How Much Should You Charge? Creating Your Freelance Rate Sheet
“So what’s your rate?”
Four words that ruin the negotiations of the unprepared.
It’s a position every freelancer finds themselves in. The question that leads to frantic consideration of every available option and what you think you can get away with charging.
Do you go high and take the client for as much as possible? There is, of course, the risk of losing the client by seeming too greedy. Go too high and they’ll balk at your quote.
Perhaps you should play it safe and go low. It’s not as much as you want or need, but some money is better than no money, right?
But you’ve read all those articles about undervaluing your work and you won’t make that mistake. The best option might be to head for the middle ground and quote a rate you’re OK (but not happy) with because you know the client will say yes.
As you sit on the phone considering these options the silence stretches. The client is waiting for your answer and you, well, you’ve hesitated. It might have been only a few seconds, but with each passing moment, the panic you feel deepens. You know you’ve got to respond soon or you’re going to look like a fool.
So you blurt the first number that comes into your head.
“Er…. Maybe $100? How does that fit with your budget?”
“Perfect”, comes the immediate response. And with that, you know you’ve fucked up.
There was no counter offer, no sharp intake of breath, and zero hesitation from the client. Why?
Because they could have stretched to $200, maybe even $300 or more. And when you offered them a rate at 50% or less of their budget, they jumped at the chance to lock that shit down.
$100 is nothing to be sneered at. You’ve come away with an OK rate, but you’ve fallen far short of what you’re worth. And it’s due to a failure of preparation.
It’s a shitty situation and one you’ll turn over and over in your head for weeks or even months.
I’ve been there and know how making your rates up on the spot simply doesn’t build a profitable business. If you enter into a negotiation without knowing your rates you’re going to end up undercharging. I’ve done it in the past and it fucking sucks.
But here’s the good news. By putting 1 hour aside today, you can ensure that you’re prepared for every future negotiation.
Featured Download: Click here to get a free copy of all the spreadsheets I use in this piece to figure out my rates and I’ll also send a copy of the 2016 rate sheet I sent to clients:
You can guarantee that even when you get less than you hope from a negotiation you’ll still be earning enough to live the life you want to live.
Spend the next five minutes reading this article and within an hour you’ll have a rate sheet which ensures you’ll never undercharge again.
But You’ve Heard You Shouldn’t Use a Rate Sheet
That’s the only thing I can say to this terrible piece of advice.
You’ll read advice from freelancers who say that every job is different and requires an individual quote. Tell that to a client and you’ll see them all run for the hills.
How would you react as a customer if you walked into a store, asked the price of an item and were told it depends on how you intend to use it?
Not well, right? You’d worry the store is going to try and rip you off by adding an extra $100 to the price because they think you’re gullible enough to fall for their pitch.
“But Pete”, you say, “those are physical products with a set price. Everyone gets the same item at the end which we can’t offer as a freelancer.” Well, you’re kind of right.
Take Apple as an example. Yes, they sell iPhones and everyone purchasing a particular model pays the same price. But Apple knows people have different needs. So what do they do? They offer multiple products.
Each product comes in a range of specifications. Each spec is priced differently to represent the increase in value and accurately cover the costs of production.
The same approach is used by service business in the B2B space. The below is a screen grab of LeadPages pricing page. LeadPages, if you’re not aware, offer a software service for people who want to create landing pages and grow their email lists.
They offer a service (like you offer a service) yet have a clearly defined pricing structure for users. Each price point comes with different features. Why do this? Because not every user is the same. People have individual needs.
Those with more detailed needs will be happy to pay more. Those who need a more basic service will simply opt in for the cheaper option.
Every B2B business offers a rate sheet, even if it’s just an estimate to give consumers an idea of how much they might have to pay.
Sometimes you’ll even see businesses use the old get out of jail free card with a “call to get a quote” option. This is often aimed at the real high-end users who need a lot of extras.
The reason you have to have solidified rates is simple. People are sceptical. They want reassurance you’re not going to rip them off. Giving your potential clients, at the very least, an estimate is a key stage in the customer journey.
That estimate is key in building trust and getting the client to feel a little more at easy. You’ve got to get them to trust you, cause if they don’t trust you, they ain’t gonna hire you.
But Every Client is Different
As freelancers, we generally have a more complicated client base than large product manufacturers or huge software service providers. We can’t offer a three-tier price service for each deliverable because our client’s needs are so diverse.
Would you charge the small business owner who needs 500-word blog posts with minimal research the same as a multinational requiring 2000 word articles including at least 10 references?
Would you be happy earning the same amount for both?
You could offer a two tier pricing structure that covers both these jobs and hope that all clients need one or the other, but what about the 1000 word pieces, the 250-word descriptions and everything in between?
They’re lost, clients who see two levels of service on your rate sheet may think they’re the only services you offer.
So what can you do?
Offer a pricing range.
Figure out the minimum you’ll accept for a job and use that as a starting point. Then look at the other end of the spectrum and use that as your top end price. List your price for every job as a from $X to $X and you should have all bases covered.
The client knows both the minimum and maximum they could be charged. You’re providing them with the information that should instil a little trust and peace of mind.
