Setting your freelance rates is totally dependent on your experience, expertise, and proof of quality work. If you have more clients, you have more leverage on how to determine your prices. If you have more experience and proof of work via a portfolio, then chances are you will be able to charge higher rates.
If you're just starting out with no portfolio and no clients, then there are a few things to consider. Regardless of your current scenario, here are 5 steps to know how to set your freelance rates.
5 Steps to Know How Much to Charge as A Freelancer
Again, this process applies to freelancers of all experience levels. These five steps should even be a regular routine when reviewing your freelance business plans, at least annually. Let's get started…
Step 1: Analyze Your Cost of Doing Business
You have no business if you aren't able to charge at least as much as it costs you to do business. If you're a graphic designer, then chances are you need to purchase a membership of a trusted software like Adobe, for example.
If you are a video designer, then you'll need to invest in good video equipment and editing software. If you're a stock market investor with investing experience selling your expertise, you'll need access to some major publications and news editorials to stay up to date.
Example: If you are a freelance copywriter, what tools do you need to run your business? As a copywriter, you determine you need to pay for a Microsoft Office subscription to write, edit and organize your content, which is about $9.99 per month. Next, you determine you will have a marketing budget of $200 per month to acquire new clients.
This means your total cost of doing business monthly will be about $210. The next question becomes how many clients can you expect per month, and how much would you need to charge them in order to make at least $210?
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Once you've determined your monthly cost of doing business, be sure to make note of it, then move on to step two.
Step 2: Do Some Quick Research on Your Market
Let's use the graphic designer as an example. After you've figured out how much it will cost you to run your services, start looking online at what other freelancers offering graphic design services are charging.
You can do this by simply doing a google search for “freelance graphic design” or something to that extent. Other options are to look on freelance job platforms like Fiverr, Upwork, Freelancer.com or LinkedIn ProFinder.
Based on your research, you determine you can charge anywhere from $35 – $95 per custom logo creation, potentially more as you build out your portfolio and proof of work and experience.
Step 3: How Much Experience Do You Have?
You now have an idea of how much money it will cost you to run your freelance gigs, about how much money freelancers are with a similar experience as yours are charging for their services.
The next step is to do an honest review of how much experience you have in comparison to the gigs you researched in step two. Why? Because this will ultimately be the deciding factor on how much you believe you can charge to start building your business.
A great way to do this is to gather all the past work you have done, whether at past jobs or even side projects and hobbies and build a quick portfolio of your work.
This isn't necessarily to be used as your portfolio (you can certainly do so as long as you have proper permissions to publicly share your work from past jobs you've had), but to give you a way to measure your work among the research you've done. You should get a fairly good idea on how much you will be able to charge.
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Step 4: Test the Waters
Ultimately, the only way to know how much you can charge is to set your prices and see if people will buy from you. Take advantage of your marketing budget and market to your ideal audience, and always ask for feedback.
A few things to look for when testing the waters are order volume, client feedback, and returning clients. If you get a quick inflow of new orders that fills up your schedule entirely, you can probably charge more than your current rates.
If you get positive feedback from clients, and begin building a strong reputation, this may be another indicator that you have some wiggle room in how much you can charge. Lastly, if you have a lot of returning customers, this is a sign that you are at least offering your services at a fair price, else they would go to someone else instead of returning for more work.
Step 5: Corner the Market & Raise Your Prices!
As said brilliantly by the Heisenberg himself in the famous series “Breaking Bad” – “Corner the market and raise your prices!” What does this mean? Once you start getting some traction for your services and have a steady stream of clients who love you, it's time to make set yourself apart from all the competition to keep those customers. Over time, you can raise your prices and the strong customers will stay and you'll filter out the customers that may not be worth your time.
It's better to have just 5 customers paying you $500 each, than it is to have 25 customers paying you just $100 each. Each scenario you're making $2,500, but one is potentially less work but with more reputable clients and a stronger relationship.
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