How do I set my rate for freelance work?
April 25, 2022 1:31 PM   Subscribe

I'm being asked for my rate by a small agency I've done one project for, which was a per-project quote. For the next project they want my hourly/half-day/full-day rate. I'm at a loss for what to tell them, because the answer is pretty situational.

I've been under-employed during the pandemic, but work is picking up. I did a job for this agency that was supposed to be video editing, but when we got the client's video it was mostly useless due to near total irrelevance to the narrative they wanted to create, compounded by very poor technical quality. So it ended up being a motion graphics job which took way way longer to execute than it would have if it were mostly video editing. So broken down hourly I made about $15/hour. The agency and the end client were thrilled with what I turned in, so yay.

The next job for these folks really is video editing. The agency shot the video, I've seen it, it's very nice. The piece will be a compilation of 9 interviews of about 3 minutes each, with an intro and outro. They're using the same graphics package as last year's version. So it's a pretty straightforward job.

The agency guys are pretty young, but they're serious. They are in a smallish city in an east-coast state, so their ambient prices and cost of living are lower than a metroplex like LA or NY. So I'm willing to lower my rate a bit to work with them. They have some plans and contacts they're working with to get into some advanced technology, and that aligns very well with skills I want to develop.

But what is my rate? It's actually whatever I think I can ask for. I just finished a job for a different agency with a giant tech corp client, and they thought $80/hour was no big deal. I worked on a TV show a few years ago where I made $35/hour and was happy to get it. I've done a lot of per-project work which really never works out to be a good rate, but I was hungry for work so I took it.

People aren't exactly lining up at my door to hire me, which is mostly my fault because I lack confidence - I don't have a cohort of colleagues with similar skills that I can talk to about the biz so I haven't really developed a sense about how my skills position me in the market. I'm also more of a generalist, and I haven't had any success applying for specialist positions (which is what all the positions are).

I know the answer is "get as much as you can!" but I don't know how much that is unless they just tell me what they can afford. Which I don't think will happen.

I know this is an age-old question and is probably unanswerable, but if anyone has any tips or processes for thinking about this kind of thing I'd be grateful to hear about them. I'm not a hustler and I tend to sell myself short, and I'd really like to not do that.

So to be clear, I'm specifically looking for advice on a rate for this young agency in the smallish city. I'd love to get $50/hour but I feel like that might be more than they can afford. I have a much better sense of what I'm comfortable asking for from a bigger player who has clients with lots of money (I probably still leave money on the table tbh, but I'm not really worried about that atm).

This agency's CFO happens to be a friend of mine, but she's really pushing me to just name a rate.
posted by under_petticoat_rule to Work & Money (15 answers total) 5 users marked this as a favorite
I'm not in your field (I'm a CPA), but when I started my solo practice, I found it very helpful to work backwards to this number i.e. how much $ per hour would I need if my goal was to work x hours per week, y weeks per year? I started with the bare minimum rate - paying for rent, food, insurance, etc. - and then went from there.

I'd worry more about what you can afford and not what the client can afford (most of my clients don't even look at the bill and I'm working with tiny companies). Even if you aren't planning on being a full-time freelancer, your rate should be what you could live on if you were a full-time freelancer.
posted by dngrangl at 1:40 PM on April 25, 2022 [5 favorites]

I have always avoided providing a daily or hourly rate, except for training programs, because it seems to invite the client to nickel-and-dime you by asking you to justify every minute you spent on the project. Instead, I've offered a project-based price and specified that it is a maximum; if the work takes me less time or proves easier than I anticipate, the price will be lower, but if it takes more time or is more difficult then I eat the difference. Clients have always been happy with that because I guarantee they will not go over budget.

If you can't wangle out of providing a time-based rate, though, be sure to mention that you have set it especially low for them as an introductory price, in anticipation of having a long relationship with them through multiple projects.
posted by DrGail at 2:22 PM on April 25, 2022 [3 favorites]

Best answer: To me, $50/hour sounds quite low for a freelancer, especially for video editing. But I'm in graphic design rather than video, so I don't quite know your market.

If you're afraid that $50 might scare them off, you could say something like, "My rate is $50/hour, but if that's outside your budget, I'm happy to talk about ways we can trim those costs."

