Editor’s Note: The language in this post is geared towards writers, but the formula shared can be used to determine freelancing rates in any industry.
Traditional Paths for Determining What to Charge for Your Freelance Rate
When it comes to setting your pricing, things are more complicated than they seem. It’s a hard truth I realized pretty quick as a green freelancer.
Whether you’re new to your industry or have been floating aimlessly along for months (maybe even years), setting your rates can feel like bobbing for apples in the dark. How can you make an educated guess when you don’t even know where the baseline is? To figure this out, freelance writers have two options:
1. Ask an industry expert
2. Research on Google
The first doesn’t do you much good for a few reasons. For starters, asking an industry leader what they charge feels a little gross, and it should. They don’t owe us anything and it's sort of a big ask. If you get a reply at all, you’ll likely be told to do your research. That leads us to option two.
This one won’t give you that same sick feeling that comes from asking for things you don’t deserve, but it will certainly bring on a migraine. Researching how to set my rates as a copywriter in my early days looked like having 50 tabs open at a time, skimming through post after post of unhelpful info. Most articles (which weren’t many) could be chalked up to an unhelpful, “It depends,” or were so outdated that I was scouring hard copy .pdfs about what to charge for brochure copy or radio scripts.
The Harsh Reality of Researching What to Charge for Freelance Rates
Truth? It took years of compiling small nuggets of wisdom, the generosity of some seriously giving mentors, and some tough real-world, trial and error experience to figure out how to set my freelance writing rates. I’ve now been running my business for five years with rates that are generating a comfortable, full-time income, don’t send clients running for the hills, and reflect my worth.
Which is exactly what I want for you. I didn’t get here on my own. There are always people helping out along the way, which is exactly why I want to turn around and pass it on. And for that reason, I’ve streamlined how to set your freelance rates in a no b.s., step-by-step guide. Skip the migraine and learn in five minutes what took me years. Let’s get cracking!
Determining Your Freelance Writing Rate, Step-by-Step
1. Deciding Whether to Charge an Hourly or Project Rate
This is a common question I get, and the best answer is almost always project-based fees. This is for a few reasons that I’ll keep short and sweet.
• Charging by the hourly penalizes you for being good. The faster you are, the less you get paid? No thanks, Kemosabe.
• Hourly feels more amateur to clients, where project fees make clients feel like you have a deeper understanding of the project, its demands, and what it will take before you even get started.
• People tend to get persnickety when they see hourly rates. Don’t ask me why. The project fee feels more like law, versus a number of hours they’ll try to manipulate.
Now, this doesn’t mean an hourly rate is not important. You’ll need to know this number, as it will be the basis of how you determine your project fees. If we’re going to determine what we’re going to charge clients for projects, we first need to know what we should get paid per hour (even if we never share that info with them).
2. Calculating Your Hourly Rate: Base It Off Your Annual Salary
To determine your hourly rate, you have to know how much you’d like to make a year. But before you blurt out, “I’ll take $100,000, please,” you’ve got some things to consider—namely business expenses. Freelancers who make the mistake of dividing $100,000 by 2,080 (the number of hours typically worked in a full-time year), will screw themselves with this math. The calculation comes to about $50 an hour. But a freelancer who strikes out at this rate will find themselves raking in far less than their lofty goal of $100k a year.
Why? Because they forgot to factor in their business expenses. There are COSTS to running a business (hello small business taxes, ammirite?), and they need to be included in your math.
So before you calculate any salaries, you must first calculate your business expenses.
A quick reference list (there are tons of these on the internet) for you includes:
• Rent, telephone, internet, and utilities (if you work from home, it’ll be a percentage of these things)
• Office equipment, office supplies, and furniture
• Software and service subscriptions (like Quickbooks, Adobe, or Harvest)
• Travel (anywhere you drive or fly for work)
• Taxes (I pay .20% in estimated taxes each quarter)
• Advertising, marketing, and printing costs (think biz cards, tradeshow materials, etc)
• Business insurance, business license fees (it costs to incorporate your business)
• Legal and accounting fees
• Professional memberships (masterclasses, local workshops, etc)
Once you’ve run a quick total on these (which you should save), you can add it to your equation. For easy math, let’s say your business expenses come out to $10,000 a year. Combine this number with your desired salary.
Your new total now comes to $110,000.
But wait, we’re still not done. We’re not just trying to break even after we pay ourselves, here. We need profit leftover AFTER we pay ourselves to reinvest in our business or spend as we see fit. Otherwise, you’re running your business off your salary, which doesn’t actually count as paying yourself. So, let’s say you want to have a 15% profit margin (this is a common percentage in the client service industry) at the end of the year for reinvesting in your business. You now need to multiply this times your new number of $110,000.
$110,000 x .15= $16,500
$110,000 + $16,500= 126,500
Our number is growing like a dang weed, isn’t it?! Are you starting to see how not including these factors results in completely screwing yourself when it comes to take home pay?
3. Determining Hours Worked
Ok, so are we ready to divide $126,500 by 2,080 hours worked?! Not even close. That number (2,080) is based off of the fact that there are 40 hours in a work week, and 52 weeks in a year. If you plan on working this much, you might as well log out of this post because you’ll have keeled over from stress in a few months’ time anyway.
