Freelancers, how to determine our rates?
I’ve been asked on several occasions how to determine a freelancer’s rate (with respect to web design). I’ve always given sort of off-the-cuff responses; however, how do we determine legitimate rates? I believe, like most things, it all comes down to supply and demand. We have to evaluate the need and compare that will the “talent” offering to fill that need. Here is my quick and dirty two-cents on “how to determine your rate”.
Pricing is about two things — experience and confidence. You have to have the experience to warrant the price and you have to have the confidence to ask for that price. Here is my personal opinion on what is fair market value:
- 0 to 1 yrs experience and a weak portfolio = free to $10/hour
- 1 to 2 yrs experience and a strong portfolio = $25/hour to $35/hour
- 2 to 4 yrs experience and rock solid portfolio along with strong client list = $45/hour to $65/hour
- More than 4yrs experience, inspiration worthy portfolio along with a strong client list = $80+/hour to {the sky is the limit}.
Obviously there are many factors to take into account. The “opportunity cost” should be evaluated in every situation. You need to know your client as well. What sort of budget do you think they typically work with? You obviously want to get the most money possible without losing the gig to a cheaper designer. Always go high (not so high you scare them away) and feel their reaction. You should always have a “Plan B” ready in the event the client is turned off by the rate. Explain to them the logic of the rate (there should be logic!) and demonstrate how you could complete the same project at a lower, more suitable, rate: Things such as offering two mocks instead of four, delivering in 2 weeks instead of 1, etc.
Disclaimer: I hate attributing years-worked to experience (just an easy way to do it). I acknowledge that some designers work in an environment that produces more work in 6 months than others do in 6 years.
- August 28th, 2006
- 18comments
- I am a proud member of the 9rules network
The hourly or daily rate has two limits - the lower limit is what you are prepared to live on and the upper limit is what the market will bear. The lower limit can be determined by simple maths.
First how much do you need a year - remember you’ll have to fund all your business expenses, medical insurance, pension, car etc as well as feeding yourself and your dependents. I’m British, so let’s pick a modest £40K.
There’s 365 days in a year, eliminate weekends. Do yo really want to work every weekend? That 260 days left.
Allow yourself some holiday. Say 20 working days. We’re now down to 240 days.
Allow 10 days for colds, flu, hangovers from hell and you’re down to 230 days.
Now this is the bit every forgets. You cannot work 100% of the remaining time. At least one third of your time will be unbillable. Dealing with office tasks, marketing and selling etc.
That leaves 154 days in which you can generate income.
Divide £40K (or whatever you choose) by 154. I get it to be £260 per day or £32.5 per hour.
Best regards,
Bob
Bob,
Great points. However, for freelancers — I think there has to be more give than take when first starting out. Just because you want 10 vacation days and to drive a BMW, doesn’t mean you should be chargin $80/hour. If you are “new to the game”, you might honestly need to work two jobs. I say, if you do want 10 vacation days and a BMW, you can have it — but you might be working a hell of a lot more than 40 hours a week.
I find that most clients my hourly rate doesn’t mean a whole lot to them. I can say I charge $XX amount an hour, but they rarely know how long it takes me to design/develop a site.
I usually just ballpark different prices that previous sites have cost, and their scope. While obviously those prices are based on my hourly rate, it seems to be much more effective than simply stating my hourly rate.
Ross, glad you brought that up. I much prefer to bill on a project basis (I think clients like it too). As you stated, you need a foundation in which to arrive at a project rate (typically best represented by estimated time for completion by hourly rate).
I have a sample project proposal I usually send out, it give the client an idea of how I charge and how their project might relate.
Well thought out. As a young freelance designer this is something I’ve always had to consider when working with clients.
Rob, I appreciate the comment. Any input as to how you’ve decided your rates? Any advice for people struggling with this question?
I agree with Ross’s method… Past experiences with proposal writing and project management have taught me that disclosing an hourly rate can form a relationship that allows clients to micro-manage hours spent. My key success with a fixed cost proposal is to spell out the deliverables and responsibilities of both parties. If the project is completed in a timely fashion, the hourly rate ultimately increases, creating additional profits from the project.
I don’t agree with an entry level designer doing work for free or $10/hour — almost for free. An important part of being a designer is the ability to educate business professionals how to communicate effectively with design… I am afraid that providing design services for free devalues our profession.
“A designer shall not undertake any work for a client without adequate compensation, except with respect to work for charitable or nonprofit organizations.”
AIGA - Business and Ethical Expectations for Professional Designers
N!ck, you definitly make solid points and I encourage everyone to pay attention to your comment. As I’ve stated, working on a project fee basis is definitly prefered than an hourly one; however, we don’t always have that luxury. Whether it is public information or not — I do strongly feel that your project rate should be backed by some sort of metric (an hourly conversion is usually best suited).
