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#FreelanceFriday: How to Set Your Prices to Maximize Income

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  • Tip Bones

It's every freelancer's dilemma: how do I set my prices low enough to beat my competition and attract new clients, but high enough that I might actually make a decent wage. This can be especially difficult if you're just starting out in the freelance market, and depending on your industry, it can be hard to price competitively. This week, I want to talk about how you can set your prices in that sweet spot that helps you get more business and grow your income faster.

First, and I cannot stress this enough: set your working hours. Not only will this help you combat burnout and stay organized and on task, but it will help you put an accurate figure on your labor. It's tempting to let your work hours be open, but putting in a set amount of hours every day is your best bet. If you're freelancing full time, I recommend an 8-10 hour workday. If you're part time, shoot for 20 hours per week. This number is the base upon which you'll build your pricing model.

Depending on your industry, you may choose to ultimately market your prices differently from the traditional per hour rate. However, I highly recommend you calculate that per hour price, and convert it to the per word, per mile, per diem, or per project price that may be more palatable to your clients later. To determine your hourly rate, you'll need to consider what it costs you to work for that hour. These expenses can be divided into three categories: facilities, supplies, and time. Let's go through them one by one.

1. Facilities

This refers to the money you spend on the hardware and physical space of your office. If you have a home office, this cost is likely pretty low. Think about what it costs to keep your office maintained. Utilities such as climate control, phone service, and internet, and physical office equipment such as a computer, printer, and fax are a great place to start. Remember: you're calculating maintenance costs, not purchase prices, especially when it comes to expensive hardware.

2. Supplies

What materials do you need to get the work done? This list includes software, or special items needed to complete a project. It could include computer software, office supplies like pens, paper, and post its, as well as specialized material, such as specific cardstock or envelopes for a client's finished product.

3. Time

Don't sell yourself short. If you're new to the game, make sure your pay is at least the local minimum wage. If you freelance full time, make it equivalent to the hourly rate required to meet the cost of living in your area. You'll see a lot of freelancers online that advertise their services at ridiculously low rates, and that can be good for attracting a large volume of clients quickly, but unless you have a plan to continue offering services to those same clients at a higher rate once you've established a rapport, it's not a sustainable pricing model.

Once you've determined your hourly price, and converted it to the appropriate unit, if your industry requires it, it's a good idea to compare your price to fellow freelancers of similar experience. If your price is far above or below the average market price, take a look at your numbers again. Could you cut your expenses? Did you miss an expense that should have been counted? This process may take some trial and error, and advertising new customer specials and bulk discounts can get you more clients than a lower average rate will. Let your work speak for itself, and don't let anyone take advantage of you to save a little money. Good luck!