007. Know your worth: How to compute your rate as a new freelancer

Not your usual BS “know your worth” pep talk

Part 7 of the Freelancing Series

Photo by Kaitlyn Baker on Unsplash

What does it mean to know your worth?

Knowing your worth is not synonymous to asking for a higher rate because someone on social media told you to. It involves recognizing the value of your work, both in terms of the quality you deliver and the impact it has on your clients. It is understanding your expertise, skill set, professional reputation, market value and all the unique qualities that you bring to the table.

1. Expertise: the depth of knowledge and experience you have accumulated in your field over time. It sets you apart and allows you to offer high-quality work that meets or even exceeds client expectations.
2. Skill Set: Whether it’s technical, creative, or soft skills (communication, problem-solving skills, leadership skills, etc.), knowing your strengths allows you to leverage them effectively in your freelance career.
3. Professional Reputation: Acknowledge the reputation you have built within your industry or niche. Positive feedback, testimonials, and referrals from satisfied clients are indicators of your value and credibility as a freelancer.
4. Market Value: Research and understand the market rates and demand for your services. Knowing your worth means pricing your services competitively based on your expertise, the value you provide, and industry standards.
5. Boundaries and Self-Respect: Set boundaries around your time, energy, and workload to maintain a healthy work-life balance. Knowing your worth involves respecting yourself and your professional standards, which may include saying no to low-paying or undervalued opportunities.

Knowing your worth means not undervaluing yourself. It also means getting what you deserve. It doesn’t mean charging exorbitant amounts that are not commensurate to your qualifications. It doesn’t mean asking for excessive fees that are not backed up by results. This post is about computing your rate as a beginner, to set a fair amount both for your client and for yourself.

How to Compute your Rate as a New Freelancer

Compute your Hourly Rate first before you compute your Package Rate.

Hourly Rate

1. Open Upwork.com. If you don’t have an Upwork Account, make one.
2. On the search bar, search for “Talent” and type your niche. For example, if you’re a beginner social media manager, search for “social media manager”.
3. Filter your search to find beginners like you. You may narrow down your search by choosing “Hourly rate: $0-$20”, “Talent Type: Freelancers” and on the Skills Filter, choose the sames skills as your, like “Social Media Management” and “Graphic Design”. You may also filter per country to know the rates of most competitors in your country.
4. Look for an account with the lowest amount earned. That indicates the freelancer is either new in the freelancing or new on Upwork. Some freelancers might be experienced but only started Upwork recently.
5. Check the profiles to know which ones are indeed new freelancers, inside or outside Upwork.
6. Once you found an authenic newbie, note their rates. It usually ranges from $5 to $10. Now you have a ballpark rate per hour as a beginner.
7. Estimate how many hours you’ll work per month. Then, compute your monthly rate based on your hours of work and your hourly rate.

Hourly Rate x Hours of Work/Month = Monthly Income

$5 x 160 = $800 Monthly Income

Question 1: Is it enough? Is $800 enough as a monthly income for your lifestyle considering that you’re working full time? This depends on your lifestyle and your location.

If $800 isn’t enough, you may want to increase your rate or increase your working hours. I recommend you increase your rate and avoid overworking because it may result in health issues and burnout.

Question 2: Can you find clients? Specifically, can you find clients that would allow you to work 40 hours a week? You may be available and enthusiastic about working 8 hours a day but can you find a client that requires 8 hours/per day, 40 hours per week? If this is not possible, you can break down your hours and find multiple clients. For example, my first client only required 10 hours per week. I still had 30 work hours available for other clients.

Question 3: Is your skill in demand? What makes you stand out? Consider the market demand for your skills to set your rate based on the law of supply and demand. If your skills is high in demand and low in supply, you may ask for a higher rate and work less hours. If your skills is quite common, you may be competing with a lot of people and tempted to ask for a lower rate.

If your skills are common, you may be competing with a lot of people and tempted to ask for a lower rate. If that’s the case for you, my next blog may be helpful.

Reverse Engineer it.

Another way to compute your hourly rate is to Reverse Engineer it.

1. Determine how much you need in a month + 30%.
2. Then divide it into the number of hours you’re willing to work.

For example, your taret income is $1000/month for your basic needs. Add 30% of $2000 which is $300. The 30% addition is for added expenses once you start freelancing, like increased electricity bill, a better Internet provider, subscriptions (like Canva and Photoshop), health insurance and savings for new equipment (which you might need to buy in a year or 2).

(Target income + 30%) / number of hours’ work per month = hourly rate

$1300 / 160 hours = $8.125/hour.

Package Rate

I talked about this on my last blog, which you can access here. But in a nutshell, the formula to determine your package rate is:

Hourly Rate x Number of Hours = Package Rate

Your number of hours is how long it takes you to finish a job. If you don’t know yet, you may need to invest some time and effort to determine how many hours you need to complete a task. Here’s a step-by-step guide:

1. Install Toggl Google Chrome Extension.
2. Open your Rate Deck to the Scope of Work part. (If you don’t have a rate deck, please read this blog first.)
3. Do each task for an imagined client. Make sure your turn on your Toggle Tracker before you start working and turn it off after you finish. Make sure to properly label your project.
4. Check your Toggl report. It will show you how long it takes to finish a task.
5. Add 15–30 minutes per task for breathing room. Use the total number of hours for your package rate computation.

Another excellent app that you can use is Clockify. Both Clockify and Toggl are FREE.

This is not a game

Freelancing is a legitimate career path. You can make serious money if you work hard enough and long enough.

Learn how to set up a good rate at the begining of your career. It will initially determine your value in the eyes of the client and could dictate your future rates.

For example, if you started at $3 per hour, you may be able to double your rates after a year. It would take you around 6 years to get $20 per hour, if you’re lucky. But if you start at $10 per hour and work well, you may get $20 per hour after a year. So, decide wisely.

Now that you’ve established you Hourly Rate and Package Rate, it’s time to whip up some rate-based strategy to land a client though the “The Pathway Method”, which is my next blog.

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Happy Freelancing!