Setting Your Freelance Rate

This article was written by Dave DiVerniero of Freelancer Advocate.

How much should I charge?

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I wish I could give you a number and send you on your way. Nothing is less satisfying than a milquetoast ‘it depends’. But, well. It does depend.

The question is, at the same time, both absurdly simple and tremendously complex. The simple answer is that you should charge the maximum amount you can get a critical mass of clients to pay. But figuring out where your services live on the supply and demand curve is much more complex.

The Minimum

Most people don’t want to give specific numbers when talking about rate, because there is so much to consider and it’s so easy to point out if a number is wrong. I’m not worried about being wrong. I live for being wrong. In any case, it’s helpful to establish a floor so we have at least one point of reference when determining our rate.

If you employ a job-skill in your freelance work- meaning any chump off the street couldn’t just walk in and do your job- you should not accept work for less than $30/hr. I didn’t just pull this number out of my sweet behind, though you could be forgiven for assuming that, there is compelling evidence that this should be the lowest fair wage for skilled freelance labor.

In today’s market you can, with minimal onboarding and no experience or job skills, make $15-$25/hour though companies like Uber, Postmates, TaskRabbit, and Rover. You never have to look for any clients and in many cases, you can get as much work as you’d like to do. $5/hr is a very modest raise for the additional value of a job-skill and the additional strain of managing your own client list.

And $30/hr is the absolute minimum. Even if you are, say, a graphic designer fresh out of college, with no actual experience, you still have a skill and that skill has value.

A Woefully Imprecise Formula

As much as I wish there was, there isn’t a one-size-fits-all equation that can determine everyone’s rate. However, I have a rough formula I use to get in the right ballpark. It’s not perfect, but it can help give you a starting place if you’re otherwise lost.

(Annual Full Time Salary / 140 ) + equipment costs and expenses = Ballpark Daily Rate

For those who can do a bit of quick math, you may have noticed that this equates to about double what an equivalent full-time salaried employee makes in a day- give or take. That’s not an accident.

Do the math with me:
100%-        Full-time salary
+30%-        Benefits- Full-time employees enjoy a variety of benefits, most notably health insurance and paid vacation. This is typically equivalent of ⅓ of a full-time salary.
+20%-        Unbillable time- Freelancing comes with certain tasks that are typically not billable to any client. Things like invoicing, bookkeeping and initial consultations represent a fair chunk of time that should be compensated with a 20% rise in rate.
+50%-        Marketing/No Job security. Freelancers find their own clients, many of whom they contract with for a short time. This constitutes a huge, time-consuming effort on the part of a freelancer and often makes it difficult to maintain a stable income. At a minimum, it warrants a 50% wage bump.

Doubling the daily or hourly wage of a full-time employee is not at all outlandish. In fact, some people say you should triple a full-time employee’s daily rate as a freelancer. I say: If you can get people to pay triple, charge triple.

Other Considerations

There is no doubt that setting your rate is subtle dance and we’re just scratching the surface. I have a much more detailed explanation in my comprehensive freelancing course. For now, here is some additional guidance to help you get started:

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The most accurate way to find out what you should be charging is to ask your peers. People can be cagey about their rates, but if you’re not afraid to ask a few extra people you should get enough answers to give you a decent average.

Don’t base your rate on job listings you see online. You’ll encounter artificially low wages in online listings. Freelance platforms have a high rate of garbage-jobs which aren’t worth bothering with and if a rate is listed on a traditional job board it is often so recruiters can find staff willing to work for peanuts. It might be depressing to encounter these low wages but don’t let it drag down your rate.

If you’re getting a lot of pushback on your rate, it’s most likely that you’re going after the wrong clients or looking for them in the wrong places. You’re not necessarily too expensive just because people can’t afford you. Kate Spade didn’t sell her handbags in Walmart, and that didn’t mean people weren’t willing to pay for them.

I want you to a walk away knowing this – whatever you decide your rate should be, you’re worth it- and if a few clients can’t afford you or won’t pay it, that doesn’t make you worth any less.

