How much should I charge? Six things to consider when setting your freelance rate.
November 10, 2008 | Posted by: Carl Alviani
Creative Seeds isn't primarily a blog about freelancing, but it does tend to come up frequently. Freelancing, it would seem, comes with the territory: the creative professions are drawn to contract employment far more frequently than the professional world as a whole. Whether as a sideline to a staff job, an interim between more traditional positions, or a default for recent graduates, freelancing is especially well-suited to the project-oriented, sprint-and-rest nature of the creative process.
This last category of freelancer--the recent graduate--is of special note, because newly minted designers are in the doubly daunting position having to both find work and figure out the financial aspects of that work once it's obtained. If you've just entered the creative contracting world, you're in for an exciting and often unnerving ride, and are probably drowning in questions, not the least of which is how much you should be making.
Unfortunately, unless you attended an exceptionally pragmatic school, you probably didn't get any solid advice on determining how much you're worth. Which is a shame, because it's simultaneously one of the most important and most difficult questions to answer when it comes to your early professional success. While there won't be a magic number at the end of this article, it does attempt to sweep together a few major considerations that should help you generate your own, based on much casual discussion with creative freelancers over the past four years:
1. Young freelancers and recent grads almost always ask for too little.
It's true. In dozens of conversations with friends who have taken on contract work, the majority observe that they undervalued themselves when starting out. Offering a good bargain is part of getting your foot in the door when you're inexperienced, of course, but the majority of newbies will err on the low side.
Objectively this sounds a bit strange: we're all motivated to some degree by money, so wouldn't it be in our best interest to go for broke and see how much we can get? Two powerful factors conspire to defeat this tendency. The first is inexperience; not at doing the job, but at managing an income. For recent grads who've only ever lived at home or school, or who's past jobs all came with a workplace and benefits, it's easy to underestimate how much money needs to be coming in (but more on that later).
The second is insecurity. Some students come out of school bursting with confidence in their abilities, but many don't. Even those certain of their value can find that certainty dissolving when asked to name their price. "Is an hour of my time really worth that much?" says the internal voice. Yes, it is, and here's why:
2. You can do things your clients can't.
Creative professionals mostly look to each other when gauging their ability, so it's easy to lose sight of the fact that most clients who hire you actually find your skill set kind of mysterious and awesome. Your temporary employers have money, business savvy and managerial experience, but they probably can't draw, sew, layout a page, set type, pull a CV, build a prototype, or render chrome in Photoshop. Even if you can name five colleagues off the top of your head who are better at a particular skill than you are, you got picked for the job, not them; and it's probably not only because of your sparkling personality.
Being judged by your portfolio can be harrowing, but it also has its benefits. Any client who's looked through your past work and then decided to hire you obviously liked what they saw, and expects you to produce work of that quality for them. If you can do that, they're prepared to pay for it, because they can't do it themselves.
3. Your rate influences your perceived value.
One of the best things that can happen in an initial quote process is for your client to come back and ask you to bring your rate down slightly.
This might seem counter-intuitive, but look at if from the client's point of view. If you tell your potential hirer $20 an hour is your rate, she'll say great and view every task you complete as a cheap way to reduce her workload. On the other hand, if she needs to negotiate a bit to get to a comfortable rate, she'll expect a higher quality of output. Provided you can deliver to those standards (keeping in mind number 2 above), this is an ideal place for you to be, even as a junior. Your word carries more weight, and you only get tasked with those things for which you're really needed. Ideally, your client's reaction to your first invoice should be along the lines of:: "Well, it's not cheap, but you get what you pay for."
4. You don't get to keep it all.
The mental math most starting-out freelancers do goes something like this: "I live in a mid-priced city, and most of my friends are making somewhere in the mid-30s. I just got out of school too, so I want to make $36,000 a year."
"If I work 50 weeks a year, 40 hours a week, that's 2000 hours per year. $36,000 divided by 2000 is only $18 an hour, so if I bill $22 I'm doing just fine. In fact I'll be doing great!"
The experienced freelancers reading this are probably chuckling and shaking their heads, because they know how unrealistic this is, and they did the same math themselves a few years back. To begin with, you won't be working 50 weeks a year. In fact, if you're employed to full capacity even 40 weeks a year, you're doing exceptionally well. Even staying that busy is going to require a lot of networking and marketing effort, and that takes time, so drop that 40 hours a week down to 35.
Also, your friends making $36K are probably doing it in an office that someone else pays for, using a computer that was given to them, running software they didn't purchase. They might be getting health insurance as part of the package, and retirement benefits too. Add those expenses to your column, and a $36,000 wage means more like $45-50,000 in billables. FreelanceSwitch.com has even gone so far as to make a calculator for taking all of these costs and limitations into account, and the end results can be sobering.
Still think you can get there on $22 an hour? Then consider the following:
5. An hour worked is not an hour billed.
You only get to bill your client for time spent producing deliverables for them: the renderings, the prototypes, the presentations, the sketches, the research reports. One thing young freelancers are often astonished to discover is how, at the end of a long hard day, they've only generated 4 hours worth of work for their client.
It's a discouraging realization, but really it shouldn't be; that's just how freelancing works (it's how staff jobs usually work too, if we're ruthlessly honest in our accounting). There's time spent marketing yourself, time spent learning new skills, and time spent recovering from mistakes. There's also time spent on the phone with a professional acquaintance, reading blogs and sites relevant to your field, and responding to emails from potential future clients. This stuff is necessary too, but it's not billable. In fact, a good rule of thumb is that for every hour you bill, you'll be working for two. Once this settles in, five hours entered into a timesheet on Monday doesn't look so bad.
Taking all of these considerations into account, another rule of thumb starts to emerge: the coveted Minimum Hourly Rate. While an hourly rate is a dramatically variable thing, dependent upon your field, your expertise, your location and a dozen other factors, it's safe to say that no creative professional in the US or Canada should be billing less than $30 an hour. That's a bare minimum number, for a recent graduate with marketable skills and little experience, residing in an inexpensive American city, or anywhere else with a comparable cost of living. If your portfolio makes people weep with jealousy, or you live in The Bay Area or New York City, you should be charging more.
6. The higher you start, the less you'll need to increase.
"My new jobs are paying me twice what my old ones did, but you can't just go back and double or triple your rate on a long-standing client," says Erin Rackelman, who's worked as a fashion industry marketing consultant here in Portland for the past two and a half years.
Erin's situation is a common one. New to the field, or new to freelancing, many creative professionals lowball themselves for some combination of the reasons given above, only to find a year or two later that they've painted themselves into a corner with their longest-standing clients. Building and maintaining relationships is crucial to a freelancer's reputation and income stability, so it's no easy thing to push a dramatic rate increase on an established business partner. The most common result is a split rate system, with only newer clients paying at a realistic level.
This outlines the last big reason not to go too low at first: your value and efficiency will improve dramatically in your first year. "I realized how much quicker and more efficiently I was doing things," says Rackelman, and most creative freelancers with some experience agree they can now achieve as much in an hour as once took them two or three.
photo credit: zoomar
Edited by our resident creative employment guru, Carl Alviani, Editorial Director of Coroflot.
Carl,
Your posts are always so helpful, especially as a student (junior) who hasn't entered the field yet. Thanks so much for all your awesome counsel!
Posted by: Cameron | November 11, 2008 03:16 PM