How To Set Fair Rates as a Creative Freelancer
If you’re just getting started in the freelance world, or haven’t run a business before, you may struggle to pinpoint how much to charge clients.
This is a particularly prevalent issue in creative industries where beginners are willing to work for little to no pay, in order to build a portfolio and network relationships.
“If you’re just getting started, you may be confused about what you’re worth and end up selling yourself short,” says Music Producer, Simon Moro.
“On the flip side, if you’ve been in business for a while, you may fear that increasing your rates will lead to a loss in work.
“However, more often than not, clients will understand the need to increase your rates as you become more experienced and have a showreel to demonstrate your point of difference in the market.”
Simon gives us his tips in setting rates, so you can get back to the fun part of being a creative professional.
CONSIDER YOUR EXPENSES
When setting or adjusting your rates, the first thing you should do is consider your expenses, that is, your cost of living and any costs associated with running your business.
“Add up the cost of things like rent, food, utilities, health, travel, car expenses, loans, saving goals and entertainment,” says Simon.
“What expenses exist with your business? What are your overheads? Add up how much you’re spending on insurance, subscriptions, business utilities such as phone, internet, web hosting, your bookkeeper and accountant as a start.”
BE REALISTIC ABOUT YOUR HOURS
DO YOUR MARKET RESEARCH
One of the most important pointers when setting rates is to do your market research to determine what rates others are charging in the market.
“Your competitor’s rates should be a good guideline for the maximum rate your industry is currently commanding.
SET YOUR MINIMUM RATE
Any freelancer should have a minimum rate that will ensure they’re making money once all expenses are accounted for.
Simon shares a simple formula that can be used to get a sense of a minimum hourly rate. Note this formula does not factor in tax nor tax deductions.
Rate: (Costs -AddRev) ÷ ((Hours x BR%) x Weeks) = ~ Minimum Hourly
Costs = Cost of living + Business costs.
Hours = Number of hours you can work each week.
BR = Billable Ratio. The percentage of working hours you charge for each week.
AddRev = Additional revenue/income from other sources.
Weeks = How many weeks you want to work each year.
Here is an example with a $40,000 cost, $10,000 income from another job, working 40 hours per week at 60% billable, and working 50 weeks per year:
(40000 -10000) ÷ ((40 x .6) x 50) = $25 per hour
Once you have calculated the absolute minimum starting point for your rate, compare it to your competitor research to come to a final figure.
“In the above example of $25 per hour, I’d suggest increasing it to $35-40 per hour. If your result from the formula comes to $40 per hour, you should be aiming for $45-60 per hour.
“Adding a buffer means quiet weeks may still cover costs, and you’ll also have scope for reduced rates. If you quote your minimum, and the client asks for a discount, the only way you can give it to them is if you lose money,” says Simon.
QUOTE AS A PROJECT RATE
Once you’ve set or updated your rate per hour, you can always adjust and set a day or project rate.
Having a day or project rate can make it easier for your customers to buy your services. This is much easier than a customer trying to guess the total cost based on an hourly rate. You just need to be sure you’re good at estimating your time, so that you don’t lose money on these fixed price jobs.
“For projects you should estimate the number of hours you expect it to take, and add 10% or so as you’ll want a buffer if things take longer. Then simply multiply it by your new hourly rate.
“Once you have these set, commit them to memory! The next time someone asks you for your pricing, answer promptly and confidently like you’ve been charging it all along.
“From my experience, if you’ve set your prices fairly, most clients will be happy to pay them without question,” says Simon.
Starting his professional career in 2000 and gaining further training from industry heavyweights, Simon has developed a unique, emotion-driven style. He delivers mixes that speak true to the artist's vision by pouring his energy into connecting with the artist and his dedication to the art of mix engineering.
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