One of the most daunting aspects of being a solopreuner is setting your freelancing rate. We all have moments of insecurities about our work and the value we actually deliver for clients. In turn, it’s common to develop fears around setting a rate that exceeds our actual value. This results in many freelancers actually charging much lower rates than deserved. If you’ve already taken the first steps to become a self-made independent, making sure your rates are high enough is imperative to building a viable business.
Most Freelancers are Currently Undercharging.
You might believe you are charging a high rate for your freelancing work, but there is a good chance it’s still not as high as your time is actually worth. According to the Payoneer’s 2018 Freelancer Income Report, the average freelancer has a rate that falls short of the actual value of their time; even ⅔ the price they could be charging. The same report claims that 68% of all freelancers are unsatisfied with their current income. Together these statistics highlight the paradox of a growing pattern amongst freelancers: the desire to make more money and the inactivity around asking so.
Another common misconception is that since freelancers set their own rates, there is no wage gap between males and females. A recent HoneyBook study showed that 63% of freelancers, both males, and females, believed both sexes are paid equally in their respective line of work. Unfortunately, this is a major mistaken belief as females are earning less than men across the board: a staggering average of 32% less. This is significantly larger than even full-time employment, which stands at 24% less. To highlight this issue even more starkly, over a third of female freelancers are bringing in an hourly wage that is shy of the minimum wage of 15 states. Freelancers, especially female freelancers, are making significantly less than they should be given their skill sets.
So why should we be asking for more money, and how do we go about it?
1. It Buys Time
Freelancers with hourly fees are even more mindful of the number of billable hours in a day. Increasing your freelancing rate simply allows you to make the same amount of money in less time. To put this in perspective, let’s say you were to increase the rate you charge by 50%. This will generate the same revenue, yet it will take ⅔ the time it currently takes. A simple increase in your rate results in significantly greater value to your time.
Even if the number of hours you work decreases, your income will not falter and can even grow. Furthermore, the time saved by increasing your rate will serve as a very valuable asset to yourself and your brand. This time can be spent searching for new clients, promoting yourself and your work, and continuing to master your practice. You could even pick up a new skill to add to your freelancing profile! More importantly, this free time can be spent with family and friends, a rarity amidst the freelance hustle. Time is everything for a freelancer so every opportunity to increase free time in your schedule should be jumped at.
2. Pricing Psychology
It’s no secret that the greater the price of a product or service, the greater the expected quality is. Naturally, human beings are wired to believe this to be true in all cases- it’s simple psychology. Therefore, the freelancing ate you set for your work is a direct reflection of its *perceived* quality. If you set a high rate, clients will expect high-quality work, while a lower rate will generate expectancy of less. But clients want their freelanced work to be exceptional if they are going to pay an outsider to complete it. They are willing to pay the higher rate for higher quality work, you just have to hone in on it.
3. Freelancers have overhead costs.
The reality is that our rates should encompass so much more than the time it takes to complete a task. A full-time employee really costs 1.3-1.6 times their salary due to benefits such as pensions, insurance, vacations, and taxes. When deciding on a rate, freelancers should calculate it the same way.
Not sure where to start? Check out the feature on the Lance app that lets you see what peers in the same industry are making. This freelancer’s hourly rate calculator may also be helpful. Once you’re confident about your numbers and your expectations – it’s all about how you communicate it to your clients.
How to tell your clients.
If you’re giving it your all and going above and beyond to make your customers happy, you’re already halfway there. Satisfied customers are more receptive to a price increase. And yet it is still nerve-racking to write that price increase letter.
As a freelancer, much of the service you provide is measured beyond the actual work you produce. Ultimately, clients chose you for YOU. What else can you offer that would add value beyond your work? Perhaps it’s a new logo or new packaging. Or perhaps it’s an infographic showing the positive results and ROI you’ve achieved for your clients. Once you show your client something is worth more, or that you have improved a part of your service, it will be easier for them to say yes.