One of the freelance questions I get asked most frequently is: How do I price my services?
When going freelance or taking on contract projects, pricing yourself appropriately is critical. Your. Time. Is. Valuable. I’ve been on both sides: freelancing myself and hiring freelancers, so I feel like I can offer some advice in this arena. You can even take some of this advice and apply it to the “a prospective employer asked me ‘what is your salary expectation?’ – how do I respond?”
But first, a story…
When I first began freelancing it held a very simple goal: pay off my student debt faster. Kthx. And I did. And I learned a lot from my very first freelance gig. I went on a bid site (freelancer.com), bid on any job I thought I was even remotely qualified for, and won several contracts. One such contract was transcribing 40 hours of interviews for someone’s PhD research. I did this job for ONE. HUNDRED. DOLLARS. WHAT?! Yeah. I had no idea what to price transcription services at. This was obviously a steal. This is a period of my life that was absolute agony for me. I’m not a quitter. I did the job. I hated the job. I learned that my time was valuable. #lifelessons. I now know that, and that will never transcribe anything ever again. Never.
Cool story. That was dumb. Now get on with the advice please.
Alright, so there are several things you want to consider when pricing your services:
- What do you want to earn?
- Be realistic; I initially based this annual value as what I was making at my first ID role
- Consider the things you have to pay out, such as taxes, HST (if you’re Canadian), and health care
- The biggest mistake I see people make is pricing their services too low and only finding out when they owe a bunch of $$$ to the CRA or IRS. It can be an expensive lesson to learn.
- Do you want project based pricing? Hourly pricing? Salary?
- Salary is self-explanatory, but you still need to factor in the things you’ll pay out to. Hourly pricing can be good if you’re unsure of how much time you spend doing each type of task you’ll be doing. Project-based pricing is typically higher, but if you do project-based pricing you may get into an underpaid pickle if it takes you longer to complete a project than what you had quoted.
For me, as I previously explained, I initially priced my services based on the hourly breakdown of my first ID salary. I then added to that. So, let’s do a simple example:
- Starting rate: $20/hr
- I set aside 35% of each project for taxes, and 15% for HST, so I would add those two things (50%) and then add that to my rate – so now I’m at $30/hr.
- Then, I add 20% to that to put aside for healthcare – now we’re at $36/hr
Now, this takes a bit of research, but I recommend you start with your provincial/state/federal tax sites to identify how much you need to pay in to taxes based on certain tax brackets. It might suck to contribute more to your tax account than necessary, but at the end of the day, it’s always nice to not have to pay out all of your tax savings vs. owing more.
The other major things to consider is: What experience do you have? How long have you been doing certain types of jobs/roles? Where do you live? These factors all play a part in pricing yourself appropriately.
Pricing yourself can be incredibly intimidating, but I’ve learned that valuing myself accordingly and confidently negotiating my pricing has more often resulted in prospective employers not batting a lash versus balking at my pricing. And if you’re being fair with your prices and still encountering prospective employers balking at your pricing…are those the employers you want to work for? For me, it’s not. There will always be more contracts. I promise you.
- The eLearning Guild has an incredibly helpful calculator: 2018 Salary Calculator, and you can use this as a starting point to base your annual value according to various elements (e.g., state in which you live, education, years of experience, etc.). Another thing the eLearning Guild does is an annual salary and compensation guide – aimed at recruiters, but also helpful to peruse if you’re looking into working for yourself.
- Estimating Costs and Time in Instructional Design by Donald Clark provides a great overview.
- The Chapman Alliance – How Long Does it Take to Create Learning is a resource I recommend OFTEN.