Q & A: How to Set Your Rates

A newbie location independent freelancer recently emailed me with the following question: what do you think is a good way to determine what my initial rate should be?

I thought my response might be useful for other people, so I’ve reproduced it below.


 

Apologies for my delayed reply. I’ve been travelling through Malaysia and Japan the past couple of weeks, so I haven’t really had much time to check email, and I wanted to take the time to give you a decent response.

Firstly, congratulations on making the leap to freelancing!

I honestly believe it’s the best way for developers, designers and other digital services providers to make their worth while providing flexibility and lots of growth potential. I also believe that simply by acting in a professional manner and doing what you say you’re going to do you’ll be ahead of 99% of other freelancers.

But to directly address your question: how much should you be charging?… I don’t think there’s one answer to this question, but I’d suggest you read the following article for some pointers in the right direction.

The TLDR version:

  • Present yourself as a premium service (highlight the fact that you have excellent communication skills, are highly accountable, use the latest and greatest technologies and utilise robust best practice coding techniques).
  • Find what your peers in high cost of living areas are charging. Charge (at least) that.

Personally I quote a daily rate of $800 / day. If the client asks for it I’ll also provide an hourly rate ($800 / 8 hours = $100). If I start actively looking for work again (I’m booked-out at the moment) I’ll increase this 25-50%.

Something you’ll learn very quickly as a freelancer is that if you’re charging reasonable rates, the right clients will rarely bat an eyelid at the price. It’s the bad projects and troublesome clients that haggle over price, so making your premium pricing known up-front will normally weed-out the guys you don’t want to be working with.

I’m not sure how far through the negotiation process you are with your (prospective) clients, but I’d suggest quoting a daily rate and then providing estimates of how many days of work it will take to reach different milestones throughout the project. Build in an iterative way, so each milestone provides a usable part of the end product. This way the client will see ongoing progress (refer to this diagram).

As a smart guy with excellent written communication skills and a proven record of delivering software on-time and to specification, I wouldn’t be charging less than ~$400 / day, even for your first few projects. When you have a stronger portfolio you should be able to charge much more.

Hope this helps.