Choosing to do freelance work is an important decision to make, and comes with a whole lot of questions. One of the biggest things a lot of new freelancers struggle with is figuring out how much they should charge for their services. In most traditional jobs, you’re paid a flat wage for your time, but with freelancing, you have to actually stop and ask yourself how much you think your work is really worth. This blog serves not as a set of rules, but a series of suggestions as to how you can go about this process. There is no “best method;” there is only the method that works best for you.

Generally speaking, you can charge your clients hourly, daily, or on a project by project basis. Below, we’ll look at those options in greater detail. It should be noted, however, that the discussion is often polarized into charging hourly vs by project, as charging by the day is something of an intermediary between the two.

Charging by the hour may make sense for you, especially if you are unsure how long a project may take. It also gives your client a better understanding of how much your time is worth, making them less likely to waste it with frivolous requests. Furthermore, charging by the hour allows you to complete multiple projects in a single day, as opposed to having to block out whole days in your schedule for individual projects. Charging an hourly rate is your best bet when doing something like video editing, especially documentary editing, as projects like that tend to be very time-consuming

However, there is a case to be made for charging a daily rate as well. For one thing, charging by the day looks like a better deal to potential clients. Charging $4,000 an hour for a project that could take an indefinite amount of time seems like a lot, while paying $40,000 for a project that takes ten hours to complete seems a lot safer, even if both are mathematically the same. Additionally, if one charges an hourly rate, the client may cancel in the middle of a project, meaning you will have been paid less than you expected for that day and may find yourself scrambling to find a new project if you have nothing lined up. For something like photography, an hourly charge makes the most sense. 

Ultimately though, it seems that time-based methods; like billable hours; of payment can cause squabbles between the freelancer and their client when it comes time to pay. Charging by time taken in some cases can cause apathy and may motivate some freelancers to spend as much time as possible on a project to make the most possible money. When paid by the project, people tend to work as quickly as possible, as they’ll be getting the same amount of money either way, and creators with quick turnaround rates get better reviews and may be recommended to more clients. Charging a fixed rate per project is typically the way to go and is seen as the default in many entrepreneurial communities.

Now that we’ve gotten methods of charging out of the way, let’s talk about budgeting. To figure out how much you need to charge, you need to start with your target yearly salary. It’s best to work out your current yearly living expenses, and then add about 30% (the average) to cover the additional expenses that come with freelancing. It’s best to research tax laws in your location for the self-employed, as these can vary by area, and other factors like marital status will affect them as well. 

After determining your new annual salary, determine the number of hours/days you’ll be working or projects you’ll be doing per year, depending on what form of payment you decide to implement. For this example, we’ll use hours, as that is the most granular unit of the three and therefore the clearest. When determining the number of hours you’ll work in a year, it’s important to be realistic. Odds are, part of the reason you’ve decided to become a freelancer in the first place is related to free time, so be sure to factor vacation time into your year, and seriously consider how many hours per day you’ll be able to work. Then, all you have to do is subtract your vacation time from the number of days in a year, and multiply the result by however many hours you can work per day. 

So, let’s say you allow yourself two weeks of vacation time per year, and can work 10 hours a day. 365 days – 14 days is 351 days, and 351 times 10 is 3,510 hours per year. Then, all you have to do is divide your target yearly salary by the number of hours you’ll work per year, and you’ll have the amount you should charge per hour. Charging by the day is almost the exact same process, but you don’t have to multiply the number of days by the number of hours per day. Charging by the project is a less clear-cut process, largely consisting of guesswork and comparisons; researching average rates for your craft is always a good way to go. You can also start out by charging by the hour, break the task down into smaller sections that you price individually, and then use the total price as an average rate for your services. This method is explained in greater detail here.

Finally, it’s best to look at comparable rates in the area where you live, so you can be sure your competitors’ rates aren’t too much better than your own. If you see a huge disparity, it’s probably best to take another look at how many vacation days you’re taking, or how many hours you’re working per day. You want to be cheaper than your opponents, but not too cheap. Another thing people seem to overlook is skill level. If your skill level doesn’t match that of your competitors, you can’t expect to match their prices. People will pay more for a more experienced worker. Moreover, be honest about how long it’ll take you to complete a given project, even if that doesn’t pertain to how they’ll be paying you. Remember that this is still, in a sense, a collaborative effort between yourself and the client, and you want to leave them satisfied. Try to give deadlines for long after you think you’ll be done, so the client is always pleasantly surprised. Under promise and Over deliver!