As to your point about working for free or $10 an hour — if you have no experience or are simply trying to build your portfolio, the reward or “payment” does not always have to be monitary. There is a lot of value in working on high profile projects and building your experience, name and portfolio. While I dont really live by this, “Money Isn’t Everything”. $10/hour is extremely generous rate for an unexperienced designer/developer (think back to working in college — $10 is a fortune!!).
I prefer to charge per project and not per hour, because when you get to a certain level of experience, you can very accurately guess how much time it will take to code something. Also, my work habits are not very good, with numerous breaks.
I recently decided I’m going to charge $10 million per web project.
I figure at that rate I may not get many projects, but I only really need one.
1. Your years experience or portfolio should have no consideration on your rate. Your rate should be based on your costs as a business, and guided by what your clients are willing to pay.
2. No one should ever do free work, outside of friends & family.
3. Rates considered industry normal are formalized by both the AIGA and the GAG.
Blogger Anil Dash posted on a this topic last year.
I think ACoolie’s sounds pretty good, especially for someone like me who will work in several 10-15 minute chunks every day for two weeks when it could’ve been done in a few hours a day for two or three days. Well, that’s how I work on school projects, if I was getting paid in cash monies for it I might work a little better.
I much prefer to bill on a project basis (I think clients like it too). As you stated, you need a foundation in which to arrive at a project rate (typically best represented by estimated time for completion by hourly rate).
I have a sample project proposal I usually send out, it give the client an idea of how I charge and how their project might relate.
Every project is unique, so I think per hour rate is laughable. Sure, have one, but really your hour breakdown come when you…
1. Bill by the project. I dont like client surprises, I should know how long something’s gonna take - but there is other factors too. Some projects are portfolio work, others pay the bills. Some projects are ripe for scope creep, have too many cooks in the kitchen, or just shouldnt be on your radar. If you need to keep the lights on, get paid well for it. If you dont have to keep the lights on - get paid really well for a knucklehead project.
2. Bill by the client. You know in the “butt-sniffing phase” tendencies in a client or company. Some are micro-managers in search of a problem. Others only value your technical skills, not your consultation and are setup for problems. One tech company includes a invoice item actually called PIA fee. Some clients are a dream, but be sure to charge the “Pain In the Ass” clients a premium.
3. Bill by your schedule. If you’re slammed - you are not charging enough. I’ve been amazed how little rates affect the amount of work. In fact, I like knocking their heads off - even if just to gauge their reaction. You can always narrow the job to get under budget.
It really is about valued relationships. I am by no means advocating a rip-off. If a company can pay 30k, I’m more than happy to charge them 300.00 - its the sole-proprietor who is writing a personal check for 300.00 bucks that is going to be the worst client. These are the real factors of a project, and the tools I use to get loyal, repeat clients. Consistently produce top-notch work, and things stabilize with a good clients. Think like a fancy restaurant matradee: lavish the care and the love on the clients where it matters most. Other folks just get a great meal.
This is an interesting way of putting it. I’m not a fan of the experience=quality equation either, but I’ve always been befuddled when trying to determine how much someone should pay for their site design.
I’ve just started doing more side work and I’m interested in any tips for avoiding those PITA clients. I’ve had several side jobs turn into nightmares for me recently. These experiences have made me more likely to lean towards billing hourly. I’ve found that there are a lot of clients not willing to agree to that type of billing. I’ve just been burned too many times to trust my estimates anymore. I think it probably stems from being a “nice guy” so I rarely ever say no to the fuzzy out-of-scope requests. While that seems to make clients happy, it ends up just making me bitter ;)
Right now, I’m taking pretty much anything because my portfolio, while technically impressive in the corporate world, doesn’t really have much in the “wow” department. I find this somewhat frustrating. Not many side jobs have been impressed by my strict db normalization or OO coding. I mean they will/would be if/when it comes to maintenance, but I sometimes wonder if I’d be better off just slapping it together as cheaply as possible, especially for the super-small jobs that will require very little maintenance.
So anywho - in summary - I’m mostly interested in tips for spotting PITA clients. Also, do you have a minimum budget requirement - ie. not accepting any project less than 2K or something like that?
Everyone in my opinion should be focusing on “opportunity cost” to determine a project minimum. Don’t take a $25 gig, even if it takes an hour to complete, you are not making $25/hour. The communication back-and-forth along with any revisions necessary easily takes a suitable rate right down to $10/hour – most of us wouldn’t work for that.
Don’t depend on clients (commissioned projects) to increase your portfolios “wow” factor! I can’t stress that enough, don’t depend on commissioned projects!! Start creating the wow factor on your own! Create a new “AOL.com” logo if you want and include that in your portfolio. It doesn’t matter if AOL didn’t contact you or you never end up selling the concept to AOL. Make up a brand; call it Streaming Media or RSS Preview and create a logo based on that! Make side projects like Virtual News Feed and include those in your portfolio. Honestly, most client projects come with one thing that will hurt your portfolio – subjective opinion! When you create something for you, it is the best you have to offer – not a compromise of your talent and a local business mans opinion.
Okay, enough of my rant — I think you’ve just inspired my next post.
It’s so interesting:,