So How Can You Work Out Your Rates?
It all starts with figuring out the bare minimum you need to survive. To come up with a number that will cover your bills, rent and living costs from month to month and reverse calculate how much that comes out to every hour.
I’ll get onto covering the basic mathematical formula you need to get to this in a minute. Before I do I’ll say that if you’d rather take the easy option then click the below link and I’ll send you a little pack of materials that’ll make this job incredibly easy for you.
Featured Download: Click here to get a free copy of all the spreadsheets in this piece and a copy of the rate sheet I used throughout 2016 to grow a six-figure business.
The equation you need is based on something called your minimum acceptable rate (MAR). Basically the minimum amount you need to earn to get by.
The number this little calculation spits out is not what you should be aiming for. The number you get from figuring out your MAR is literally the very least you should be earning. It’s the bottom, not your goal.
Here’s how you can figure out how much you need to earn every hour to survive.
Figure Out How Much You Need and Want to Earn
How much do you need to earn to survive? How much do you need to earn to live the life you want to live?
These are two numbers you need to figure out before going any further in setting your rates. The below is a completely fabricated example of what you need to do.
You’ve got to figure out exactly how much you need to earn to survive by listing every expense and how much it totals for the month.
Then, do the same with how much you want to earn to live the life you want to and put them side by side. Just like in the below.
These are post-tax earnings. You’ll need to look into your country’s tax rates and figure out exactly how much the total pre-tax amount is to net you what you need to survive and thrive.
The minimum rate you’ve worked out is just that. The bare minimum. I don’t recommend using it to figure out the rest of your rates because it’s too limiting.
By setting the bar as low as possible you’re never going to be able to save money or have a little extra cash to enjoy yourself. That minimum earning is a safety net of sorts. It’s there to let you know how much you need to survive, not what you should be aiming for.
No one takes a job because it gives them just enough to survive, people take jobs and move up the ladder so they have more money to play around with.
So from this point on, use your goal earning.
So head to your government’s tax website and figure out what the pre-tax amount would be for your income goals and convert it into a yearly total.
I’ve imagined the 6700 above is a pre-tax goal and punched it into a UK tax calculator to get the below.
The tax calculator tells me my goal of £6700 is £80,400 per year. I’m going to round that up to £81,000. Rounding up each of my calculations just gives me a bot of extra wiggle room.
Figuring out Your Minimum Acceptable Rate
Taking your goal earning, you need to figure out how much you need to charge to actually meet it.
This is not a case of picking some numbers out of the air. I see a lot of advice telling freelancers to increase/decrease the price depending on what they think the client can afford. Which is shitty advice.
By having no structured fee it makes projecting your future earnings and growth near impossible. Here’s an example.
I know all my rates. If I need to earn $1000 extra a month I know that equates to, let’s say one landing page client. I also know that on average, I send 50 outreach emails to land one client.
So to land an extra $1000, I need to send ~50 emails. By knowing all the stats it makes the process so much easier.
But if I charge company A double the fee of company B because they can afford it, it muddies the water. How many more clients do I need to hit an extra $1000? Will they pay the $1000, or $500? Does that mean ~50 emails or ~100 emails?
I’ve no idea because I don’t know if the clients I land are going to be able to afford the $1000 or $500.
You need to know how much you charge for each service so you can figure out what steps you need to take to hit your income goals.
If the clients you approach can’t afford you, then either your pricing is off or you’re targeting the wrong clients. Figuring out your rates is as much about attracting the right clients as it is about earning potential.
Anyway, on to the next step of figuring out your MAR.
Step 1 — Figure out how many hours you can bill in a week. Remember, you’re a freelancer. You might work 40 hours per week, but you can’t bill all 40 of those hours. Much of that time will be spent advertising yourself, handling admin work, and other non-paying tasks. I estimate I have 5 billable hours a day.
Step 2 — Work out the number of hours that equates to a week and multiply it by how many weeks you want to work a year (everyone wants a few weeks holiday so factor that into your equations).
Step 3 — You should now have the total number of working hours per year. Divide your required minimum earning by the total yearly hours and, ta-da, you have your minimum acceptable rate.
One of the spreadsheets in the free downloadable will help do this for you. The below is a screen cap of what it’ll tell you.
FEATURED DOWNLOAD: Click here to grab the free materials including the above spreadsheet and the rate sheet I used throughout 2016
So I’d round that up to 70 and I’d know that I need to charge 70 per hour to hit my dream income goal.
How Long to Complete Each Project?
The next steps are to look at how long it takes you to complete certain jobs.
You know from experience that it takes you two to five hours to complete a blog post. So, you take your MAR of $70 and multiply it by 2 and then five. That would give you a fee range for blog post writing of:
$150 (rounded up of course to the most logical number) — $350
$150 for a good blog article is a reasonable amount. Most good clients wouldn’t balk at $350. Its a fair rate both for the client and you.
Follow the same process for every service you offer and you should have everything you need to create your own rate sheet.
Important Caveat — When you’re figuring out your MAR and your rates for each job always round up. You’ll find you’ll get weird numbers like 72.37 for your hourly rate. That then rounds up to $75 an hour.
