It’s one of the biggest struggles as a freelancer. And it continues to be a struggle whether you’re a seasoned business owner or you’re just starting. Your income and financial well-being is directly tied to pricing your services fairly. So it’s good practice to take this step in your business with extra care—and make sure that you’re doing it correctly.
Importance of a fair price
More often than not, I see freelancers under price their work. It usually comes from a lack of knowledge and a lack of confidence. The first problem. As many freelancers come from a fully-employed background, they try to start their freelance hourly rate based on their previous job. This isn’t a terrible benchmark to use, but it can be very flawed.
You have to remember that the hourly pay that you take home isn’t the hourly pay set by your company. They usually pay anywhere between 20-30% more than the hourly pay you see on paper for taxes. Because freelancers use this benchmark (and usually lack this latter knowledge), they end up undercharging for their services, and they pay the tax on their wage salary. This leads to you having an even lower salary than at your last job.
The second reason is lack of confidence. Freelancers sometimes hesitate to stand by their values. It’s tough finding clients in the beginning and you’ll have to negotiate project prices. It’s sticky, and it’s a game that many don’t like to play. I recommend to act-the-act, and the confidence will follow. Act like you’re confident and come up with three reasons to justify your wage. Then stand by that number with confidence.
How to price fairly
Now, let us discuss how to calculate that fair wage.
I don’t think starting with your past professional employment is a bad start. However, I would begin with the correct wage and add at least 20% to that number. If you made €20 an hour, your freelance hourly wage is €24.00. I would also note that many consultants up sale their services. You’re considered an expert in your field and you provide a specific service. Scale that hourly wage to 40% on top. Accenture does it; why not you!? That new number is €28.00 an hour.
Now, you have your hourly wage of €28.00 an hour. I suggest to never give a client your hourly wage, because it will never allow you to scale your business. And clients love to dice and slice budgets to save money; i.e. “Did it really take you five hours to write that blog post?”
Once you have your set hourly wage, you now will ALWAYS price your proposals as projects. This allows you more flexibility and to upscale your price with more added services.
Calculate the project fee
I have you sold on a project fee, yes! The next step is a simple exercise. You’re going to start with an excel sheet, and you’re going to list every single task that goes into a specific project. Are you a graphic designer? Here is an example:
|Administration tasks (i.e. answering emails)||30 minutes|
|Selecting photos||1 hour|
|Designing a logo||3 hours|
|Logo revisions||1 hour|
From your total hours, you can accurately calculate your wage based on that amount of anticipated work that you’ll have. For example, you anticipate 5.5 hours of labor for a logo graphic design project. Calculate 5.5 hours by your hourly wage of €28.00 an hour and your total is €154.00 as a project fee. I would then pitch that project fee to your potential client.
I would also suggest that your calculation here is a baseline. Almost always, womxn under-priced themselves and if you were to compare yourself to a male freelancer’s hourly wage, you might find it much lower. As a rule of thumb, I always upscale my price by 20% just in case I under-priced, or it becomes more hours than I expected. Then, your total project price is €184.80.
Setting a fair wage for yourself can be difficult. But I suggest to take these beginning steps to accurately price out your project fairly. It’s the right step in the right direction to begin paying yourself fair wages and getting paid your worth.