Freelance day rate - how much should I charge?
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Here, we explain how to set your freelance day rate.
One of the most important steps when first setting up as a freelance consultant is making sure you charge the correct freelance day rate/hourly rate for your services. Day rates can vary quite significantly, even for freelancers at a similar level, so it’s important to make sure you strike the right balance between being paid what you’re worth, while trying not to overprice yourself on the market.
One important piece of advice we give new freelancers is to make sure you remain flexible with your rate. Yes – it’s okay to have a base rate you’re not willing to work below, but one of the biggest mistakes we see is when freelancers charge a single universal freelance day rate for all projects. Every project is different and needs to be evaluated independently. It’s important to work out what range you should charge for different projects and what factors can affect that range. Here are some of the key ways to help make sure you’re in the right ballpark:
Here are some of the key ways to help make sure you’re in the right ballpark:
Calculate the day rate using your most recent perm salary
Take your most recent salary as a permanent employee, add in all benefits, and divide by 250 (number of working days in a year). This provides you with a ‘base rate’ on which you can add a ‘freelancer charge’ for operating independently. This charge can range from 50% all the way up to 150%. So if your base rate is £400 p/d and you apply a 75% charge your day rate will be £700p/d. The ‘freelancer charge’ is there to compensate for the fact you won’t be working all 250 days of the year. You’re then able to add any ‘premium charges’ for specific skills/knowledge. Note – this method is only applicable if you recently left permanent employment.
Speak to other freelancers at a similar level
This is especially useful when first starting out, as it’s crucial you remain price competitive when going up against other freelancers at a similar level. I also highly recommend experienced freelancers occasionally benchmarking their freelance day rate versus others at a similar level – you’ll be quite surprised by the price disparity in day rates when freelancers gain more experience!
Understand the ‘premium’ charge for specific knowledge
As the majority of clients like some kind of specific knowledge/skill when engaging a freelancer for project work, it’s important to understand what the price differential is between your ‘generalist’ rate and your ‘sector specific’ rate. The fact that you have this specific skill/knowledge means you’re able to charge a premium for your services.
A smart way to improve your utilization rate is finding a niche to specialize in and becoming known as the go-to freelancer for that type of work – you do run the risk of finding yourself out of work for long periods if that niche ever goes out of fashion, but if it works, you’ll find yourself fending off offers from clients hoping to work with you. Digital is a great example of a sector niche that is in tremendous demand at the moment, as it’s highly transferable cross-industry (everyone seems to be developing an app/website nowadays).
Agree the best method of payment with a client
It’s always worthwhile exploring alternate payment methods for a project. If you have a task that won’t take longer than 2-3 days, it’s often advisable providing an hourly rate instead of a day rate. Similarly, if you’re speaking to a client about a defined project with a specific time period and key milestones, it might be worth proposing a total project rate, instead of a freelance day rate. Clients will be receptive when discussing alternate payment methods – especially when they find they can get the work done twice as quickly, with half the cost!
Flex your rate depending on your lifestyle
The flexibility of freelancing is one of the major reasons why there has been a rapid growth in the number of full-time professionals opting to make the switch – the ability to do the school run, spend time on your own start-up venture or go on a summer holiday longer than 2 weeks! With this flexibility, there comes a need to remain vigilant with your rate. If you only work 4 days a week or have restricted hours because of childcare responsibilities, it’s worth flexing your rate to remain price competitive.
You don’t want to find that you’re losing out on potential projects because your rate is perceived as being too high, compared to other freelancers working a full 5 day week for a lower rate. Striking the right balance between charging a sensible amount for a project and maintaining your freelancer lifestyle is one of the trickiest challenges you’ll face, but if you manage to crack it, you’ll be reaping the full rewards and benefits that freelancing has to offer.
Try agreeing rates directly with clients
When working on a project through a recruitment agency, it’s always worthwhile trying to negotiate your rate directly with the client. You don’t want to find that you’re being short-changed because an agency is taking the lion share of the rate available in fees. Speak to the client about what their budget is and work with the agency to facilitate fees – you shouldn’t be the one who budgets on your rate to win new work. This is especially important when projects are extended and clients try to reduce their overheads – it’s astonishing the lengths some agencies will go to ensure their fees are the last thing reduced when cost-cutting measures need to be taken, that’s why it’s worthwhile having an open and frank discussion with the client about your rate from day 1 (ideally before the work kicks off). If you’d like to learn more about how agency fees work, click here.
So there are a couple of things to consider when thinking about what day rate to charge. As ever, don’t hesitate to get in touch (email@example.com) if you have any further questions or would like some help discussing what day rate you should charge if you’re new to freelancing.
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