Rounding up just gives you an extra bit of wiggle room both in terms of the cash you earn and meeting your financial needs, but also for negotiation. For example, if $150 is the goal but you know your bare minimum is $50, you could drop to $100-$125. You still earn more than enough to survive and the client will be grateful for the reduced rate.
That’s it for figuring out your rates. It really is that simple.
What you then need to do is figure out how many clients you need every month to hit your income goals. All that’s left then is to start your outreach and marketing strategy to land the clients and earn what you’re worth.
Rather than sign off there and let you go and create a great rate sheet, I want to address one of the most talked about questions when it comes to figuring out your rates.
Should You Display Your Rate Sheet on Your Site?
There’s a minor online debate as to whether you should openly display your rate sheet on your site. Some freelancers do as they think it’s a great way to filter prospects who can’t afford them, others don’t because it doesn’t demonstrate value and every job is unique.
But really, it’s a personal decision.
Do you want to display it on your site?
That’s the only consideration you need to make. Personally, I don’t list it on my site, and here’s why.
I want to stay away from clients whose primary concern is price. I only want to work with clients who understand the value of what I offer and are more focused on that value than saving a few pennies.
Don’t get me wrong, price is always a consideration, but it should be the secondary consideration.
So rather that putting my rate sheet up on site for my potential clients to see and judge me based on what I charge, I use the same space to sell the service to them.
I talk about the benefits of what I offer, how it can help their business, the benefits they’ll receive, and a few other things. I focus on them and highlight the value and benefits of my service.
Why? Because that’s what I’m selling. I’m not selling words, I’m selling the benefits those words bring. And so value is forefront for my marketing, pricing is secondary.
If a client leaves the site because they don’t know how much I charge, then good riddance. I want to work with people who are focused on the value, not the price.
And that’s not some shitty way of me ripping people off. My rates are pretty fair. But I’m getting too long in the tooth to quibble over 50 bucks. If 50 bucks is a deal breaker for a client, they can fuck off. And I’ve found that by not displaying my rates, I receive far fewer queries from cheaper clients.
Your rate sheet is not a magical magnet that’s going to attract higher paying clients and deter the cheapskates as soon as it’s published on your site. That’s your job.
This isn’t some magical approach I’ve discovered. It’s one used in the B2B world oh so often.
I’ve included a few samples below from service and product based businesses. Sure, they’re not freelancers, but they do an incredible job of selling you on the product. They focus on the value and get the user wanting to buy.
By the time you’ve finished reading what they have to offer, you want to purchase the product.
Dyson have a great example of selling the benefits and I’ve included it below. Sure, they lead with the price, but the number of benefits they list kind of make me think the fee is worth it.
Tell me I have to pay $550 for a vacuum and I’ll tell you to go forth and fornicate. But if you tell me that for $550 I’m getting a vacuum that has the latest tech including dozens of patents, is particularly good for allergen control, comes with 8 attachments and a 5-year warranty, then yeah, I might just think it’s worth the cash.
Wistia is a video creation service. The first thing you see on their site are the primary benefits of the service. Even after clicking on the more information links below or the “get started” button in the centre of the screen there’s no mention of price.
All of their marketing is focused on the product and how it can help you (the get started link lets you immediately set up a free account to try things out).
Everything they do is focused on the benefit, not on the price. By the time they do mention the price, you’re so invested in the service and desperate for the benefits that the price is secondary.
And that’s what they’ve done well. They know that price is a secondary consideration for good customers, just like you should know it’s secondary for great clients. Great clients want results, and they know that the best results don’t come from cheap services.
Look, your rate sheet is important, but if you’re worried about it scaring off clients and damaging your business just stop. Your rate sheet is for you.
It’s organised so that you can earn enough to survive. Instead of worrying about your prices and whether they’re scaring people off (for being either too low or too high) focus on communicating value.
I view a rate sheet as something that helps me price my services fairly and keeps me earning enough to survive. The rate sheet isn’t some magical piece of marketing that’s going to help you land more clients, but it will help streamline your processes and assist in planning your growth.
Go Forth and Create Great Rate Sheets!
Having that wonderful little á la carte pricing menu makes quoting so much easier. A client asks how much you charge for a service, you look at your sheet and immediately know the range you should quote to earn a decent amount.
It also makes planning and invoicing a breeze. I’m not an accountant and whilst my mathematical prowess ain’t half bad, I need my invoicing to remain simple so I’m not wasting billable hours balancing my books.
Ignore the bullshit advice of “but every job is different” and stop worrying whether displaying it openly will scare off clients. Work it out to your personal needs and focus on building your business through great work.
Before long you’ll hit the income goals to live your dream life, and soon after, you’ll be able to exceed even your dream income goals.
Once demand outweighs supply you can revisit your rate sheet and increase the prices to better reflect your new skill level and desirability.
So that’s my take on rate sheets, and it’s one that’s served me well. I’d love to get your take on it though. Are you one of the people who will display their rates on site, or are you going to be a benefit boaster instead? Oh yeah, and don’t forget to pick up your free rate sheet creation kit!
Originally published at Have a Word.