In this article we want to discuss one aspect of freelancing which can be the deciding factor in becoming a successful freelance professional. Pricing your freelance services is not about getting the right amount of money for your work, but the right quality of life you want to live. Hence, you should be well aware of all the internal and external factors to correctly decide the right price for your work. Below we will discuss some strategies of setting the right price for your freelance work.
Before starting, the price setting exercise we would recommend you to try is to answer the following questions. You can also add extra questions to make the process more comprehensive.
After answering the above question it’s time to set your target annual compensation. For this you need to consider if you are single, or need to support a family. How much do you need to expend in to support your lifestyle, and how much do you need to save? Based on that you can come up with an amount.
Let’s assume that you want to earn an annual income of €70.000 (Basic living expenses of €50.000 + Freelancing expenses + Health Insurance of €20.000)
Annual Compensation = €70.000
Hours per week = 40 hours (7 days X 8 hours/day)
Week of absence = 4 weeks (due to vacation, health issues and other reasons)
Working week per year = 48 weeks
Working hour per year = (48X40) = 1920 hours
Hence, rate per hour = (€70.000/1920) = €36,45/hour
In the first glance it looks like that if you charge €36,45/hour to a client for your work, you will be able to support your desired lifestyle. But, this is where freelancers can make a big mistake. Maximum working hour and billable hours are different and one should consider only the billable hour to calculate one’s hourly rate.