“What’s your rate?”
It’s hard to think of another question from a potential client that instills a greater sense of dread in freelancers. Even seasoned independent workers tell us they still balk when asked for their rates. If you think about it practically, it’s silly: you’re a professional, you’re good at what you do, and you have the experience and skillset to back that up. But in reality, emotions often kick in and it’s not that easy. Maybe it’s because we’ve been conditioned not to talk about money. Maybe it’s because of a nagging sense of imposter syndrome. Maybe it’s a fear of over-bidding and losing the gig or burning a bridge. Or maybe it’s the opposite, that we’re afraid of coming in too low and under-valuing our work.
“Freelancers have worked really, really hard for their rate,” explains Cindy Medina Carson, CEO and Founder of Wager.co, a new company that’s working to narrow the wage gap by pairing professionals to have open and transparent conversations about how much they make. “They feel every dollar they get.” But then why then do we find it so hard to ask for what we deserve? Medina Carson has a hypothesis: “There’s a kind of identity crisis: A fear that the dollar amount quoted becomes who you are. But it’s not. The rate you quote once is one decision you make. It doesn’t define you.” There’s a second part of her hypothesis: “People have a really hard time having honest, open conversations about money. They don’t know how. So then they don’t have the information necessary to make an informed decision.” And as any person who’s ever had to set an hourly or project rate knows, Medina Carson’s right on both counts.
In that spirit, here are a few tips, formulas, and some general advice to keep in mind when it comes to setting your rates.
Don’t Go First
If you can help it, don’t be the first person to give out a rate. Why? Quoting your rate before having a ballpark idea of a project’s budget puts you at a distinct disadvantage in both directions — you risk sounding wildly expensive or insanely cheap.
One way to get around this? If asked for your rate, come back with a polite and professional, “It varies depending on the project and scope of work. Can you give me an idea of what you’re looking for and your allocated budget for the project?” It doesn’t always work, but it’s a strong first step.
If you were researching a fair compensation package for a full-time job, or getting ready to ask for a raise, you’d do your homework and get comparable salaries. Freelancing is no different, except for the fact that it can be harder to find the information you’re looking for. “Get bold and talk to people,” says Medina Carson. Of course, she adds, you have to be careful how you go about these fact-finding missions. “Going from totally opaque when talking about salary to radical transparency is hard, you have to walk people to that a bit,” she explains.
So how do you go about these delicate conversations? First, find your people. Facebook groups or Slack channels for your industry are a good place to start, as are your peers. Medina Carson suggests asking open-ended questions like “My background is X and I’m looking for work doing Y. What’s a good range to expect?” or “I’m new to freelancing. I used to make $Z dollars, what’s a realistic goal? Any tips on pricing?” And of course, don’t just ask for help from others — offer it, too.
It’s worth noting that the point of Wager.co is to connect people for the purpose of having deeply transparent conversations about compensation. As there’s a fee for this service ($75 per call), this seems like a relevant time to note that it’s ok (and important!) to invest in yourself as part of your career growth — ”you have to spend money to make money,” as the saying goes. Investing in professional development like workshops and conferences, a career coach, a co-working space, new equipment, or a service like Wager, is often part of the path toward success.
Account For Everything — Especially Time Off
Naming a rate isn’t as simple as taking your full-time annual salary and dividing it by 52 40-hour weeks. There are a lot of other factors to consider: health insurance, vacations and sick days, admin time, the aforementioned professional development, and self-employment tax, just to name a few.
In a previous article about the guilt freelancers often battle when taking time off, we mentioned this spectacular tip from Courtney Glashow, LCSW and psychotherapist at Anchor Therapy: Divide your annual target income by the balance of weeks in the year after your ideal time off for vacation, holidays, sick days, and personal time. “I try to really take off six weeks over a calendar year,” she explained. “So when I calculate the money I want to make in a year, I’m counting the year as having 46 weeks.”
Knowing that you’ve accounted for these things helps you track your work, which will likely be a mix of high- and low-paying projects, and can alleviate any nagging feeling that you’re “aiming too high.”
Be Flexible With Your Rates
Anna Davies, a freelance writer and content consultant who’s worked independently since 2005, has these words of wisdom: “I wish I had known earlier that rates can be so fluid, depending on time involved, the people you’re working for, and quite honestly, how much you need the cash.” She suggests you take a hard look at what you’re trying to achieve as a freelancer and identify your priorities: Are you trying to build your business? Then you might take on more work at a lower rate (the same goes if you’re trying to expand into a new field). On the other hand, if you’re looking to hit a certain target each quarter, you’ll have a better idea of when to say no to a low-paying gig.
Every freelancer we spoke to for this piece agrees that their rate fluctuates based on current goals and priorities, and that it’s a constant cycle of re-evaluating. “You have to mess with your rates and projects,” adds Medina Carson. “Once a month, take out your [budget] spreadsheet. It’s a lot of self-management, but it’s worth it.”
Consider the Client
Freelancing is a business of relationships, and those relationships play a factor in determining rates. “It’s good to get a combination of different types of clients in the mix: I will lower a rate if a client has me for a contracted number of hours a month and charge more for a one-off project,” explains Davies. “There’s value in ongoing relationships.” She also considers another factor: “My rates are also determined by how hands-on a client will be. If it’s a ton of phone calls and midpoint deadlines, I’m going to set a rate higher than if I have control over my time and the client is pretty hands off.” In other words, does your client deserve a PITA (pain in the a**) tax? It’s fair game — all that micromanagement costs time and attention.
Still Lost? Try a Formula
There are a few formulas we’ve seen that suggest how to tackle setting an hourly rate. One is to take your desired and fair full-time annual salary, back it up into an hourly rate, then add 40% to cover those freelancer additional expenses we mentioned. Another is to take the annual salary you’d make at a full-time gig and move the decimal three spots to the left to determine your hourly rate. Through this method $120,000/year becomes $120/hour. Then say you want to work a total of 48 weeks a year (that’s four weeks of “paid” vacation) at 35 hours per week, that’s $120 x 35 hours x 48 weeks = $201,600 — likely enough to cover your vacation, taxes, personal retirement contributions and more. While these approaches may feel a bit reductive, they’re at least a helpful starting point.
At the end of the day, there’s no golden rule or one-size-fits-all approach to setting your rates as a freelancer. The best you can do is have informative conversations, do the research, and be confident asking for what you know you’re worth.
But remember these words from Medina Carson: “As a freelancer, you’re likely wearing 17 different hats. You’re managing the project and writing content and doing multiple roles. And you can do that all without having to be managed. You might be more expensive than the others, but you can do the work of four people. You’ll give it to them on a silver platter,” she says. “And people will pay well for good work.”