Choosing a path as an independent professional over a nine-to-five job could offer you a better work-life balance, more freedom, and independence.
But at the same time, working on your own has some notable challenges, for example, setting your freelance rates or managing your global finances.
Without the right financial approach, you can get wedged either with an untenable business strategy or may price yourself out of reach.
To succeed as an independent professional it is imperative to grasp certain aspects, like how to set freelance rates.
But which strategy should you use to fix your rates?
- Hourly pricing
This pricing strategy is self-effacing and allows you to set an hourly rate. Consequently, you charge your client for the number of hours you will spend working on a specific project.
- Project-based pricing
Project-based pricing means that you set a fixed rate for a project. With this strategy, you establish your rates according to the needs of each and the related costs. This strategy does not depend on the hours that each project demands and demands that you calculate your freelance budget.
Although these two strategies are common while fixing your freelance rates when deciding which approach to take, it’s essential to determine the following factors:
Deciding on your annual income will help you achieve your goal. Having a clear perception of how much you want to earn in a year will assist you in setting your pricing strategy. Select an annual income and analyze how many hours or projects you will need to undertake to reach that income.
When you have an insight into the annual income you want to make, you can determine the starting point of your freelance rate by dividing your desired annual income by the number of months.
This strategy will give you an idea of how much you’ll need to make monthly to reach your target income, afterwards you will set your baseline rate and charge your clients accordingly.
When fixing your prices you need to also set your freelance rates according to your sector.
Analysis of how much you need to earn in a month will help you determine the hourly rate you require to charge to reach your monthly base income. Therefore, it is crucial to understand how to invest your time wisely in the most profitable projects.
Another factor that you must be aware of before setting your freelance rate is your costs. Starting a freelance business is like any other business that needs a suitable strategy that balances your expenses and income.
As a freelancer, you will cover the excise cost, equipment costs, software payments, and those expenses related to your promotion. So, you need to include these fees in your freelance pricing. Calculate your freelance budget, add it to your annual goal income, and increase your rate accordingly to settle these costs.
As a freelancer, it is important not to undermine your skills and the value you bring to the table. Recognizing your worth will help you to set a logical and satisfactory rate for your work.
Valuing your previous experiences, competence, education, and understanding to understand your worth. Strengthen your self-awareness and be conscious of the value that you provide to your clients. Lastly, you need to consider that your skills and experience are your biggest asset.
Understand the market rate for your services
The freelance market is expanding and becoming more globalized, which implies that the offers are growing. This behavior suggests that professionals should be more competitive when offering and pricing their services.
Therefore, it is crucial to research the freelance rates according to your sector to examine the pricing strategy of other professionals and what they offer. Undertaking this investigation will help you ensure that your rates are coherent with other freelancers in your sector. This exercise will prevent you from over or under-pricing your services.