My 'trick' for figuring out what to charge as a freelancer, is to take a look at what someone who is on-staff would make for that job (so in-house video editors), and charge double that hourly rate. You should be making more as a contract worker because you're paying your own taxes; you're buying your own equipment; etc. It's a savings to the company who hires you because they don't need to train you; they don't pay employment taxes on you; etc. They don't need a full time video editor, which is why you're an asset to them - they can call on you just when they need you.

In the future if you feel you might undersell yourself on a per-project cost like the one with crappy video, be sure to include some caveats in your project quotes like: rate may be adjusted upon receipt of files, or rate based on high-quality video content provided. Additional hours above XYZ will be billed at X per hour.

It's still ok to adjust your rate up/down depending on your clients. I've got about a $35 range between my highest and lowest paying clients. The higher paying clients help me to be able to continue working for non-profits, for example.

I'd also recommend seeking out some groups of colleagues. There are some design guilds for example that I belong to, where I can throw out a question like this, and get some ideas. You might find a similar group on Facebook or Reddit, or look for a professional association of video editors. Push past any feelings of imposter syndrome and remind yourself that everyone started out somewhere. Good luck!
posted by hydra77 at 2:35 PM on April 25, 2022 [5 favorites]

one factor is: how long is the job expected to take? i haven't done short-term freelance engagements but have done 6-month & 12-month+ body-hire contract roles, for longer term contract roles the effective daily rate can a bit higher (20%? 30%?) than the value of a top-end corporate salary & benefits for doing the same work. for short-term projects of a few days or weeks the daily rate should be _substantially_ higher to compensate you for more of your time being spent on unbillable work such as wrangling clients & doing the initial scoping/estimating/contract negotiation etc

another factor is: supply and demand. if you are getting swamped for requests for work, you could raise your prices until enough of the demand disappears and you are getting a manageable amount of work at a higher price point

another factor is: how much do you need the work? if you can afford to lose the work then you can be a bit more experimental or optimistic around pricing and see what happens.

yet another factor is: if your client is an agency, they might take whatever you quote and add a 30% markup and bill it to their client. if their client is a large corporate and not very price sensitive, then maybe you are in a position of not being nickle and dimed...

i speculate that giant tech corp clients might have been comfortable paying some multiple of $80/hr . you could try pitching $100/hr to the agency and see what happens. if there is any pushback, you could talk about how you're set up to do the job efficiently and complete it in less time than someone unfamiliar with their situation & needs...

i reckon getting paid a daily rate removes a lot of your risk around the client not knowing what they want or not being able to competently deliver inputs required for you to complete some deliverable, compared to you estimating and quoting a fixed-price per project.
posted by are-coral-made at 2:42 PM on April 25, 2022

Best answer: I have two rates:

1) My desired annual salary, divided by 52, divided by 40, to get my hourly rate. Then I add $15/hour because running freelance gigs costs me in accountant-having, time spent doing side-work, and general issues like needing to maintain professional subscriptions that I otherwise would not have.

2) My Go Away Rate, which is kind of astronomical and is the rate I quote when someone wants me to quote, won't take a polite no, and ensures it's worth my time to do the work. This rate is $25/hour more than my regular rate.

Don't quote a "day rate." Quote an hourly rate. If they want 8 of those hours they can do the math.

Agencies routinely -- ROUTINELY -- make a 65% margin. They can afford to pay you. Don't undersell yourself.
posted by Medieval Maven at 3:05 PM on April 25, 2022 [1 favorite]

Best answer: I'm in a creative/tech field, and dngrangl's plan sounds about right.

One sort of rule-of-thumb I've heard in my line of work is "figure what you would need to get per week if you were employed full time, and then double it." (Because of course as a freelancer you're not going to get 40 hours a week, 52 weeks a year, so you need that extra dough as a cushion for when you're between gigs, plus you gotta pay taxes & build retirement funds with no employer matching & etc etc etc.)

This does assume a certain amount of flexibility and negotiation - if you know the client has deep pockets then feel free to shoot for the moon, and if the potential client balks at the price you can drop it a little without making the gig not worth your time. (I also definitely agree with DrGail's advice about presenting a lower price if they ask for it as a sort of "special introductory offer" kinda thing.)

I'd love to get $50/hour but I feel like that might be more than they can afford

Bluntly, you won't know until you ask. So you might as well ask.

Unless you somehow have access to their accounting, you have no real idea about what their financials are like - trying to sort-of-vaguely-guess by "well, they're East Coast, but not NYC, but this, but that, but the other . . ." That's nothing but second-guessing yourself.

