For as long as the very concept of freelancing has existed, one question has plagued rookie and veteran freelancers alike: How much should I charge? Regardless of the type of work you do, there’s no right or wrong way to arrive at a billable rate, as long as you land somewhere that doesn’t undervalue your skills. But even in cases with a fixed budget and no wiggle room to negotiate, you always have the choice to simply turn down an unfair rate.
And therein lies the ultimate beauty of freelancing: Freelancers and independent contractors have the ability to determine their own success. That said, there are several strategies you can implement to ensure that you maximize the value you receive from every job you take. To understand some of these strategies, we spoke with Alan Weiss and Rafael Espinal, two experts in the freelancing and consulting world.
Calculate your freelance rate based on value, not time
Weiss wrote a book on independent consulting. Actually, he’s written more than 60 books on the subject, most notably Million Dollar Consulting and The Consulting Bible. In his work, Weiss emphasizes the importance of charging based on the value you deliver rather than the time you spend. This approach ensures that you’re compensated for the impact of your work rather than just the hours you put in.
To determine how much to bill, Weiss suggests evaluating your services through three lenses: objectives, metrics and value:
- Objectives: Understand what the client aims to achieve and quantify those goals. For example, if a client wants to increase sales, reduce expenses or improve team efficiency, ask them to attach a dollar amount to each objective.
- Metrics: Determine how you and your client will measure progress and success. Clear metrics help you justify your rates and demonstrate the tangible benefits of your work.
- Value: Monetize the value of achieving these objectives. Weiss recommends aiming for a 10-to-1 return on investment (ROI). For instance, if your services can conservatively add $400,000 in value to the client, a $40,000 fee is more than justified.
By focusing on the value delivered, you position yourself as a strategic partner rather than a mere service provider, which can lead to higher rates and better client relationships. Weiss also recommends getting paid in advance whenever possible so the client can’t try to change the terms of the deal or suddenly cancel the project.
Reeducate your clients
Weiss acknowledges that charging based on value isn’t without its hurdles—the biggest being educating your clients. Since many clients are likely accustomed to hourly or project-based fees, they’ll need guidance in understanding value-based pricing and the importance of getting paid in advance.
Educating them about the value you bring shifts the focus from cost to investment, which makes them more willing to pay higher rates for the results you deliver. If you provide clients with clear proposals, regular status updates and examples of previous work that highlights your value, they’re far more likely to adopt your pricing structure. Here’s a closer look at these three facets:
- Clear proposals: Provide detailed proposals that outline your work’s objectives, metrics and value. Demonstrating potential ROI can help you justify your rates.
- Regular updates: Keep clients informed about progress and milestones. Regular updates reinforce the value you are delivering.
- Case studies: Share case studies or examples of past projects that highlight the impact and value of your work.
Leverage industry standards and community resources
Former New York City council member Rafael Espinal has spent his entire career fighting for the rights of freelancers and gig workers. As executive director of the Freelancers Union, Espinal highlights the importance of leveraging community resources and industry standards to set your rates.
Freelancers Union and other organizations like Freelancing Females offer valuable tools, such as rate sheets, that aggregate data from freelancers across various fields. Weiss’s website also features a thriving community of independent consultants who share advice and insights from their work.
By tapping into these resources, you can better understand fair market rates and avoid underpricing your services when calculating your freelance rate.
Factor in your experience and skills
Your level of experience and expertise should significantly influence your rates. For example, a seasoned professional with a strong portfolio and specialized skills can command higher fees than someone who’s just starting out.
Espinal encourages freelancers to recognize their worth and not be afraid to set higher rates if they have the experience to back it up. And remember, be confident in your skills. Confidence in your abilities and the value you provide is essential when negotiating with clients.
Account for all costs
It’s important to account for non-billable time and all expenses when setting your rates. These include administrative tasks, marketing efforts and ongoing professional development. Factor in overhead costs such as software subscriptions, equipment and office space, and don’t forget to account for health care costs and taxes as well.
When you consider these factors, you can set rates that cover all aspects of your work, not just the hours you spend on client projects.
Consider pro bono work strategically
Weiss and Espinal both recognize the value of pro bono work, but they stress the importance of being strategic about it. While working for free can be a way to build your portfolio and gain referrals, it should also serve broader purposes:
- Cause alignment: Choose pro bono projects that align with causes you care about or that can offer significant exposure.
- Networking: Use pro bono work to connect with influential individuals or organizations that can lead to paid opportunities.
- Referrals: Ensure that your pro bono work showcases your best efforts, as satisfied clients can provide valuable referrals and testimonials.
Strategic pro bono work can enhance your reputation and lead to more lucrative opportunities. Still, you should always balance it with work from paying clients to ensure financial stability.
Determining your rates as a freelancer or gig worker involves a multifaceted approach that considers your value, industry standards, experience and expenses. By focusing on the value you deliver, leveraging community resources and educating your clients, you can set rates that reflect your worth and sustain a successful freelance career.
This article originally appeared in the September issue of SUCCESS+ digital magazine. Photo by px.palette/Shutterstock.com