To calculate the number of hours you’ll actually be working, first decide how much time off you’d like to take each year. For example, I take a total of five weeks off every year (200 hrs)—because freelancing is hard as hell and we deserve to reap the perks of it, too. On top of that, there are roughly 10 big federal holidays to keep in mind (80 hrs), and you’ll get sick, because as mighty as you may feel striking out on your own, you’re not Thor. Let’s assume you take three full sick days a year (24 hrs).
200 + 80 + 24 = 304 hrs. For simplicity let’s round to 300 hrs.
Here’s a newsflash, for you though: You likely won’t work 8 hours a day
Most freelancers don’t work a full 8-hour day. Let’s say you take an hour for lunch and spend two hours working on your own business (answering emails, paying bills, running out to buy printer ink, etc). These are called administrative hours, and you don’t bill your clients for them. So in reality, let’s say you’re working 5 hours each day.
5hrs x 5 days a week = 25 billable hours a week
Now, multiple your weekly hours by weeks in the year:
25hrs x 52 weeks = 1,300 billable hours a year.
Now, we haven’t forgotten about all that vacay and sick time. Let’s subtract it from your new number:
1,300-300 = 1,000 hours.
Pretty crazy, eh? We’re a long way off from that original 2,080!
4. Dividing Salary by Real Number of Hours Worked
NOW we can take that salary and divide it by our actual number of hours worked in a year:
$126,500 / 1000hrs = $126 an hour. (Round to $130 for simplicity).
You’ve officially got your hourly rate!!!!!!! That’s a long way off from our original $50 an hour, friend. It’s why not knowing how to properly calculate what to charge can leave you wondering how you’ll buy a pack of ramen when your taxes are due. Don’t be the freelancer who goes to purchase something for a client only to find you’ve got no money left (even though you’ve been consistently raking in jobs).
You can also see why people would now buck at $130 an hour. People in a corporate environment are sitting there thinking, “Hell, I’m in the wrong business!” My own family has said this to me. They’re not thinking about the fact that you have to pay the power, taxes, janitor, CPA, and more with that hourly rate. Because they don’t understand this reality, it’s much easier for them to swallow a project rate.
Determining Your Project Rate Based on Your Hourly Rate
Now that you’ve got your hourly rate, it’s super easy to figure your project rate. Project rate is just the time you believe the project will take you x your hourly rate. Pro tip? Always overestimate your time, especially as a newbie. Green freelancers almost always underestimate the amount of time a project will take them (usually by a multiple of three), so even doubling what you assume something will take isn’t a bad idea. Don’t forget to include correspondence, meeting, and any possible phone time.
Let’s say you’re writing a landing page for a client. You assume the content itself will take you 2 hours, and that back and fourth with the client will also take you roughly two hours ( a one hour consultation meeting, and an hour for emails and quick phone calls). Edits will take you another hour, bringing your project hours to a total of 5 hours.
5hrs x $130= $650 project fee
Do that for all of your projects (think webpages, blog posts, social media content, email marketing, etc). and save it in an excel sheet for quick reference when quoting jobs for clients. Also be sure to use language like “My blogs begin at $250 for 800 words,” so that if it turns out the content is extremely demanding or research heavy, you’ve reserved some wiggle room to charge a fair price.
But What’s a Fair Annual Salary for a Newbie Like Me?
Maybe you’re sitting there thinking, that’s great and all, but I still don’t know what’s a fair annual salary to ask for myself. That’s when you look at the corporate world. Entry level copywriters make an average of $40,000 a year. Now, you need to up that number some, because the perks that usually come with a corporate salary are now coming out of your own pocket (hello health insurance, business taxes, and other expenses). So, after you figure out your expenses, add that to $40,000 (or there abouts). This is a fair price for someone with no proven experience in the freelance world. It’s enough to make a comfortable living without feeling like you’re ripping clients off for services you can’t prove yet. If you want to ask for a bigger number, by all means, go for it. Just be ready to validate your price when clients come asking for success metrics.
A Few Pro Tip Truths Before I Leave You
• If you never get pushback on your pricing, it’s too low. Raise your rates. Period.
• Speaking of, raise your rates every single year. Without question. Raise them at LEAST enough to account for annual inflation, and then some. (Wondering how to announce to your loyal clients that your rates are going up without sending them for the hills? Stay tuned for my rate hike email template that literally had clients THANKING me after I sent it).
• Don’t overly-itemize your invoices. That’s when clients begin raking through and nit-picking. As soon as I stopped doing this and grouping expenses more generally, they started paying without question.
• DO NOT DO ANY WORK WITHOUT A SIGNED CONTRACT. THAT’S…DO NOT DO ANY WORK WITHOUT A SIGNED CONTRACT. I will personally drive to your house and give you an earful not even your mama can match.
Ok, if you’re still with me, you get all the kudos for diving in and doing the hard work for your business. Seriously—give yourself a little pat on the back, and then ask me whatever questions you want to know about determining your own freelance writing rates in the comments below. I’m here for you, boo.