Keys to Setting Your Rate Based on Experience
Credit: Suljo on Photodune
There is no one set strategy for setting your rates, which is why the process can be so confusing for freelancers. Basing your rates off regional competitors’ prices is a very smart tactic, but I think many freelancers forget about something important when putting together rates, and that is their value.
It seems that so many of us are quick to assign the highest price we could be making–but that’s not necessarily the most practical strategy. Why? If you have little experience and a non-brag-worthy portfolio, why should someone pay $100 an hour to hire you?
Instead of pricing yourself at a point that seasoned freelancers are getting, there’s nothing wrong with pricing yourself at a competitive wage that reflects your skill set. You can still make a good salary, plus you won’t be excluding the opportunity to build your skills and your portfolio.
Wait, I thought I was supposed to raise my rates!
Instead, pricing yourself moderately will attract strong clients and give you the chance to build your portfolio.
This may sound a little opposite of what many of us are told: raise your rates, raise your rates, raise your rates. While increasing your rates is necessary to ensure you can cover your costs and turn a profit, you may limit your potential to reach out to more clients if you are only taking the highest-wage jobs.
I’m not saying to work for $10 an hour. I’m not saying to write for content farms or design for logo farms. I’m not saying to work for lowest-bid type of work.
Instead, pricing yourself moderately will attract strong clients and give you the chance to build your portfolio. You may think raising your rates will only attract quality clients, but that’s not necessarily the case. While it will weed out those that try to nickel-and-dime you, it doesn’t guarantee that you won’t encounter a bad client. Those, unfortunately, are everywhere–even those that pay $250 an hour!
Won’t I have to work less if I price my services higher?
You may have to take more jobs by charging a moderate, practical rate–or not. If you’re working for the highest-wage pay, and clients don’t see the value in paying you top dollar for you, they’re going with the guy who is priced at a more affordable rate or someone that has the experience and sparkling portfolio…either way, you are not getting the job. You may get some jobs at that higher rate, but without demonstrating your value consistently, you won’t get those opportunities consistently.
The guy that has the top portfolio and charges top pay along with the guy that is working his way up and charging moderately are likely getting more work, and possibly more money in the long run.
The guy demanding the highest wage without experience and clips to back it up isn’t showing much value and clients will pass on that. Until you can show that you’re worth the highest wage without a doubt–and get into that circle that pays top dollar–you may want to reconsider the notion that by simply charging more, you will make more.
How can I attract clients using the rate I set?
We all want to make the highest wage possible, but there are ways to still make out smart. For instance, my hourly rate is typically lower than what I make on projects because I charge a project fee. That rate helps me to attract clients and show them what I am willing to work for, but I typically wind up making more–even in the event that I do work at an hourly rate. It shows them where I stand, and what I think is practical. When they see that I’ve been working for a few years and have a strong set of clips, they see my value.
How do I set a practical rate and still make good money?
A great way to find out what a moderate rate in your field would be is to look up the going rates that competitors–and local jobs are paying. You can also look at what creative agencies are paying. It just may give you a reference point to see if you are underpricing or overpricing. Then you have to add your value–what do you bring to the table that the guy charging $50 an hour more doesn’t? Is your portfolio strong–how long would it take to get to the point of that experienced freelancer you admire?
Don’t just look at the person in your field you admire most–that person may have a great record of clips, but if you don’t have that experience or connections, you probably don’t hold the value that person does…yet. It doesn’t mean that you don’t have value or that your value isn’t always increasing!
Just because you are in business doesn’t mean you don’t have to build your business. It takes time. So develop your skills and demonstrate your value before you jack up your rates. When it’s time to give yourself that raise you’ve been wanting, you can be sure that you deserve it and clients will feel the same way.
Photo credit: Some rights reserved by Suljo .
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Yes, all this is true.
But the most important advice to take away is this:
At some point, you have to be brave, take that leap of faith and raise your rate.
So it goes…
-dp
All my clients didn’t mind when I raised my prices, I suppose I was under-charging before.
Good post but how do you know what your competitors or other people in your industry are charging in order for you to make a comparison to raise or lower your prices?
I’m from the UK and no-one puts their rates on their websites or talks about them on social networks so how can i find out?
Then try:
Your_Yearly_Salary_from_previous_job / 1000 = Freelancers_hourly_rate
This approximately works in the UK, but it probably can be applied in other countries too.
Example: Your Salary is 40000 GPB per year. Then
40000 / 1000 = 40 GPB / h
This is what worked for me: Start from a higher price – for example 60GPB/h. See the response. Decrease by 5GPB, see the response. Do this couple of times and soon you will know how much you can ask for – or how much people are willing to pay you.
Makes sense but surely there must be a better way?
How many potential jobs could you loose in financially unsure times such as these, just because you’re experimenting with your hourly rate?
There must be a more logical and calculated approach that doesn’t involve all guess work!
@Jack you shouldn’t lock yourself to a single unchangeable rate.
If you don’t have enough work, you want to lower your rate. You need to have a minimum, but other than that, you want to react to the market conditions.
On the flip side, if you constantly reject projects because you are busy, then you want to raise your rate. This will let you build up a set of potential clients that are willing to pay your new rate. You can send them a new message as your availability situation changes.
@Freddy
You’re right and that makes sense.
I’ve been freelancing full-time for just over a year now and so far i’ve been pleased with the number of clients and the type of clients i’ve been getting but obviously, with experience and time, my basic rate should increase.
I think that the current economic climate can make people extremely edgy around prices and even if you’re just a few £s over what they wish to pay per hour which can lead to possibly hundreds of £s per project, you can be rejected.
A decent system that is essentially an informed calculator that could be finely tweaked should give a fairly good solution but in the meantime, a site or anonymous survey of hourly rates vs experience that includes the UK would be highly beneficial to all, wouldn’t you say? You can’t really react to the market too much if you don’t know what the going market rate is.
I think that making informed, calculated decisions are essential, not try this and then try that in difficult financial times.
@jack
Yes, the more information the better.
To be clear, I only mean to react to the subset of the market that affects/concerns you. If you look at the global odesk market place, you can see how the rates vary like crazy.
You can also see the average rates for something as broadly categorized as a c# developer, is very very low if you don’t restrict it by country. I compete on that market place, and my current rates nears 4 times the global average, everyone has been happy so it’s all about the value x hour they get.
Can one provider add 4 times the value x hr than another provider, you bet. Experience is obviously mixed in there, but the difference in value can be as big in peers of the same experience in terms of years.
Freelance rates > Job salary.
I hope we quote initially as a TEAM for a base level and later on finalize the customization and add ons extras depending on the strategy else it might become price skimming which is illogical where there are numerous buyers and sellers to reach the right perfect mutual balanced rate?
I guess starting with a moderate hourly rate & increasing it as your portfolio becomes more rad is the best option. It’s definitely working for me.
I guess I was starting from a below average point but you’de be surprised by how many clients are willing to pay what you think is “a lot” without blinking.
Yet others, complain regardless of the sum.
It’s all about filtering projects.