Business Talk: Starting out & setting your rate

18th May 2018
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Starting out, the question that most freelancers dread is ‘what’s your rate?’ – and that’s because frankly, it can feel like a minefield. Aim too high and you might price yourself out of the gig while someone cheaper slips through; aim too low and you’re underselling your skills and doing your industry peers a disservice. Or perhaps – and most disappointingly – you’ll just end up earning far less than you should be.

So how do you set a rate that reflects your skills? Whether you’re just testing the waters of freelancing at the moment or you’re a seasoned pro, it’s always good to take stock, examine what other people are charging and work out whether your money matches your mastery.

In our Business Talks series, we look at some of the challenges of being a freelancer and give you some tips to help you know when the price is right…

First, research.

Talking to people in your industry is possibly one of the most important steps in your freelancing journey, but it’s also the one most people tend to skip.

Why? For a start, people don’t really like talking about money, and especially so in the UK. However, at Starling, we believe that openness about money can help all of us live better lives, and we encourage people to have a more transparent relationship with their own money, and to create more dialogue and discussion around the subject in their everyday lives. You’d be surprised how many people are willing and happy to chat, give advice or recommend approaches – so just reach out and ask!

The same goes for getting comfortable talking about money with clients. Learning to be upfront and open about how much you charge and why is key to developing your business. Don’t be afraid to negotiate and feel confident in your rate; you’re probably pretty good at what you do, so if your client’s one worth having, they should be happy to reflect that with what they pay you.

Don’t sell yourself short.

Or in other words: try to avoid underpricing yourself. Your hourly or daily rate will be totally specific to your skills and expertise, the area you’re based, your competition and the type of clients you work with. If you price yourself too low, you’ll firstly just look like you don’t really know what you’re doing, and secondly, you’ll lower the bar for your whole industry (remember, a rising tide lifts all boats). There’s always room for negotiation too, so start at the high end of what you think is reasonable – you’ll likely be surprised how many clients will accept your offer. Know your worth, stay the course and have the confidence to match your rate to your skills.

Overheads are important.

When you’re trying to decide how much to charge, it’s worth working out all of your business costs. Whether it’s rent for your workspace, insurance, travel, materials, your rate isn’t just supposed to cover your everyday living expenses – it has to cover the entire cost of running your business. One of the reasons that freelance work is (usually) more well compensated than a permanent salaried job is that you don’t have the comfort blanket of someone else’s company to take care of all those little things. You are the company.

There are so many plus sides to freelancing, but you don’t have the safety net of holiday pay and sick pay, plus you might also be faced with periods of downtime between jobs. Your freelance rates need to reflect that uncertainty and include a buffer that can cover you during your business’ downtimes.

It’s worth noting that the Association of Independent Professionals and the Self-Employed (IPSE) recommends taking your equivalent earnings as an employee and adding a third, which accounts for the added costs that arise as a freelancer. You can find simple calculators online to help you work out a ballpark figure that includes time off.

Be flexible.

When you’ve started working for a few different clients, you’ll notice that rates can vary dramatically depending on the size of the company or the nature of the project. That being said, it’s worth figuring out what your absolute bottom line is. What is the lowest you’re prepared to go that will still cover overheads? Work it out and then stick to it once you have. Clients can always knock you down on price – but it doesn’t work the other way around.

Do some detective work.

There are definitely ways to establish a potential client’s budget, and it can be a great way of working out what you’ll be able to charge them. Once you know what they can afford and have a ballpark idea of what they are likely to have paid people in the past, you can adapt your price accordingly. It also works in your favour because if that same client expects to hire your skills for a cheap price – despite the fact you know that they had a £50 million funding round last year – you’re probably best to run for the hills. Look into the company; if it’s a limited company, find out its age and key financial statistics like turnover and any debt.

Another good general rule of thumb is that if a first-time client is an unknown quantity, you might want to charge slightly higher to cover yourself for the possibility of problems. This also works conversely for familiar clients, who you may want to give a preferential rate to.

Choose a pricing strategy.

Pricing for jobs is usually either time or project-based. Time is when you log your hours or days and then invoice the client for it; project is when you work out how long you think a piece of work will take and supply the client with a fixed-price. The strategy you go for will usually depend on the job but generally it’s best to try and work out how much time it’ll take, rather than a fixed cost. You should also always remember that most projects take more time than expected and make room for this accordingly.

Should you ever work for free?

Over the past decade, unpaid work has been somewhat of a hot button topic, mainly because of controversial unpaid internships in creative industries and the media. For careers like journalism, writing the odd article for free can be a good route into to gaining experience if you’re just starting out. But for everyone else, you should never feel like you need to work for free to gain ‘exposure’ or build a relationship with a client. This is your livelihood, and skilled labour – any labour, for that matter – deserves to be financially recognised.

Further reading

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Strength in numbers