Freelance work allows a large degree of autonomy and could be your ticket to ditching the cubicle. The obvious downside is financial insecurity and a need to really grab your life by the scruff of the neck to make it a success. The primary hinge on which your life swings is your mode of pricing, your going rate. Let’s take a look at a few ways of approaching this.
1) The budget
First, get numerical and write up a basic budget that takes into account rent, food, entertainment, savings, debts, clothes, rates etc. If you are terrible at this, crawl through monthly spends in your bank transactions, a clear pattern should emerge.
Now you have the minimum you must earn. Loftier goals? Create an ideal budget as well, a goal budget where you factor in greater savings, holidays, house deposit, hovercraft down payments etc. This is where you want to be, not where you need to be (don’t get too ridiculous though). Now you have a survival number and a prosperous number, cover the first and aim for the second.
2) The hourly rate
This is how most freelancers begin – Lets take an example of a web designer.
You have a client looking for a simple WordPress site. They have visual assets and a strong idea of composition. The rest is up to you. Let’s say you have looked around and decided that $50 per hour is a reasonable rate. Now let’s say you are good at your job and knock it out in 4 hours.
The client is ecstatic, done well and done quickly. Also cheaply. You just earned $200 for an awesome site your client will use to run their entire business for years to come. Was that enough? Have you valued your time and expertise properly? Have you factored their benefit into your pricing? Nothing wrong with hourly pricing but often you miss out on the idea of creating value for your client, and valuing the benefit you have created for them not just billing hours.
3) The project rate
An often more reasonable rate would be the ‘project rate’. It requires a real professional to pull it off as it requires a high standard of work. Take the above example. If you take into account your client’s budget and a detailed scope of works and outcomes you will find they would easily pay a few thousand dollars for a quality website. You ripped yourself off. Do some investigation into what they are willing to pay. Remember, when you charge based on the project, you are tying the price of the project to the client’s end result. The end result is all that the client really cares about.
Be canny. Don’t rip your clients off – but find a number that would suit them, their business and their budget… have the meetings, be forward with your questions….then deliver real value! This way you are really putting a premium on your skills and results, not your time. If you are good at what you do and do it quickly and professionally, aimed solely at the end result, you will really get closer to that ‘prosperous budget’ we spoke of above.
4) Be flexible
All clients are not equal, they have different means and different aims. Without being unethical you could charge either $2000 or $3000 for similar work. A larger cash rich business will expect to pay more, a one person shop will be drilling you for value and perhaps pushing an hourly rate… There is no easy answer here and you have to bring it back to four simple factors;
- Does it fit my budget?
- What value am I delivering?
- Have I undervalued my work?
- Can I afford to not have this client right now?
There are many more factors at play in reality but this is where instinct takes hold. At the end of the day you need to value your expertise and quality of work more than your time and you need to at the very least meet a minimum budget and create value for your client…. the sky is the limit beyond that.
- What about GST for freelancers? Read my earlier guide to keep yourself on the good side of the ATO. You really want to be on their good side.
- What about Accounting for the gig economy? Skim this to know what to do differently if your freelance work involves Airtasker, Uber, Deliveroo or the like.
