One thing that freelancers struggle with is setting rates for their skills or services.
The fact is, that setting rates too low, means you’ll struggle to survive. If you set them too high, you won’t get much work. You have to learn how to set competitive rates for your clients, and cover your own living expenses and financial goals at the same time.
The first step to setting rates is to determine how much money you need to earn in one year. Add up everything that you need to pay for the month, including monies needed to realise your financial goals, and multiply by 12. This is how much you need to earn in a year. Make sure that you include money for emergencies. Don’t leave anything out.
Forget all of the charging what you’re worth hype!
I tend to switch off when I see or hear people saying ‘charge what you’re worth’. How can you even begin to start setting your rates based on what you think your time is worth. You cannot value your life or the time you spend on earth. If you do, ask yourself ‘why is my life more precious than others’.
When setting your minimum hourly rate take into account:
- Overheads – the cost of equipment/software/apps
- Facilities – electricity/gas and maybe renting office space
- Taxes – National Insurance/Tax
- Living expenses – rent/food/life away from work
Now, you need to find out what the average rate is for the proven skills and the experience which you offer. This is the tricky part, because rates vary. For example, a Virtual Assistant in the UK can earn anywhere from £10 to £35 an hour, and possibly more if they are offering a specialist skill.
With that done, you can determine how much work you will need to get each month in order to meet your financial obligations. This is also why having an emergency account funded with three to six months of living expenses in it is so important. As a freelancer, especially when you first set-up your business you won’t get the required amount of work each month.
If you’ve set rates, and you find that you are getting quote requests, but very little work, the chances are good that your rates are too high.