More Highlights from International Freelancers Day: Two Answers to the Eternal Conundrum: What Do I Charge?

What should freelancers chargeWhen considering going into the freelance writing business, one of the hardest questions you have to ask yourself is: “How do I make a real living doing this job?” If you’ve been working as a full-time employee for awhile, that question becomes “Can I maintain my existing standard of living working as a freelancer?”

In difficult economic times such as the ones we’re in now, many of us are asking these questions. It was even a hot topic on the TechWhirl discussion list in the last month.

This question is so important, and has so many answers, that the International Freelancers Academy scheduled two presentations on this topic at International Freelancers Day 2011. Shane Pearlman came at the topic from his perspective as a web designer, while Rebecca Matter from American Writers and Artists looked at the broader spectrum of freelance work. Both offered good lessons for technical communicators.

Setting Rates to Maintain Your Lifestyle

Shane Pearlman started his career as an independent freelancer early. He learned how to create websites in high school, but didn’t have any professional experience. So he did what a lot of us do: tried to find out what the industry standard rate was. At the very beginning, he charged clients $25 an hour, and took on any project he could find.

While combing the web for projects, he started noticing that clients were paying more for some skills. Folks who develop sites with the Ruby on Rails web framework were charging more than PHP developers, so he did that when he could.

After a while, Pearlman grew up and found a house he wanted to buy. He realized that he wasn’t making enough to buy this house, but what rate should he charge to be able to afford it? He was smart enough at this point that he put together a spreadsheet to figure out the appropriate monthly rate to pay the mortgage, pay his taxes, and otherwise maintain the business every month.

After figuring out that he could bill about 30 hours per week, he determined that he would have to nearly double his rates to live the way he wanted to (the Ideal Lifestyle Rate). Because of the amount of experience he now had, his clients didn’t have a problem with the new rates.

Ten years later, Pearlman can charge 10 times what he did when he started. His advice for freelancers boils down to three strategies:

  • You’ll almost always start out with the “industry rates.” Find out what a client wants to pay for a project. Decide whether you want to work on it, remembering that you don’t necessarily have to deliver the same quality for lower-paying clients.
  • Set your rates based on what you need to live comfortably. Don’t forget to put money away for taxes, retirement, and health insurance.
  • Once you’ve got your lifestyle needs met, what you make depends on your ability to market yourself. Maintain your rates until you’re getting too much work. Raise rates when you’re turning down gigs.

Pricing Freelance Projects with Confidence

Rebecca Matter knows the value of her time. She thinks you should too. As a freelancer, you first have to respect yourself as a professional, then persuade your potential clients that they will get the value of your professionalism and expertise.

Unlike Pearlman, Matter advises that you don’t work on an hourly rate. Your goal is to get better with each assignment. The more experience you have in an industry, or with a particular tool, you should know more and be able to deliver faster. With hourly rates, “you penalize yourself for working smarter.”

When discussing a project with a new client, Matter recommends focusing on a series of questions you need to find out, either through research or discussions with the client:

  • What’s the marketing strategy behind this project? What is the client trying to accomplish for their business? Have they thought it through? Can you help them develop that strategy?
  • How much experience do you have with this type of project? Here’s where Pearlman and Matter agree: When you’re just starting out, you have to charge less. It will be a learning experience. But as you learn how to do a particular project type, your rates will improve.
  • How big is the client? Clearly a big company will have a bigger budget than a sole proprietor, but that isn’t always the key factor in defining your client base.
  • How important is the project to the client? Here’s where the numbers come into perspective. “If your client will make a million dollars as a result of this job,” Matter said, charging them “$10,000 won’t even make them blink.”
  • How long will the project take? This is where your awareness of the value of your time pays off.

Once you’ve delivered a quality project on time and within budget, you can build your business by asking what the next task is. Matter said clients have told her “If I like what (a contractor’s) doing, they’ve got me.” That feeling applies to rate-raising situations as well.

Another area of agreement between Pearlman and Matter: the importance of marketing. Matter said you should do one thing every day to build your business. Whether that’s contacting an existing or potential client, posting on Twitter or LinkedIn, or writing a blog post, you should spend at least 10 minutes doing something else besides your current project.

“Clients do disappear,” Matter said. “Bigger clients do appear!” It’s your job to find them.

Mike McCallister

Mike McCallister is devoted to the idea that technology need not be feared, and can be mastered by anyone. After all, he grew up in the days when computers filled entire rooms, and spent 13 years as a civil service clerk doing nothing more technical than recording WordPerfect macros. Mike is also devoted to making computing easier for the full spectrum of user levels and experience. You can connect with Mike through his Google+ page.

Read more articles from Mike McCallister