And on top of THAT, there are definitely quality-of-work intangibles involved. It sounds like you already pulled off a minor miracle in your first project, so as far as you know they think $50/hr would be a bargain for YOUR skills, even if the going rate for their area would be $25 to $35. It's possible they'll just go radio silent if your quote is too high, but if a client wants to work with you, IME they're almost always more than willing get back to you with a counter offer if the initial quote is higher than they are hoping for.
posted by soundguy99 at 3:06 PM on April 25, 2022

I found it very helpful to work backwards to this number i.e. how much $ per hour would I need if my goal was to work x hours per week, y weeks per year? I started with the bare minimum rate - paying for rent, food, insurance, etc. - and then went from there.

I'm a graphic designer (and have worked for myself for over 20 years). I totally agree with dngrangl on the above.

A phrase that I've found helpful is "what's your budget on this project?" That pushes back on them to say how much it is worth to them.

Remember, they aren't doing you a favor hiring you to do this work. It is a commercial exchange. You are providing services they need. Because they already like your work, you are coming at this in a position of strength.

Generally when my rate is more than a client wants to pay, they don't just disappear. They ask if I'm willing to go lower for X, Y or Z reason. Don't be afraid to charge what you need. (Also clients that are a pain in the ass about rates are often a pain in the ass throughout the whole project and end up more trouble than they are worth.)
posted by mcduff at 3:11 PM on April 25, 2022 [2 favorites]

I forgot to mention, just in case it helps: When I realized I was undercharging my primary client by a lot, I asked for a 250% increase with little preamble or explanation. What I got was a 200% increase for about four months, with the full increase taking hold with the new year's budget. Easy peasy. I bring that up because it is so so easy to underestimate the value a freelancer brings to the client. To paraphrase Martin Mull, you're there when they need you and not when they don't. Having expertise on demand is very very valuable to a client. Don't sell yourself short.
posted by DrGail at 5:21 PM on April 25, 2022 [2 favorites]

Best answer: Building on what several people have said above:

To calculate your minimum rate, figure out what you can live on as your base hourly rate then double it. You have to pay taxes that salaried people don’t. Plus you have all the administrative overhead of running an indie business. And need to sock some money away for those weeks when you can’t find work. (Even if some of these things aren’t true of you, they will likely be true of any freelancers they hire.)

If you are worried about going over their budget, I see several options:

1) when feeling out a client I’ll often say something like, “My rate is $XXX, but longer contracts and fun work can bring that down.” That gives you both some negotiating room.

2) Since they’re still growing you might try, “My rate is $XXX but i really want to help you grow, so if that’s out of your budget let me know and I can work for less and grow as you do.”

3) Decline to name an hourly rate on the basis that they’re still growing and knowing exactly how much a project will cost will help them budget.

4) Lie a bit. I’ve never had a client look at my timekeeping. My time-based bids are usually something like “$XXX an hour for a maximum of XXX hours.” Decide on your flat rate, quote them an hourly rate and then only report the hours that match your flat rate. (Minus a little bit.)

And last of all remember it isn’t the agency paying you. It’s the agency’s client.
posted by Ookseer at 6:08 PM on April 25, 2022

Best answer: Calculations above are really useful. Please consider:

- I did a job for this agency that was supposed to be video editing, but when we got the client's video it was mostly useless due to near total irrelevance to the narrative they wanted to create, compounded by very poor technical quality.
- The agency and the end client were thrilled with what I turned in
- This agency's CFO happens to be a friend of mine
- People aren't exactly lining up at my door to hire me, which is mostly my fault because I lack confidence
- I'd love to get $50/hour

You've more than proven yourself by fixing that mess for them. Doing so ate into your rate, but saved their bacon with their client. Please have more confidence in your work and ask for at least $60-$70, which is a discount from your $80/hr clients. If there's still pushback, you can be open to negotiation and still meet your $50/hr goal. You'll also have a bit of cushion built-in the next time you're thrown a messy, intensive job by this agency, which will happen, because they're "this young agency in the smallish city" and they know you can work a miracle.
posted by Iris Gambol at 6:18 PM on April 25, 2022 [1 favorite]

I have a consultancy business, so feel your pain. It took me a while to get used to valuing myself far higher than I thought I was worth because I also suffer from lack of self-confidence.

