Deciding Your Basic Hourly Rate
This is the easiest and also the trickiest thing you’d need to do. It’s one of the first questions clients will ask, and a deciding factor if they want to hire you.
It’s easy because you have carte blanche. Perhaps you’ve decided during the first meeting that your prospective client is really your prospective spouse. Give a discount! A meeting with a beta-male client might raise several red flags and you foresee a dark, grim road ahead. Charge more! How much you want to charge is entirely up to you.
It’s tricky because how do you decide how much you’re worth? And would industry people be willing to pay you handsomely, however handsome you may be?
Ultimately, it all comes down to a few things:
What is your financial goal? Say you want to earn a six-digit annual income. That means you’d need to hit $8,333 per month, $2,083 per week.
How many hours a week do you want to work? Working 40 hours a week is realistic. That comes up to $52/hour.
And there you have it: your basic hourly rate.
Deciding Your Professional Hourly Rate
The basic hourly rate is a little too simplistic. It comes in handy when you have a great opportunity that you don’t wish to pass up on, but the client’s budget is tighter than your jeans. This would be your best price. It’s the fee that won’t make you feel as if you’re slaving in a sweat shop.
For you to hit your financial goal, you’d have to work 40-hour work weeks for 52 weeks straight. That means you’re not allowed to fall sick, procrastinate or take any vacations. You gotta put the ‘free’ — as in ‘free spirit’ — in ‘freelancing’!
The above price model only works if you have lined up so many projects that you’re all set for the year. Which is impossible because you’d still need time to generate leads, go for meetings and make amendments to your works.
So double — or triple it; again it’s up to you — that basic hourly rate. Now your professional hourly rate is $100/hour.
Deciding Your Project Fees
More often than not, clients will ask you to quote a lump-sum figure. It gives them the surety that you can keep to your proposed budget. Just imagine you’re in a taxi and the meter’s running. The errant driver takes the longer route, one that’s dotted with traffic junctions, so that he can charge you a higher fare. The same is true with hourly fees: clients proceed with caution because they do not know if you’d pull a fast one on them.
How should you decide your project fees then? Easy: use your professional hourly rate! How long does it take you to design a logo? How long does it take you to write one article? It’s simple maths then.
Project Fees = Professional hourly rate x Number of hours x Number of deliverable
Know and Charge for Your Value
Photo Credit: Anonymous
As you get more and more experienced, you will be able to clear your workload faster. When I was a junior writer, I would spend four to five hours churning out a food press release. But now I have the lexicons at my disposal, and I can polish a draft in considerably less time. Does that mean I should charge lesser than a junior writer because I spend less time on it? Definitely not.
I recently had to get a plumber to change my kitchen faucet. He charged $120 for a job he finished in 10 minutes. I was once locked inside my house, and had to call a locksmith. To extricate me, he hacked away the lock in just two minutes and charged me $80. I felt the pain of parting with the money, but I didn’t haggle. I mean, I could change the faucet myself but it would probably be the second coming of the Yellow River Flood.
We tend to lower our fees when we’re met with a gasp or an disapproving gaze. But remember this: your client needs you. That is why he is getting your help. He doesn’t have the same skill set as you do. He could be a senior person in your field, say photography, but he needs your help — maybe he’s too busy. You’re providing something of value. And you should charge for what you can bring to the table.
And so the formula for deciding your project fees would be:
Project Fees = (Professional hourly rate x Number of hours x Number of deliverable) + Your Value
Don’t Forget the Extra Time Needed for Miscellaneous Tasks
With creative endeavours, chances are you won’t hit the bull’s eye the first time round. Designers have to make amendments according to clients’ seemingly-whimsical requests, and then the revisions as stipulated by their clients’ bosses. Photographers have to spend hours sifting through photos and then enhancing the selected ones. All these tasks take up time, and they should be factored into your quote.
Seek Advice from Others in Your Field
I began my freelancing career in 2009, and circa 2013 I was still quoting $25/hour for event coverage. I thought it was a lot of money. It wasn’t until I had to enlist a fellow writer to stand in for me that I realised I was
freeballing low-balling the entire time. I asked him if my fees were reasonable. He said — and I quote verbatim — “Someone of your calibre should be charging a lot more.” After that conversation my fees skyrocketed.
I used to charge 10cents per word, and gradually increased it to 30cents per word. In 2012, I started working with two editors, and they paid me 50cents per word. That means when quoting a client directly, I can go up to a dollar per word. With agencies, there tends to be a markup fee so I’d need to adjust my expectations slightly.
So check in with your fellow freelancers. Ask for their price ranges to get a feel of what you should be charging. Are your fees on par with your counterparts’? Or are you quoting more than what a mogul is charging?
Test the Waters
At this stage you would already have an idea your rates. Add another 15 to 20% to your estimate when quoting a client. When asked to lower your fees — and a lot of times you will have to — you can bring it down (in 5 to 10% tiers) before you reach your “original” quote.
Take heart when you receive some pushback on your quote. This means you’re not being taken for a ride. If all your clients happily agree to your quotes, it’s probably a sign that your fees are too low.
Of course, this largely depends on whom you’re quoting for: conglomerates or corporate entities usually have a bigger budget; government agencies have to be conservative with their spending; and new startups might not be able to afford you. The converse is also true: entrepreneurs might be most appreciative of what you do and they see the value of your work, hence they pay more. You never know.
Never Hastily Agree to a Ballpark Number
People love pressing me for a quote, but I’ve learnt to say this: “I will get back to you.” And you should do the same too. Never give your estimate over the phone or during the first meeting. You need time to mull it over. You will also need to discuss the specific job scope with your clients.
Take this scenario: A client wants to pay $1,000 for 10 articles. While the fees are low, I envision these to be straightforward articles that I could whip up in two days. Because I’m going on a vacation, this sum of money would determine if bread and butter would be my meals throughout the entire trip. And so I hastily agree to it.
And after a gentleman’s agreement, the client brings up the need to conduct face-to-face interviews with him, and that this project would stretch over the next 10 months.
Of course, I can negotiate or reject these terms but that would make for an unpleasant start. Likewise, when you acquiesce to a proposed quote over the phone, the agreement will likely bite you in the derriere later.
So how should you negotiate your fees? Stay tuned for the next instalment on quotes.