About Dave DiVerniero

Dave DiVerniero is a freelancing expert and advocate. He was a freelance editor and producer for nearly a decade, serving some of the biggest clients (Facebook, Oakley, Audi) and TV Shows (e.g. Hell’s Kitchen, Biggest Loser, Tanked) in the world. Now, as The Freelancer Advocate, he teaches creative professionals how to build freelance careers and supports freelancers by speaking out against inequitable treatment.
Website: www.freelanceradvocate.com

The 8-Step Guide for Dealing With Nonpaying Clients

If you’re reading this, you’re probably having trouble getting a client to pay your for your work. We’ve been where you are now, and it’s no fun. Speaking from experience, it’s hard to know what to do in your position, so while every situation is unique, what follows is a general strategy for you to move forward.

Your first instinct may be to call a collection professional (an agency or lawyer), but that’s not always the best path. Bringing in the big guns means there’s a good chance your client relationship will never be the same, and you’ll have to give someone else a significant chunk of the money you’ve earned. Whether you find and manage your collection professional yourself or use our service to do that for you, this should be your last resort.

Of course, in some cases it’s obvious that your client isn’t going to play ball. If that’s the case, these first few steps won’t make sense for you and you can skip ahead.

Step 1: Put them on notice.

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Politely but firmly let your client know it's time to pay. Include (or resend) a formal invoice. Let them know you want to resolve the situation quickly and informally, but that you'll go further if necessary.

Step 2: Keep the pressure on.

Keep the Pressure On

Be persistent. If your client tries to kick the can down the road, make sure they know that’s not acceptable. While it’s not a big deal to them, this payment is a priority for you. Don’t just send an email and leave it at that. There’s an adage that goes, “The squeaky wheel gets the grease.” Of all the people your client owes, you want to be the one they most want to make go away. You want to be the squeaky wheel. Reiterate that you want to solve the situation amicably but that your next step will be a formal, less pleasant one.

Step 3: Go up the chain.

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Some clients think they’re too busy to worry about paying you. If your client answers to someone, you can realign their priorities by bringing their boss into the conversation.

Step 4: Decide whether it’s worth the fight.

Worth the Fight

If you don’t get a response within a few days, consider whether you’re going to want to work for this client again in the future or whether the social awkwardness will be worth it. Frustrating as it may be, if this is an important client or someone you’re going to have to interact with a lot in the future, it may be worth writing this one off even if you disagree with their reason for not wanting to pay.

Step 5: Send a formal Demand Letter.

Send a Formal Demand Letter

Don't be afraid to CC the client’s boss, partner, board member, etc. Let them know you'll take legal action if you're not paid in ten business days.

CLICK HERE for our FREE Demand Letter Template.

DO NOT post anything negative about your client in any public forum, including on social media. While it may be satisfying in the short term, you could wind up being sued later.

WARNING: You might have a lawyer friend who is willing to write a letter for you. Think twice before you take them up on the offer. If you have an outside party make an attempt to collect for you, collection agencies and lawyers might later charge you more or refuse to work for you because they’ll assume your case is more difficult.

Step 6: Take them to Small Claims Court.

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If the amount is low enough ($2,500 to $25,000 depending on your state), consider Small Claims Court. If you have the time, energy, and money to pay filing fees (usually less than $200), go to small claims court. This can be draining, but if it's about the principal, having your day in court might be satisfying.

WARNING: Even if you get a ruling in Small Claims Court, your client can still ignore the ruling. Then you’ll have to go through another process to collect on your judgment.

Step 7: Engage a collection professional. (Or have Freelance Collection do that for you.)

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If the amount is high enough, consider using a collection agency (minimum $1,000) or lawyer (minimum $2,500). Both will keep a significant portion of the money they recover for you, but there are important differences:

Collection agencies attempt to contact your client and negotiate on your behalf. They can be persuasive and can report your client to the credit bureaus, but at the end of the day, your client has to agree to work with the collection agency. Collection agencies shouldn’t charge you anything upfront.

Lawyers first threaten to sue then they actually sue. While lawyers can be more effective than collection agencies, they typically charge a few percentage points more or you have to pay by the hour, the process can take many months or even years to play out, and you’ll have to front court filing costs of up to $700.

Finding the right collection agency or lawyer is hard if you don't know the space, and the better ones might not take your call because they prefer bigger customers. Consider letting Freelance Collection manage the process for you so you can get back to the work you love.

Step 8: Know when to walk away.

Walk Away_Photo by Amy Shamblen

If you've exhausted these steps, it may be time to move on for the sake for your own sanity. Learn what you can from the experience because you paid for the lesson.