A reader writes:
I'm about to start my first freelancing job, and I'm not sure how to set my rate. Is there an industry standard, and if so does it vary based on location? I'm also not sure of the etiquette for how to go about telling a client what your rate is. Are there any best practices in how to go about communicating that information?
Such a great question and one I've seen asked a lot, which goes to show you how tough it can be to price yourself as a freelancer. Luckily, smart people have already thought about this and there's ways to figure this stuff out.
First off, let me tell you what I thought and how wrong I was: I was like, take what you want to make per year, divide it by 52, take out 4 weeks for vacation and holidays, and bam. Done. I figured I was so clever, remembering to take out time for vacation. I was....wrong. So very wrong.
My friend Natalie was the first one to tell me you can't just divide up your salary like that. Then, good dude Robert sent me this article that he wrote, which has some calculations for you and stuff you might forget about, like more taxes than usual (WHO KNEW) and the value of benefits.
So, unfortunately, you're gonna have to math a little bit but if I could math it, it'll be a breeze for you. No one maths worse than me. After you go through that exercise, then just make sure you're at industry standard. Regardless of where you are in the US, you can usually price yourself between $85 and $125 per hour. But you know your unique skills you bring to the table, so price yourself accordingly. And don't shortchange! PS, while you're doing this exercise, also calculate the LOWEST you can possibly go so you know your low threshold.
So communicating that information to the people who want to hire you - this is the part that I always worry about. It's like a water balloon I am trying to give someone - one false move and you're both going to be soaked. But what's the worst that can happen? Tell them what you think you're worth when they ask you (which is usually after you talk about how your skills match their needs and vice versa) and say "Is that in the ballpark of your budget?" They're either going to say "that's perfect!" or "well, that's a bit more than we wanted to pay" and then you negotiate. And if they want to pay you something less than your low threshold, then you say "I wish you the best!" There are PMs willing to take peanuts to manage projects but that doesn't mean you have to work for the same peanuts.
It can be scary to step out on your own. I found it SO TEMPTING to just be like "I'll take $50 total! Or wait, I'll pay YOU!" just to make sure I had the job. Don't do that! Know your worth. Good luck!!