The question I get asked most from fellow freelancers is, “how do you determine your rate”? It is a tricky question with no direct response that is appropriate for anyone one person in any one area. There is a lot of that goes into determining a rate – a lot of personal questions need to be answered and a significant amount of research within the industry and area needs to be done as well. Or, you could just wing it and see how a rate is working for you and adjust accordingly. However there is one thing that many will ignore – the simple psychology of your rate.
I tried to put together a simple and quick reference point for freelancers confused about their rate or new to the whole environment in “Freelancers, how to determine our rates?”. However, I did get a lot of personal responses to the post asking why the rates were so low – I assumed people would be asking the opposite. Well the answer is easy, I took into account the psychology of a rate.
A lot of my close friends and colleagues place their rates between $75.00 and $150.00 an hour. Granted these individuals are extremely talented and have the portfolio and experience to match. I just can’t see justifying that high of a rate without coming across as arrogant or alienating many of my clients. But that doesn’t mean that I am making less money per project – I actually make slightly more. Because it has nothing to do with your hourly bill rate, it has everything to do with your clients’ comfort level with your relationship.
I’ve determined that the optimal rate for small to medium sized clients is $65.00/hour. It is slightly more than $50.00/hour, connoting some sort of value, and significantly less than $100.00/hour – I’ve found that anything close the breaking point of $80.00/hour is generally perceived as expensive and typically unnecessary. Clients generally have a point at which they will “work with you” because they realize they get what they pay for – however back-of-mind they also have a point at which they realize you are too expensive and negotiations will be uncomfortable and impolite. Don’t be naive, clients are doing the math and realize that a rate of $100.00 an hour comes out to be roughly over $200,000.00 a year – more than most are making themselves. And yes, unfortunately most are not taking into account that you are not constantly working a 40 hour week or just doing this on the side.
So how do I keep up with my colleagues charging $100.00 an hour when I only charge $65.00? It is simple; I play the psychology card and work on everyone’s comfort level. If I changed a client $100.00 an hour for 5 hours of work that is $500.00 – simple math. Instead, I charge clients $65.00 and hour for 8 of work which works out to be slightly more — $520.00. The thing I realized first in this industry is that clients will negotiate over a few dollars an hour but won’t over a few hours on a project. They are more concerned with the project rate and its cost than the duration of the project.
The simple fact is that most business people will assume they know how much they should be paying for your services, but have no idea how much time it takes you to do your magic. The clients that say “it should only take you …” are the ones you should be running from anyway. Now, don’t get me wrong – I am not conveying poor business ethics or in anyway proclaiming you mislead your clients. I simply suggest incorporating the idea of charging less for the opportunity and convenience of having a longer project duration. Longer project durations reduce stress, increase time for creativity and help alleviate the possibility of missed deadlines – all completely justified reasoning. Also, including this buffer will give you some negotiating room – if the client requests a fast turn-around, you simply explain that it is possible but at a raised rate. Let the client at that point make the decision.
I should mention that the psychology of your rate works both ways – know your client! If you have a large and established client, a small rate will leave them thinking you are inexperienced and unprofessional. Most larger corporations want to pay over $100.00/hour – it isn’t that they want to pay that, it is that they want to hire the designer demanding that. Larger clients know more than anyone that you get what you pay for, and they are willing and have the resources to do so.
Your rate is a personal thing – don’t take my or anyone else’s advice right on. You have to work out your rate for yourself. This post and others should be used as a reference point! Figure your rate out through trial and error – you may take some projects at less than you are worth and you may lose some gigs because you went to high; but that is the nature of figuring out this all important number!