From time to time, I will tackle a freelance project when it involves a topic or industry in which I am particularly interested. For example, my last project was doing a social media audit for a radio station. Even though I work full-time as a Director of Social Media, taking on the occasional project helps me keep in touch with other industries. How I decide how much I should charge for these projects should be easy, but the reality is that it is complicated. I often get asked how I define my rates, and I hope this guide helps you do the same. This information is meant to help get you started, but it is by no means the definitive guide; you define, calculate and change your rates as you see fit.
Defining Your Value And Rates
Baseline Rate
Let’s assume my salary is $100,000 per year; this would translate to an hourly rate of $48.00. This rate acts as your baseline hourly fee.
Experience Rate
Consider your experience related to the task; I have 20 years of professional experience at the time of this writing. For this calculation, I am charging each year at a rate of 1.5 (20 X 1.5 = 30). Therefore, the 30% margin of $48 is $14.40, which means my baseline rate plus experience is $62.40.
Skill Set Value Rate
Your skill set value is what you bring to the plate for every project; look at it as your standard offering. This includes your education degree(s), certifications, software knowledge, and other soft skills. If you have advanced studies, specialized certifications directly related to a task, or a specialty skill, that should be factored into your skill set value rate.
For example, suppose you have a master’s degree, advanced SEO certifications, and are bilingual. In that case, you have an uncommon skill set in being able to translate content while applying SEO considerations.
The more you hone into specialty skills, the higher the margin should be. The more specialized and hard-to-find skillsets, the higher your skillset percentage. I charge an 80% margin on skill set value for a highly specialized project. If you want to do less challenging work, don’t charge a high skill set value rate because it will make you less competitive.
Add your baseline + experience + skill set rates to find your hourly base work rate.
What are your fixed and variable costs?
Fixed Costs
Fixed costs are recurring expenses such as utilities, professional subscriptions, websites, workspace, materials, etc. As I am employed full-time, I enjoy the benefits that come with it. However, if your only source of income is freelance work, you must consider your cost of health insurance, retirement, and other recurring costs within your fixed costs.
A small percentage makes sense if it’s a short project because you’re not putting as much time into it. However, you would add a significant percentage for longer projects or recurring commitments. Since the example is a shorter project estimated at 20 hours, I am charging 5% of my monthly fixed costs. This pricing strategy is called cost-plus pricing, in which you add a percentage of the price to the total cost.
Variable Costs
Variable costs are those you spend on materials and any expenses needed to complete a project. For example, buying creative assets or materials would be a variable cost if you outsource part of the work. These project-specific variable costs are passed on to the client with a charge. In the example, the variable costs total $185, using the cost-plus pricing strategy. I multiply the $185 by 20% for a total of $37. The final charge for variable costs will be $222.
Your Final Total
Multiply your hourly base work rate by the hours the project will take to determine your total hourly charge. Next, add your total hourly charge to your fixed and variable costs to obtain your final rate.
Additional Resources
Remember that every project can be different, so consider figuring out your hourly rate, day rate, and project rates. The links below contain much more information for those considering freelancing full-time. Good luck!
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