What’s your day rate? It's a question freelancers get asked every day, but a surprisingly hard one to answer. Here are some of the top tips that we learned.
When I went freelance for the first time I was asked a question I’d never been asked before: “What’s your day rate?”It’s a question freelancers get asked every day, but a surprisingly hard one to answer.This was a hot topic at the Flylancer event last week (Flylancer is a global community for location independent freelancers and digital nomads) where dozens of freelancers shared their experiences.Here are some of the top tips that we learned.
Take a second to think about the software, equipment, travel and other expenses you need to cover. You don’t get holiday and sick pay either.Then factor in tax and savings and it starts to add up. Here’s a handy calculator that works out your day rate based on your target income, working hours and holidays.
When you’re competing for work, knowing what other freelancers are charging will help you to come up with a sensible price. Good data on market rates is hard to come by, but this article gives a good starting point.It’s not all about rates though. Clients (the good ones anyway) rarely choose the cheapest option. We discussed the importance of building your portfolio and having a good personal brand, though that’s a topic for another day.
The go-to pricing method for most freelancers is “time-based pricing”, i.e. a day rate. Sometimes though, it’s better (i.e. you’ll earn more) if you use another method.Clients buy your work because it’s worth something to them. They have a business goal, and you’re helping them achieve it. If you take the time to understand these goals, then you can understand the value you’ll create for them.This means that you can price based on what the work is worth to the client, rather than what you want to be paid for it. So next time you know you’re going to be delivering a big win for a client, why not try adding a zero to the fee!You should also check out freelance guru Ben Matthews’ recent post on the different ways to price your work.
Sometimes clients will say they don’t have the budget to pay you and ask you to work for less. A few good points came up around this.Let’s say you quote a client £500 for a piece of work, but they don’t have a budget, so you agree to do it for £50 as you like them and want to work with them in the future. Now the client sees you are worth £50, not £500.When the client has a budget of £500 for the next project, they might take it elsewhere.Be careful not to devalue your work by dropping your rate too easily.One tip on how to balance this is to be clear what your day rate is and apply a temporary discount. Reinforce this by clearly showing your normal day rate on the invoice and showing the discount on there too. You could mark it “this invoice only” to hammer the point home.This way, not only does the client value you at the higher price still and it removes the expectation that you’ll continue to work at the lower rate.
It’s tempting when you’re new to freelancing to drop your rate or work for free to get those first few clients. This was the topic at last month’s Flylancer event which we wrote up here.
Get regular content and resources for growing your business!
As part of HMRC’s Making Tax Digital, sole traders will soon be required to complete 4 tax submissions per year instead of 1.
Take a look at the latest sole trader tax rates for the 2021/22 as well as our advice on how to prepare for the new tax year.