How do I set my rate?
This question is easily in the top three along with “how do you get clients” and “how do you deal with insurance?” Setting your rate can many times feel like a shot in the dark. Aim too high and you miss out on jobs, or aim to low and you die the slow death of too much work but not enough cash. The trickiest part is many times you don’t get feedback from your clients to tell you one way or the other. Am I a nieve money-grubbing fool? Or am I a cheap date to the logo party? Who knows, right? Well, there are three ways I’ve gone about figuring out this magic number.
Step 1: Know your market.
Know what your value is based on skill, experience and the market rate. Think of this as your market research part of building your business. First, talk to other freelancers and clients about what they charge and pay for similar services. Second, identify the clients that will pay what you need to make. Third, attend some meet-ups, networking events, and coworking spaces. These are good places to connect with both freelancers as well as potential clients.
Step 2: Know your business.
This is the most grown-up, big business pants approach and honestly the most responsible. Put together a P+L (profit and loss sheet) and a budget. Remember your expenses need to include ALL of your operating expenses (what you need to make your life/business work). Approach this honestly so you can truly define what your business needs to make to be legit. So, don’t cut out eating real food to save money with Ramen. Here is a link to a P+L sheet / Rate Calculator we’ve created.
Step 3: Know your goal.
One of my favorite quotes is by Zig Ziglar “If you aim at nothing you’ll hit it every time.” This comes into play when figuring your rate. If you are setting yourself up as a business then businesses set revenue goals. How else can they plan for expenses and plan for growth? You should do this as a freelancer and business owner. Write out goals and revisit them each quarter. Remember goals need to be 1. Time-based (When will you achieve said goal?) 2. Measurable (How will you measure you’ve reached said goal?) 3. Achievable (Is it realistically possible for you to reach said goal?) Write them down. Track them. It can even be good to share them with a fellow freelancer who can help you be accountable.
However you choose to define your rate it’s always a work in progress. It’s kinda fun. Test out higher rates on clients, ask questions. Also remember that non traditional compensation is also possible. (Link to my Linkedin article). More on that later. Finally, remember that thinking logically about your rate from an informed and planned place will make it easier to negotiate and get what you’re worth.
Get more insight into setting your rates! Join us and Wager for an upcoming webinar series “Freelancing: Now with More Money!”