Finance Series II: How to Price Your Freelance Services

If you read my last article on pricing, you should know what your hourly rate is. If you didn’t read that article, I would go back and read it now before continuing on.

This article will cover all the ways you can use your hourly rate to determine pricing, and not only in the obvious way of billing per hour.

The Per Project versus Hourly Myth

I mentioned in my last post that I don’t believe in a per project versus hourly pricing model. That’s right! I’m not sure why people fixate on this distinction. After years of working as a freelancer, I’ve found they are one in the same. In either scenario, you are pricing based on your hourly rate. The only difference between per project and hourly is how much information the client wants up front.

When a client asks for per project pricing, it’s probably either your first time working with the client or the project is really big. In this case, you’ll need to send them an estimate for approval before starting work - which is basically how many hours you think the project will take multiplied by your hourly rate. Then, I would add 20-30% onto that, because no one wants to go over the original estimate. I will never give clients a discount on my time. However, if the estimate is too high for their budget, I’ll suggest ways we can cut corners. For instance, maybe I'll show two design options instead of three. Clients really appreciate these conversations, where you give them choices as to how their money will be spent.

When your client asks for per hour pricing, they probably want to use you as an ongoing resource. In this case, they might have a series of tasks they’ll need your help with indefinitely. This is the type of situation I prefer because it initiates a long-term relationship. That being said, I usually let the client drive the conversation, and let me know what works for them. In this per hour scenario, I’ll send hours updates via e-mail frequently, so the client isn’t blindsided by how much I’ve been working.

Either way, make sure every client is aware of your hourly rate up front- whether it’s telling them, or including it in your estimate. This way, if they do have ongoing tasks they need done, they know what you cost and will be likely to reach back out to you.

How to Estimate a Project

When I’m providing an estimate for a project, I always put it in e-mail. In the past, I used an estimate template. Now I just type out the hours breakdown in the subject of the e-mail. This works better for me, because I have the client’s approval documented via e-mail. It also allows me to deliver estimates more quickly - something the client really appreciates.

So let’s get to the fun part - how to figure out how many hours a project will take you. Every estimate should include these components:

• Meetings (Initial Brief + Review Rounds + Emails & Calls)

• Creative work

• Edits

• Prepping Final Files

• Room for Additional Costs (Stock Photos, Fonts, Travel, etc.)

Now, I’m going to walk through how I approach each of these categories.

Meetings: For your average medium-sized project (a 30 page booklet, for instance), I like to assume I’ll have several 1 hour meetings to review the project with the client. I usually spend a few hours on e-mails, and 1-2 hours on phone calls with the client). Make sure you overestimate on meetings, especially when working with a new client. How they will want to talk to you can really vary from client to client. In order to save the client money, I try to communicate through e-mail as much as I can. Also, it’s great to have their comments/edits documented, versus having them relayed over the phone.

Creative work: This is the hardest part, and you need to go with your gut. The longer you freelance, the easier this will become. As a rule of thumb, I tend to estimate 30 minutes to1 hour per page for a booklet project - depending on the complexity of the content. For a flyer (front and back), I would probably estimate 2-3 hours per side. For a basic logo project, I would show 3 choices for the logo, and estimate 3-4 hours per option, for a total for 9-12 hours. If I work faster than you, that’s totally fine! Try to be honest with yourself as to how long something takes you.

Edits: This is where most freelancers go wrong. They don’t leave enough time for edits, and then they blame the client when edits exceed the estimate. This is not the client’s fault, unless they completely changed the scope of the project on you. As a rule of thumb, I tend add on at least 40% of the design work hours estimate for edits. Say I estimated 20 hours for design work. I would estimate at least 8 hours for edits. Maybe this sounds excessive, but there is no harm in overestimating.

Prepping Final Files: In order to be a great freelancer, you need to be extremely organized. By leaving room in the estimate to prep files, you can make sure everything is in order - from file names, to folder structures, to colorways, to linked files. When I hand off files, they are usually pretty perfect! That’s because I don’t rush through this step, given that I accounted for it in the budget.

Additional Costs: You’re going to have to use your judgement on this one, because it really varies by project. Just think about whether you’ll need any outside assets for the project. Do your research as to what stock photos and fonts cost on various sites. If you absolutely don’t know what to do, estimate a couple hundred dollars for this. If you go over, just get the client’s approval, and tell them you are under budget in another category (which you will be, if you’ve followed my advice so far). You can never communicate too much with a client.

Estimate Example

Now that I’ve gone through all of the categories, here’s what my estimate might look like for a basic 30 page booklet (including a 30% overestimation):

Meetings & E-mails: 8 hours

Design Work: 25 hours

Edits: 10 hours

Prepping Files: 3 hours

Additional Costs (Stock Photos & Fonts): $300

TOTAL ESTIMATE: $4,440

*Calculated at an (example) hourly rate of $90/hour.

For the record, what you see above is literally what I would send via e-mail, word for word. I would obviously attach a nice greeting, and ask if this all sounds good at the end of the e-mail too.

Using your Hourly Rate to Calculate Other Costs

This is where it gets fun, and why I put such an emphasis on knowing your hourly rate. You can now calculate what your time is worth in a much broader sense. If someone asks you to speak or teach a class, you can figure out how many hours that will take and how close it is to your hourly rate. If you are making a product, would you pay your hourly rate x the number of hours it would take to have it completed? Are the returns worth it?

I’m constantly asking myself the question - is it worth it? Not only in business, but in my personal life. This is how I justify having my grass cut and my house cleaned. If a service provider has an hourly rate that is much lower than mine, it’s really a no brainer. Suddenly, it’s easy to make these calls because you know what your time is worth, and you don’t feel bad or spoiled taking things off your plate. It’s just a smart business decision.

I can’t emphasize enough how important it is to charge what you’re worth. Again, if you don’t hear you’re too expensive once in a while, you are charging too little. Charging what you are worth will attract the right kind of clients, clients who respect your time and skillset.