As a freelancer, you've likely grappled with the question of how much to charge. Pricing your services appropriately is critical to your business's sustainability and your own well-being. Let’s delve into why you might want to consider charging more, and how to do so effectively.
First of all, let’s make one thing clear: it’s not about being greedy!
You need to charge what you’re worth. And you need to cover all of your costs. And if you’re trying to build a business, then the whole point is to make some profit that you can then invest in things that will grow your business - even if those things are just a better laptop, chair or desk.
“But won’t I lose clients by charging more???”
Yes, you will. You’ll lose the clients who don’t value your time, expertise and experience. Good riddance!
But the clients who are happy to pay your higher rate will get better work from you, because you’ll be able to focus better and produce higher quality work!
The news will spread which will, in turn, lead to more soon-to-be-happy clients, who will also be more than comfortable paying your increased rate.
Don’t forget about inflation and the creeping increase in responsibility and workload that often happens. You should reassess your costs regularly and make a fair and realistic measure of your workload to make sure that any material increases are being covered in your rates.
We all want a little more. If we get back to basics, there’s only so much we need for the fundamentals - food, shelter, clothing.
If that’s all you’re thinking about though, you’re missing some really important fundamentals.
When you’re freelancing, depending on the laws in your country, you will most likely need to be collecting taxes which you’ll pay later on. You need to earn enough to pay all of your expenses PLUS those taxes.
So your rate needs to include your baseline expenses and then allow a percentage on top for paying your taxes.
<aside> 💸 Let’s say your living costs are around $3,000 per month. Say you only want to work 4 days per week, that means your daily rate needs to be close to $175 to just about cover your costs.
For your taxes, you should add a percentage on top that more than covers the rate of tax you pay. I allow around 40% on top of my base costs for taxes. So 3000*1.4 = 4200, which means my day rate would need to be over $240.
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And don’t forget your running costs - bills, bank fees, service providers (accountant, bookkeeper, lawyer) and mandatory fees (e.g. government charges, social security etc) and the fact that these all go up with inflation over time.
Oh and you should definitely be thinking about: