As a freelancer, you have the freedom to choose your prices. In reality, it's one of the best aspects of working for you. Even so, determining the costs may be challenging. Overall, you deserve to get paid what you're worth, but you still want to make sure you're setting your rates wisely. You will build and show the prices to prospective clients in several ways.
Even there's the nagging doubt about whether you cost the correct price. Knowing how to set your freelance prices wisely is critical in the search to provide your customers with the value they need while still allowing your company to flourish. Today, I'll give you some helpful hints for getting your prices exactly where you want them.
Let's get this underway!
Choosing Your Annual Income Target
The method of determining your freelance prices begins with a single question: How much money do you want to make?
However, many considerations go into addressing this issue, and you must bear these in mind while developing your calculation. If you want to raise more than you do at your new 9–5 job? While this will seem to be a reasonable rule to adopt in determining your target annual revenue, keep in mind your cost-of-living expenditures as well. This is the best position to begin. Pay attention to the information! Start by measuring the cost of living by adding up expenses such as rent, Bills, and Utilities.
Once
you've determined how much each of these expenditures would cost you each
month, factor in how much money you'd prefer to save each year. This would send
you your target annual salary, which would be helpful when determining your
freelance prices.
Time is money
It
does not occur to you to predict how much time you would waste in front of your
screen operating as a freelancer, but as the adage goes, time is capital. As a
result, you must determine how much time you can realistically expect to spend
operating.
One
of the most significant advantages of working as a freelancer is arranging your
hours and operating according to your timetable. What isn't so cool about it is
that time will get the better of you, and you can find yourself running almost
24 hours a day to meet deadlines if you're not cautious. When determining how
much time you can afford to live, one can weigh options including;
Mental Health Days (Believe me, all freelancers deserve them)
Number of days you are willing to work (whether you work only on
weekends)
Number of days you free
If
you've determined how many days per year you'll spend living as a freelancer,
it's time to refine your focus and choose how many hours per day you'll work.
Assume I decide to operate about 245 days a year out of 365. With this detail,
I can calculate that I'll spend approximately seven hours a day running. Two
hundred forty-five days of labor at a rate of 7 hours per day equates to 1,715
hours worked a year.
Besides,
as a freelancer, each hour spent in front of a screen does not always equate to
compensation. As a freelancer, you are your manager, which ensures you are
still responsible for all of the activities associated with operating a small
company. Calculate the amount of time that company administration activities
such as reviewing email and making a cold pitch would take for every specific
day. Subtract these activities from your running total until you've produced an
estimation for them. This will calculate the annual time commitment.
Calculating the Costs of Doing Business
Money
generates expenses; it's an unavoidable reality of life. As a consequence, it
is vital to understand the distinction between annual sales and annual gains.
Having a business incurs certain costs. This is the first costs to consider
when determining the freelance rates. Overall, unless and unless those costs
are deducted, you would not see a profit.
But what are business expenses? There are many costs, varying from the large, such as the computer you use and your office, to the small, such as task scheduling software and web hosting. Smaller costs can seem negligible at first, but they may quickly add up.
Self-employment taxes and the burden of self-insurance are two more important areas of business spending to include. In general, freelancers should set aside roughly 25% to 30% of their taxable income to prepare for tax season. Unfortunately, as a freelancer, you would be liable to both payroll and self-employment taxes, and the expense will cover both.
There
are many things to consider before paying for your health insurance. Except
with the most common plans, health care may be prohibitively expensive. Earn a
Living the comprehensive post-Health Benefits for Freelancers: 12 Viable
Options contains helpful information about how to plan for health insurance as
a freelancer. It could be beneficial to you!
Take into account the Hourly Rates
Now that we have defined our annual target sales, the costs of doing business, and our yearly expenditure of time, it's time to get to what we all came for: measuring your hourly freelance prices. Doing this is straightforward enough and involves the use of a reasonably easy-to-understand formula:
Target
annual profits + Costs of doing business / Annual Billable Hours Let's look at
a case. Let's assume that our annual target revenue is $60,000. Next, we have
identified that our cost of doing business is approximately $9,500 a year.
We'll take both of these totals and sum them up, figuring up our annual profits
of $69,500 a year. Next, we can split this amount by our calculated annual
billable hours of 1,500 hours after subtracting the hours spent performing
company administration activities. This total averages out to $46.33 per hour.
This suggests that you'll want to charge each customer a minimum of $46.33 per
hour to reach the taxable salary. Any situation in which you bill a customer
higher than the minimum hourly wage is merely icing on the cake, further
boosting the annual target revenue.
Bear in Mind the Worth of Your
Services
Although
we've offered a minimum hourly rate, it's crucial to note that not all
freelance jobs will rely on hourly rates. How came it? Charging an overtime
wage is beneficial while it takes labor. If not, you put a severe limit on one
thing: time. There are only so many hours in a year to gain and limiting your
wages to hourly rates drastically restricts your earning ability.
If you realize that the bulk of freelancers work less than 40 hours a week on average and that 79 percent of freelancers are making more money within one year of leaving their 9–5 jobs, you have to wonder how it's done. Stated, the alternative to this drastic rise in pay without further working hours is fixed-rate jobs. Fixed-rate roles rely on reminding the client of the project's cost, not on the period taken to complete it.
The
real value of fixed pricing is how plans are distributed to consumers. Consider
the probability of a single worker valuing $125 per hour. When you present this
to a client, they'll wonder if it's worth paying $125 per hour for the work.
Overall, they are inexperienced with the work method and may not realize how
long it will take them to complete the task.
If,
on the other side, you deliver an offer saying that the job would pay a flat
rate of $375, the buyer is much more likely to approve it so that they know
just how much they'd owe upfront. In one case, consumers pay what they think
the time is worth. On the other hand, they pay your operation's whole expense.
This also encourages you to start paying a premium on the same workload.
Therefore,
it is necessary to keep your commodity in mind while setting your freelance
rates. Ultimately, you decide your costs and worth of your capital and
electricity. Remember not to undercharge the clients for fear of asking
anything from them. How much money you make as a freelancer (and therefore your
success) depends on your ability to consider your services' value.
Use
the specifics in this article, follow the five steps described below to
establish freelance rates, and continue with confidence. Confidence is critical
in getting the gigs you need as a freelancer. If you're confident of the value,
the customers will be too.
…….