Freelancing: How To Set Your Hourly Rate

If you have recently taken the decision to go it alone as a freelancer, congratulations! You are about to enjoy the UK’s most fulfilled independent workforce that is growing bigger by the day.

Signature Works in Liverpool is a dedicated flexible office space provider and we provide a wealth of support for freelancers to boost their success. Taking the plunge to become a freelancer doesn’t mean that you have to be on your own. There are close to 2 million self-employed people in Britain and that number is rising and so you’re actually part of a rapidly growing trend.

We endeavour to support our members as much as possible and providing useful information is just one of the ways we can help.

When it comes to freelancing, one of the hardest things is to accurately set your hourly rate. It can be difficult to calculate prices that don’t put your clients off but also don’t leave you short.

The team at Signature Works in Liverpool has these vital tips for you:

What Pricing Methodology to Use?

According to small business accountants, there are several ways you can set your pricing using different formulae including cost-plus pricing, market-based pricing, and value-driven pricing. What you pick will affect whether you charge by the hour, month, or project.

It isn’t unusual for freelancers to base their hourly rate on the salary they were earning as a full-time employee. Although that figure is a reasonably good benchmark, you have more expenses as a freelancer that you’ll need to factor in if you want to be paid a reasonable amount for your work. It’s essential that you take into account all your overheads, costs and taxes when it comes to setting the pricing for your work.

Here we take a closer look at the different methodologies:

Cost-Plus Pricing

Cost-plus pricing is when you calculate what you need to get paid based on your monthly expenses. It’s a fact that your rent and bills don’t’ fluctuate every month and so you want to ensure your static bills are paid from the money you ear. You have to calculate how long you intend to spend working each day and how much you need to charge an hour to meet your regular overheads for the month and this is called cost-plus pricing.

Market-Based Pricing

Market-based pricing is simpler to understand although it is much riskier because you base your pricing on what others are charging for similar jobs. If you offer a wider range than your competitor, this methodology for pricing suggests you put your prices up to reflect it. The only downside which can add to the risk of pricing yourself this way is that your clients may be tempted to look elsewhere unless you can provide a very good reason for them to use you over a cheaper competitor which may not have as much to offer them.

With more people freelancing than ever before, many of whom live in countries with cheaper living expenses, you may find yourself undercut by others if you adhere too strictly to market prices. It’s best to use them more as a yardstick than a rule.

Value-Driven Pricing

Value-driven pricing involves basing your charges on the value of your work to clients, rather than basing it on the cost of producing the work. This can become very complex because the value is a perceived thing and that leaflet you wrote for a client, generated loads of leads to make it valuable to them and so they should be prepared to pay you a premium for producing it.

As a freelancer, it’s an uphill struggle getting full recognition for the value of your work but it’s important that your clients appreciate it. It’s very easy to pitch yourself too low just to get the work in the first place but you should remember that you’re probably saving your clients considerable money by providing them with top quality work.

The next consideration for freelancers is whether they should charge an hourly rate, a monthly retainer or flat payments and each freelancer is likely to have a different idea of what works for them.

Here we take a look at the pros and cons:

Hourly fees

Pros

• You can bill for all of your work including any revisions you make
• You will be incentivized to be more productive during your working hours

Cons

• The client probably has a figure in mind they are prepared to pay which means you may have to come down from your original quoted figure
• You have less flexibility and your clients may expect you to complete the next job in the same time and for the same rate as last time.

Project-based fees

Pros

• You are free to charge whatever you want without being scrutinized for how many hours you clock-in
• You can set a different rate if you get a referral client rather than being tied to what you charged them

Cons

• Clients usually want more work if they are satisfied with your performance and they may expect to get everything else they need for what you originally charged
• You are not in control of the speed of the project which means it could drag on for a few months and that will influence your pay

Signature Works is dedicated to providing full support to its growing membership based in Liverpool. Working from the city centre’s stunning Bling Bling Building, Signature Works co-working members have the advantage of some pretty significant membership benefits including:

• FREE Membership of the high-tech Signature Fit Club in Liverpool
• A Privilege loyalty card that offers a wide range of discounts and offers
• Access to Business Advice from Industry Leading Professionals

Working for yourself can be extremely rewarding but also very lonely. Come and join our collaborative community in the heart of Liverpool and you will be on a fast track to success in your chosen field. Signature Works is more than somewhere to rent a desk or hire a private office in Liverpool; we have a commitment to our members that is catapulting them to success.

FIND OUT HOW SIGNATURE WORKS IN LIVERPOOL CAN JETTISON YOUR BUSINESS AND CONNECT YOU WITH OTHER SMALL BUSINESSES YOU CAN GROW WITH BY CALLING OUR MEMBERSHIP TODAY!