I recently purchased a “money tree” plant for my office, and that inspired me to start a little finance series on my blog. In the past I’ve shied away from these conversations, but I know it’s something we need to talk about as creatives. If sharing my experiences means we get paid more fairly as an industry, then I’m an open book!

There’s too much info to cram into one post, which is why I’ll be doing multiple articles. In this post, I’ll be introducing you to my pricing philosophy. In future posts, I’ll be talking about charging for projects, banking & taxes, and raising your rates.

In my first year of freelancing, pricing was my main concern. No one seemed to want to talk about it. Was I charging too much or too little? For the record, I was charging WAY too little. I couldn’t find concrete advice anywhere online and I didn’t have freelancer friends. I had to figure it all out through trial and error.

Everything I’m sharing with you is based on what has worked for me in my five years as a freelancer, so please take it with a grain of salt. In the end, you need to decide what’s best for you.

There’s one principle I live by - it all comes down to your hourly rate. Everyone needs to define their hourly rate in order to make a decent living. Once you define your hourly rate, business becomes a lot more simple. There are many ways to use your hourly rate, but we need to start with the basics and decide what it is first.

You might be asking - what about charging per project? I actually don’t believe in the per project versus hourly concept, but more on that in my next post.

There are three factors that should determine your hourly rate:

1. Where you live

2. Resume

3. How busy you are

Now, let’s break each of these down and talk about what they mean…

1. Where you live: In larger cities, the cost of living is more. What constitutes a decent living in Des Moines, Iowa is very different than what constitutes a decent living in Chicago, Illinois. It doesn’t matter where your client lives. I work with clients all over the country, but I charge what’s reasonable for the Chicago suburbs because that’s where I live. You can charge 25-45% higher if you live in one of the larger cities.

2. Resume: A new freelancer can’t charge as much as someone who’s been freelancing for 10 years. Experience prior to freelancing counts too. I think everyone should work in an office for a few years before freelancing, just to learn the ropes and meet contacts. However, you can probably charge a little more if you spent this time at a hot agency or well-known corporation. Also, you can charge more if you know how to do things other creatives don’t. Maybe you are really good at photography, or maybe you know how to animate. Unique skills mean more money.

3. How busy you are: This is how you know when it’s time to raise your rates. If your hours are full, and people are happily paying your rate, it’s time for an increase. If you aren’t busy, it could be that you are charging too much, or more likely you need to invest time in marketing your business.

Now that we know what matters, let’s talk about what doesn’t matter when calculating your hourly rate…

• Lifestyle: I don’t like to think of this as a factor, because every freelancer should be able to have a nice lifestyle as they work their way up. It’s the same as in corporate. You don’t really get to decide what lifestyle you want without doing the work. In the beginning, things will be tight. Later on, you could be rolling in it. It’s all about getting paid what you’re worth. Better skillset = better lifestyle.

• Who the client is: Do I think you can charge more for a high profile client? Maybe. But you most certainly should not charge less for a low profile client. Don’t fall for the, “but this will be a great portfolio piece” song and dance. If the project is that amazing, why wouldn’t they make room in the budget for it? Awesome projects are NEVER a reason to charge less. If people can’t afford you, it’s probably not a good fit. I would try to be as consistent as you can with what you charge across the board. If you charge people different rates, it can get awkward with referrals. It can also be difficult to keep track of.

• How much you want to work: I used to think this mattered, but I don’t anymore. You should be paid fairly for your time, no matter how many hours per week you’re working. However, most freelancers think they can work more than they can. I tell most beginners to aim for 30-35 hours per week on average if you’re working full-time. You need the other hours to grow your business, send invoices, and update your portfolio. I’ve found that billing 40 hours per week isn’t realistic every week. Some weeks, I’ve billed much more than that, but it’s never what I’m aiming for.

Now that you know my hourly pricing factors, let’s talk numbers. I’m going to list what I think are fair beginner rates for various cities. By beginner, let’s assume you have 3 years of prior experience working in an office or agency (which I always recommend)…

• Ann Arbor, Michigan $40/hour

• Columbus, Ohio $45/hour

• Atlanta, Georgia $50/hour

• Chicago, IL $55/hour

• Los Angeles, California $65/hour

• New York City $70/hour

Here’s how to calculate what I think your rate should be, based on these figures:

1. Take the city rate that’s comparable to the size of your city.

2. Add $5 or each additional year experience you have beyond 3 years of office work. Subtract $15 if you are fresh out of school (not recommended).

3. If you have a unique expert skillset, or impressive work history, add at least $10 extra - more, if you are very marketable.

   *In order to figure out your estimated yearly salary, multiply your hourly rate by how many hours you plan to work in a week, and then how many weeks you plan to work per year. There are 52 weeks per year. The U.S. has 10 annual holidays. I tend to calculate at 48 weeks in a year when calculating annual salary.

Here’s an example, using this equation:

Say I’m a designer who lives in Atlanta, Georgia. I have 3 years experience freelancing and 3 years prior experience in an office. I also have a degree in photography, which tends to be very helpful on projects.

$50 + ($5 x 3 years experience) + $10 for photography degree = $75/hour

Annual Salary: $75/hour x 30 billable hours per week x 48 weeks per year = $108,000 Profit (before business expenses)

Here’s one last thing I will say on the subject - maybe these rates sound too high, but in my experience they are not. Creatives are underpaid, and I think we should be raising the bar. You never want to charge too little, because people will think you are inexperienced and there’s a reason you’re cheap. Cheap rates attract bad clients. Charging too little will actually stunt the growth of your business, and the growth of the industry. This advice goes for selling products as well - if you charge too little, people will assume your product is low quality.

A good litmus test is to ask your loved ones what you should charge. They will always think you’re worth more than you do, and are probably a good benchmark. I regularly ask my family members for pricing advice.

You’ll know your hourly rate is perfect when every once in a while, people tell you that you’re too expensive. It shouldn’t happen too often, but sometimes. On the flip side, you have to be worth what clients are paying you and rise to the occasion. You have to be responsive, organized, true to your word, and deliver results on-time. A lot of designers fall short here, so if you can deliver on all those things, the clients will keep coming back.

If you need specific advice on what you should charge for a project, you can email me at nicole@nicolecicak.com, and I will try to respond with my thoughts! Stay tuned for next week, where I’ll be discussing all the ways you can use your hourly rate to calculate costs.