If you don't think you're worth $50 an hour, do some secret squirrel research by contacting competitors in a way they don't know who you are and ask for their hourly rate. You might be surprised and don't use the excuse that they can charge more because they're better known. You're worth every bit as much as them.

When I'm asked to quote an hourly rate, I try and avoid it but offer to give an estimate of what the total is likely to be. If pushed, I say 'well my usual rate is $x per hour, but I do only charge you for the actual work I do for you and, if I've previously done something that I can re-use for you, I don't charge you for that' (because lots of consultants in my area charge a lot for work they've already been paid for and re-use with a few changes). I also let people know that, for larger or on-going work, I offer a discount. Every time I do a job for less than my 'usual' hourly rate, I calculate the invoice based on the 'usual' rate and calculate the discount so they can see what a great deal they're getting. Even when I give a fixed estimate, I always invoice slightly less for the same reason.
posted by dg at 9:26 PM on April 25, 2022 [1 favorite]

Lots of good advice up there. “Double the hourly rate of a salaried position” is often a good rule of thumb to start. It should feel like a lot, to you, as a solo person who isn’t used to dealing with company overheads, taxes, profit margins, etc.

But what a client can pay varies a lot, and how much you want to work for a particular client on a particular project also varies, so even once you’ve set your standard rate, the “what should I charge for this project?” question never entirely goes away.

As someone who also isn’t very confident, but has been freelancing for twenty years, I still think of this that anildash wrote in 2005:
Slap the client in face.
Tell the client your hourly rate.

If the person looked more shocked, horrified, offended, hurt, saddened, or wounded by the slap in the face, then you are still pricing yourself too low.
That’s difficult, even metaphorically, but it’s something to aim for! You say…
I'd love to get $50/hour but I feel like that might be more than they can afford.
…and I know that feeling well, but that should not be your concern. Your rate is your rate. You tell them your rate and see what they say. They will either say “great”, or “that’s a bit much” (at which point you can decide to offer a lower rate if you want), or “no thanks, bye”.

If you think an immediate “no thanks, bye” is a possibility and you really want the work, then sweeten the initial offer by saying there’s some flexibility in the rate for longer contracts, or charities, or art projects, or whatever criteria seems suitable.

If/when you do work for less than your standard rate, always mention on your invoice that the rate you’re invoicing is an x% discount from your usual rate of $y, as a reminder that this isn’t necessarily the way things will always be. It’s easy to offer a discount for a good reason to a client, who becomes a repeat client (great!), and then it can feel difficult to increase your rate after that, even if it’s only up to your standard rate.

Charge what you’re worth. It’s your time and you only have so much of it.
posted by fabius at 6:37 AM on April 26, 2022 [2 favorites]

Best answer: Do not discount the value of your work because of fear about what a potential client may or may not be able to afford. This is a business issue and y’all are grown-ups. So don’t back into the deal by being apologetic to begin with. If you don’t have a lot of business now, all the more reason not to discount your work. Moreover, clients tend to value consultants who charge more. Your job is to ask for what you want. The client’s job is to decide if they are willing to pay that. If not, they will negotiate. The good news is that you are not attempting to sell yourself because the client already knows your work and likes it. So you’re starting from a position of strength.

You did a good job! You have what the client needs. Don’t screw yourself over by offering a discount at the very beginning. Again, it’s not your job to worry about whether or not the client can afford your rates. The client can worry about that. You may not get what you initially ask for but that is OK as long as you start high enough. I’m with Iris Gambol. Ask for $60 to $70 an hour And and then just be quiet. Just listen. It’s possible that all you will hear is something like, “sounds great!” If you hear something else, like “do you have any wiggle room,” you can drop down a bit. You can do this, you just have to practice. Good luck!
posted by Bella Donna at 12:42 PM on April 26, 2022 [1 favorite]

Wait, I just realized that you had a client that paid you $80 an hour. Ask for $80 an hour, your going rate. You know what the job is, it’s straightforward and it won’t take long so that won’t be a ton of cash for them in the end. I hope you are asking for a minimum as well.
posted by Bella Donna at 12:47 PM on April 26, 2022

I included a post about this subject on my now stale and defunct blog Glimmering Ingots. Breaking the time barrier is Worth a read.
posted by pmaxwell at 7:12 PM on April 26, 2022 [1 favorite]

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