29.3.22

How to calculate your freelance rate

We are going to go directly to the point, as we usually do here.

A) Should we charge by project, a monthly rate, a daily rate or per hour?

There is no good or bad answer. The main focus has to be, not how you want to get paid, but how your clients feel more comfortable.

If you clearly control the amount of work you are going to need for a project, billing for a full project makes sense. In general clients love to be able to anticipate their expenses and prepare a reasonably exact budget.

If you happen to work in several projects for the same company, and you feel you can adjust the number of hours as the projects are not time critical, negotiating a monthly rate could be a great idea. The client companies are expecting some kind of discount from the per-hour rate (around 30%).

We are not sure why someone will want to bill by days. We think it is more logical to bill by hours. There are some useful apps to track the working time, such as Clockify.

B) How much should we charge per hour?

Our rate is a reflection of our value to our clients compared to the value of the competitors. Again, our preferences don’t matter. There are some webs that recommend starting the calculation with our desired salary and then divide it by… Obviously, this is all wrong.

If we want to increase our hourly rate, we need to be more professional, faster and more experienced than our competitors.

Each day we see a shift from worked hours to value added to the project. The benefit of basing our rate on value is that it’s easier to start thinking about value-based pricing methods and transitioning away from trading time for money. Value-based pricing requires a huge change in mind-set. Even if we are thinking about our hourly rate as a reflection of value, it’s still tied to time. Some authors suggest to charge by week instead of hours to force the client into thinking about added value instead of worked hours.

In any case, the hourly rate will remain as the default method of pricing our work, so we just need to check the prices around: in the countries where we work, for our expertise, for our experience…, and try to find a fair value.