When you score your first client as a freelancer, you might think you just got lucky. Meh, I just knew someone. Meh, I was in the right place at the right time.
But then it happens again. You find another client. And another one. You start to think, hey, maybe there’s something to this freelancing thing! It’s a great feeling. And when you’re just starting out and building experience, these first few clients will help determine your rate, which can be both disappointing AND exciting. My first copywriting client paid me something like fifty bucks – big whoop. Another client said they could “only” pay me $200 for the same amount of work. I did a mental happy dance, then calmly said, “that will be fine.” It’s a roller coaster ride.
It can be hard to set your freelance writing rates, especially when you’re new. This guide will help you figure out how to do just that.
Don’t forget to factor in your extra expenses.
Self-employed folks love to glamorize our work-from-anywhere lifestyles, but working for yourself comes with a few drawbacks, too. For one, it’s expensive. Here are a few freelance expenses full-time employees typically don’t need to worry about:
- Health insurance: Yep, you have to search for your own plan and pay your own premium. I pay about $300 a month.
- Office supplies: Don’t underestimate the cost of batteries, notebooks, and other office supplies. Plus, you’ll have other business expenses, too: lunches, parking, travel.
- No PTO: Want to take a week off as a freelancer? That’s an entire week you won’t be getting paid.
- Subcontractors: Freelancers often have to hire other professionals to help with projects or ongoing work.
- Retirement savings: Okay, everyone should be saving for retirement, but many full-time employees get 401(k) benefits from their employers. As freelancers, you don’t get a savings match. Plus, you’re in charge of starting your own retirement account.
- Taxes: Again, full-time workers obviously have to pay taxes, but they don’t have to worry about paying them during the year. As a freelancer, you have to remember to deduct a portion of your income to taxes, then pay those taxes every quarter.
There’s the time factor, too. It takes time to shop for a retirement account and figure out how they work. It takes time to navigate your taxes, look for an accountant, create invoices, and so on. When you’re just figuring out how to start freelancing, it’s easy to overlook all the extra time it takes.
When setting your rate as a freelancer, it’s crucial to consider all of the above. When I worked for a technical writing firm, I was floored at how much our freelancers were paid: over $20,000 more than the rest of us! However, when you consider taxes, time, and every other expense, it’s actually about the same.
When you set your rate, understand that freelancers have to ask for more to recoup these expenses. And established clients will expect that.
Start with your “minimum acceptable rate.”
As you progress with your freelancing business, more potential clients will ask the Big Question:
What’s your rate?
Even experienced freelancers might be used to someone else determining their rate, so this question is a tough one to answer. Budgets vary; a smaller outlet may only pay you $150 for an article, whereas a more established company is willing to pay $2,000 for the same piece. This range makes it difficult to standardize a rate.
In other words, there is no magic formula for figuring out exactly how much you should charge a client. You can, however, use a formula to determine a “Minimum Acceptable rate” (MAR), the lowest rate you’re willing to work for. Over at Lifehacker, writer Tom Ewer (who coined the idea and the term) offers an example:
“If you’re already a full-time freelancer (or are planning on being one), your MAR calculation should look something like this:
( (personal overheads + business overheads] / hours worked ) + tax
Let’s look at a practical example. Say your personal overheads (i.e. the total cost of keeping a roof over your head, food on your plate, and so on) are $30,000 p.a., and your business overheads are a projected $5,000 p.a. You plan on doing client work for 6 hours a day for 48 weeks of the year (1,440 hours total). Here’s the calculation for your MAR (gross of tax):
($30,000 + $5,000) / 1,440
Your MAR (gross of tax) is $24.31. Add say 20% for tax, and your MAR (net of tax) is $29.17.”
This is a general formula, and your MAR should not necessarily be the rate you accept. It’s simply a guideline for figuring out the lowest amount you’re willing to accept–a starting point from which to answer the “what’s your rate” question.
Use the “Target Income” method.
Some people use the “Target Income” Method to determine their MAR. Over at Cashville Skyline, writer Kate Dore explains this method in detail and here’s a handy calculator that helps. In a nutshell, you determine your MAR based on your desired income.
When I got serious about freelancing, I used my former full-time salary as my MAR. I was paid about $30 an hour, so I tacked on about 20% to cover taxes. My MAR was about $35 per hour. Again, this doesn’t mean I charged clients $35/hour (in fact, I recommend NOT charging by the hour, but more on that later). It was just a starting point to figure out my number. Perhaps I should’ve tacked on a higher percentage, too, but I was just starting out, and that seemed fair and realistic.
As your business grows, you’ll command a higher average rate, and your Minimum Acceptable Rate will increase, too.
Determine your “command rate.”
It’s important to know your Minimum Acceptable Rate, but again, it shouldn’t be your target. If you want your business to grow, it should merely be a starting point from which you determine a better rate, based on your professional value.
And your professional value depends on a lot of factors, but there are two basic numbers that can give you a ballpark idea of your value: your Command Rate and your average rate.
Your “Command Rate” is your earning potential–the highest rate you’ve been able to command thus far. You won’t always get this rate, and you shouldn’t turn it into a ceiling, but it helps to know how much you can command. If a company is willing to pay you a large sum of money for your work, that increases your overall professional value. It doesn’t mean you should turn down any writing project that doesn’t pay $1,000, but the fact that you can command big numbers means you have strong professional value, and you have to adjust your rate accordingly.
You want to be realistic, too, though, and that means you have to consider what you’re paid on average for your work. Your professional value is a balance between your earning potential and how much clients are actually willing to pay you. When I think about my rate, I typically take the average rate I’m paid for similar work, then tack on about 10% of my command rate. There might be a better formula for this, but this is what I use. It ensures you’re being realistic without remaining stagnant. It doesn’t necessarily stop there, though. There are other factors you should consider before determining your number.
