Setting Your Rates for Freelance Work

Setting your freelance rates for your freelance work can be tricky. You don't want to undervalue your services, but you also don't want price yourself out of the market. Determining the best rate for you and your clients depends on a number of factors, including the kind of work you do, what your competition is charging, your overhead costs and the complexity of your projects.

Know the Going Rate
Before you set or change your freelance rates, spend some time researching the going rate for your market. This research is critical when you're first starting out, but it's a good idea to do repeat this exercise periodically to keep your eye on any increases or decreases.

You can gather this information by regularly combing freelance job boards on the Internet, checking freelance job listings and talking with other freelancers in your field. Search the Internet every few months to keep an eye on your competition; look at other freelancers' Web sites to see what rates they charge for similar work.

Include your Overhead Costs
The rate you set for yourself needs to cover your overhead costs. At a minimum, you'll need to calculate or estimate taxes, insurance and social security. Then, look at the costs for any supplies, equipment and materials and other inventory your projects require. If you're not sure what you should build into your freelance rate and what you should deduct from your taxes instead, consult an accountant. Your goal is to cover your essential costs so your net income meets your financial needs.

Build in your Non-paid Hours
Your freelance rates also need to compensate you for the hours you spend doing tasks you don't get paid for: sorting paperwork, generating invoices, collecting payments, purchasing supplies, updating your Web site and negotiating contracts with new clients. Figure in these non-paid hours when you're setting your rates.

Start Low, Raise Slow
If you're just starting out, you may find that you need to charge less than your ideal rate to land your first clients and begin building your portfolio. It's okay to let those first clients know that you're charging them less than the going rate for helping your establish your business and reputation.

Communicating this now-combined with getting the job done right and on time-will make it easier to raise your rates for these clients later. When it comes to increase those fees, do so gradually for these early accounts.

Flat Rates Don't Fit All
Depending upon your line of work, it may not be possible for you set a flat rate that applies to clients across the board. If your projects vary based on level of difficulty, you may benefit from setting different rates for different work requirements-charging one rate for proofreading and another for writing, for example. So before you quote your rate to a client, make sure you understand exactly what the project entails and that the rate you propose accurately reflects the time, effort and materials need to complete the job.

Negotiating with Existing Clients
When you increase your rates, you'll need to communicate this to clients in advance and offer them an opportunity to discuss it with you. Be prepared for the reality that you may lose a few existing clients because of a higher rate and know which ones you are and aren't willing to negotiate with.

If you value the client who's threatening to walk, you'll need to decide whether continuing the relationship is worth what now amounts to providing services at a discounted rate. In some cases, accepting a lower rate makes sense-especially if the client is a steady source of work and the project requirements stay consistent. Working a lower rate for one good client might net you more in the long term than having to devote time and effort to find enough new clients to replace them.

Sometimes You Just Need to Lower Your Rates
It's only natural that one of your goals will be to raise your rates over time, but even being the best in your field won't help you if the industry you work in takes a dive. Freelancers who made a mint offering services to the real estate industry won't fare nearly as well when the housing market experiences a downturn. If you want to keep working and you're limited to one or two industries, you may have no choice other than to lower your rates if you want to continue working.