There’s no rule that says you have to charge all clients the same rate. If you’re doing some work for a not for profit or charitable organisation then you may choose to give those services at a reduced rate. The idea is to charge at a rate that the market can bear.
However, if you’re working for a multi-billion dollar multinational with deeper pockets, then you might be able to charge them $200 per hour for the same work. There’s no problem with doing this. It’s only an issue if you make it one. Many large businesses won’t flinch at paying a contractor a few thousand dollars to solve a problem. If they’re happy to pay, you should be happy to be paid.
Having a base rate you work from is useful. I have three set rates that I use as guidance when quoting on jobs. These are aligned to my earning goals. I have a survival goal, a comfort goal and a Big Hairy Audacious Goal. The clients that I judge as having the greatest capacity to pay get charged more than those with fewer resources.
But I never make a decision on what rate to set without thinking about how much I need to earn in order to achieve my goals.
It’s important to remember that as a freelancer you don’t have control over everything that happens. If a client chooses to pass on your offer then so be it. I’ve presented quotes to potential clients at both ends of the rate spectrum and missed out on the job. Sure, it’s disappointing but it’s not the end of the world. Savvy freelancers who are intentional about marketing and chasing new business move on quickly to greener pastures.
When you’re a freelancer, you dream of only ever taking up projects you really believe in. You get to choose the work you do, who your clients are and where you work. Well, that’s the idea. But the reality is that sometimes you have to decide whether taking a job that you’re not passionate about for the money is worth taking.
Every now and then you’ll come across a client that wants you, pays well but the work isn’t something that you are passionate about or particularly like. So, why would you take it?
There will be times (I’m in that space at the moment) where a potentially reliable and well paying client can keep me busy for a couple of days each week. This allows me to do work I really enjoy but pays less for the rest of the week.
In other words, the boring, well-paid jobs subsidise the fun but less lucrative work.
In the Star Trek universe, as described once by Commander Riker, the people on the Enterprise don’t work for a salary. All, regardless of their role, have enough to live comfortably. However, we don’t live in such a utopian society. We don’t live in a world with the Star Trek economy.
While we all like to think we work with the intent of making the world a better place, the reality is that food, shelter, clothing and Star Trek movies all cost money. What we do is trade time and skills for the money to pay for those things.
There will be times when you take jobs for the money. While it sounds quite mercenary, it’s OK to do this. Some freelancers say they prefer to go hungry than do work they don’t enjoy. While that sort of idealism may be considered admirable there’s always a need to consider taking jobs just to make ends meet.
Taking a job for the money is not a reason to relax on how you set your rates. If you’re looking to take a job that will subsidise your passion projects or preferred work then I’d suggest taking the jobs for your preferred rates as an absolute minimum.
In fact, I’d suggest that you take jobs like this at higher rates that satisfy your highest aiming goals – remember to set different goal levels so you do more than just get by. Set goals that allow you to be covered for when things are tight or if you want a special treat like an extended holiday.
One thing that freelance writers discover early in their career is that there is no sick leave or holiday pay in this job. In most cases, this doesn’t bother us, or we’d go back to working nine-to-five in an office. You start to miss all these things more, however, when an accident leaves you out of action.
Image Credit: The Ammons Law Firm
This happened to me just over a year ago, when my car was demolished by a drunk driver at 120 kph. I have no memory of this, but I awoke later in pain, to see the fire department slicing through the roof of my car. I was carried out in a stretcher and spent a night in hospital. Between the pain and the painkillers, I wasn’t at full capacity for the next couple of months. As I was not responsible for the accident, medical expenses were paid by the NRMA (the only choice in the ACT, but fortunately they were fine – provided I didn’t charge them for natural remedies).
While medical expenses were fairly straightforward, another issue was not so simple: loss of income. As I’ve kept in generally good health during my decade as a freelancer, and have previously had the good fortune to avoid any major injuries, the problem was new to me. I have no regular income, save a lowly-paid weekly Fairfax newspaper column, but usually have enough work to keep me busy, sheltered and fed. Happily, apart from my column, I had no deadlines over the next two weeks.
So how could we calculate “loss of income”? If I were a salaried employee, this would have been simple. I previously had loss-of-income insurance with one of my credit cards, but when I discovered that it didn’t encompass the more variable income of a freelancer, I cancelled the insurance.
The accident happened in November, which was bad timing. As a lifestyle and travel writer, the end-of-year “silly season” is a prime time for assignments. Most years, I get plenty of newspaper assignments around that time of year – often the result of several hours’ pitching. Naturally, this income was all speculation. Instead, we had to rely on my relatively modest earnings of the previous quarter, when I had spent more of my professional hours on book promotion. Dividing my quarterly earnings by 13 was an imperfect method of working out my fortnightly income, but it was the best one available to me.
Another problem was with my income protection insurance. I didn’t have any. I had looked this up in the past, but the policies I had investigated were rather expensive. A colleague once had a policy with FAI/Tower (as part of a package), but she cancelled her income insurance after it was costing her some $700 a month. As most freelancers earn less than staff journalists of similar experience and calibre (who, of course, should have no reason to pay income protection insurance), this caused a considerable dent in her earnings.
Had I known, I could have arranged a policy through Media Super, which is far more reasonable than through an insurance company. Media Super’s income protection cover is generally based on 75% of your income. (If your monthly income is $1,000, the maximum cover available to you is $750 per month.) Of course, working out your income is another matter, and you might need to speak to the good folk at Media Super about that.
I had no knowledge of Media Super’s insurance rates, but as it was a motor accident, I relied on the NRMA to provide me with insurance cover. (Happily, I was not responsible for the accident, or I would have shouldered some of the costs.) This meant that I would eventually receive a payout, including pain, suffering… and loss of income. However, as they planned to pay in one large lump-sum payment, I would need to wait until I had mostly recovered. This, I was soberly informed, could take up to three years.
Happily, I was prepared for this. While it might occasionally seem easier said than done, a freelancer should always ensure that they have money stashed away for just such an occasion. Though I am told that I should expect my payout soon (far less than three years from the event), it has taken over a year and counting.
Fortunately, though not fully healed, I was able to work full-time at my desk (and even travel for work) within a couple of months. Had this not been the case, I might have had slightly more trouble paying for food and rent.
That’s one of the less glamorous parts of freelancing. Unless you have a lot of money saved up, you should work out some form of loss-of-income insurance. You never know when you will need it.