Your Experience and Skillset
If you can quantify the value you bring to the table, you know exactly what a potential client will get from your services, which makes it easier to put a price tag on your work.
Workers should be paid according to the value they bring to the table. For example, when I started copywriting, I learned SEO (these days, it’s a must, but back then, it was a relatively new concept). I read books, I implemented strategies, and those strategies worked. I now had a new skill under my belt. My average rate and my command rate didn’t apply to that new skill because, well, it was new. I felt comfortable increasing my rate based on my new skill.
The bottom line is, If you bring added value to the table, it might be time to ask for more, despite your average rate or even your Command Rate.
Another factor that could increase your rate? How in-demand your services are. How many other freelancers can do what you do?
Writers are easy to come by, for example, but knowledgeable writers are a little more difficult to find. And it’s even harder to find knowledgeable writers who require very little editing. When demand for anything is high, prices go up, and your rate is no exception. And don’t forget about the clients you have to turn down. If you’re so in-demand that accepting one client means refusing work from another, you want to factor that into your professional value as well.
It’s tough to determine exactly how much more to ask for based on your demand and skills, though. It really depends on the industry and your level of experience, so it’s time to do some research and compare.
Compare, But Don’t Be Afraid to Negotiate
Once you know your MAR and your professional value, you want to see how much more you should charge based on your skills, experience, and demand.
Sites like WhoPaysWriters and Study Hall can help you see what other writers are paid, based on the publication. And Glassdoor can help you see what a specific company or client pays their workers. You can talk to other freelancers in your industry, too. If another writer has the same skill level you do, they can give you an idea of how much more you can command.
It’s important to have the support of a writer’s group or network at any stage in your career, but especially when you’re just starting out. You can get their feedback on specific gigs and ask for advice on what you should charge, given the situation. You can also swap job postings and ask them to look over pitches or queries. Your local library or bookstore might also have a regular writer’s meetup group. Following and engaging with other writers on social media is a simple way to start networking.
On the other hand, other writers may be charging much less than they should be, so you want to consider that, too. Don’t be afraid to negotiate more. According to Clarke University, most employers can likely budget 15-20 percent more than they initially offer. Of course, this is just a generalization, but it serves as a decent guideline for raising the bar.
If you want to be successful as a freelancer, you have to learn to raise the bar. You can’t just settle for your Minimum Acceptable Rate or your average rate. You have to push for more to increase your professional value.
Consider benefits beyond money.
Of course, not every client will be able to offer your ideal rate, and that doesn’t necessarily mean you should pass on them. If the client offers other benefits, they could be worthwhile. Here are a few perks you may want to consider.
Exposure: I once wrote for a client that only paid my Minimum Acceptable Rate. They were actually my lowest paying client, but I did it for the byline–they looked good in my portfolio. It’s worth noting, though, that I don’t think you should ever work for free for exposure. However, a high-profile client that’s still willing to pay its workers may offer a decent exposure benefit, and that can lead to other gigs. Or they might link to your blog or business, which is another perk.
Experience: If you’re testing out a new skill, it can help to cut your teeth on a client even though the pay might not be stellar. When I learned SEO for example, my first couple of clients didn’t pay for this new skill, but I used them to prove my ability.
Learning a new skill: Similarly, the gig might allow you to learn a new skill that you can monetize later. It may provide you access to certain resources or materials that can help you hone that skill.
These are just a few examples. The point is, your rate is obviously important to your professional value, but a client with a smaller budget might still be worthwhile. Over at Young Adult Money, I discussed my Three-Question System for deciding on gigs when I’m on the fence. In short, I ask myself if the job will be fun, lucrative, or educational. If I can’t answer “yes” to two out of three, I don’t take the gig. If a client can’t offer a lot in terms of pay, they should at least be fun or help you learn something new.
Avoid per hour rates.
When you figure out your rate, it might be a time-based number, like $50 per hour. That doesn’t mean, however, that you should charge the client according to your time. In fact, you shouldn’t charge based on time. You should charge based on the product you deliver.
Years ago, a client decided they wanted my articles to be half as long. According to their logic, I should thus be paid half as much “because it should take you half the time.”
Word count is just one of many factors that determine how long it takes to write something. There’s also research, outlining and organizing–in fact, sometimes it actually takes me longer to write a shorter post!
Another client wanted to pay me $50 for a post because “it shouldn’t take more than an hour to write this.” In both scenarios, I kindly explained to the clients that, yes, it might make sense that I should be paid less for a shorter post, but I’m paid per product, not per hour.
The thing is, time and value are two totally separate metrics when it comes to your business. As a business owner, efficiency is everything. As a freelancer, when you’re paid per hour, you’re punished for being efficient. When I hire subcontractors, it’s none of my business how long it takes them to do their work–all I care about is the value they bring to the table. Did they create an awesome batch of graphics for my client’s video? If so, I don’t care if it took them an hour or an entire day; that’s for them to figure out.
If the client wants to plug in some arbitrary “per hour” or “per day” numbers for the sake of invoicing, that’s one thing. But when you work for yourself, you have to think of your work as a business. Businesses aren’t typically paid for their time, they’re paid according to the quality of their deliverables. I realize it’s not always easy to call the shots, but it’s an important point to consider nonetheless.
Just like there’s no blueprint for launching a successful freelancing business, there’s not a single formula for figuring out what your rate should be. Your business is based on many different factors, and you learn to be resourceful and take advantage of every opportunity to grow. That said, there are some guidelines for figuring out how much you can charge and earn as a freelance writer, and these steps should start you in the right direction.