What to Charge? A Freelancer’s Guide to Giving an Estimate

When you’re starting out your freelancing career, you’re facing dozens of challenges and dilemmas. Although you’ve been dreaming about work freedom, it will soon come to your senses that this comfort brings a high level of responsibility, as well.

Working for a large company insulates you from numerous direct responsibilities. You’re just a cog in a huge business machine. And even if you make a mistake, it won’t break down the entire mechanism.

As opposed to that, freelancers feel every wrong move they make. Since your existence will depend on your income, learning how to charge your services is the essential prerequisite for becoming a self-reliant freelancer. While the rates and rules differ from niche to niche, there are some common features that need to be followed in order to make a living from freelancing.

The most important factor in ensuring a steady income is a well-composed estimate.

How to set the minimum rate?

This is one of the eternal questions that bothers every freelancer.

Most new performers on the freelancing bandwagon simply can’t figure out how much they should charge for their work. This is so due to the fact that they start with a false premise. Namely, they don’t look under the surface, i.e. their living conditions and the current status. On the contrary, many freelancers think only about one particular project when setting their work rates.

However, if you apply a reverse logic and start calculating how much money you need for a dignified living, you’ll find it easier to set your rates. For instance, let’s say you’re a designer who wants to launch an independent career. Here’s what you should take into consideration when setting your rates:

  • Basic living expenses – Calculate your rent, food, utilities, clothes, and transportation. So, your monthly income shouldn’t go below the total sum of these expenses. Let’s say you live in Cleveland. According to the Numbeo calculator, a single person needs about $1800 to cover all the monthly expenses, rent included. So, if you work 40 hours per week, your hourly rate should be around $11, so as to make the ends meet. Just for the record, these are the rates for jobs that require no qualifications. Even beginner designer should charge at least two times more than that.
  • Personal lifestyle – This part comes after you’ve covered your living expenses. Some people just pay their monthly Netflix fee and they don’t need anything else, while others like to travel and spend money on many different pleasures. Since this depends on personal preferences, everyone should calculate these expenses for themselves and include them in their work rates.
  • Taxes – You’ll need to give a certain amount of your income to the tax authorities. These rates are different from country to country. Therefore, don’t forget to include this deduction in your rates.
  • Your experience – A newbie designer on Elance can’t go for too high rates. However, as you gain experience and build your portfolio, don’t hesitate to increase your rates.

Negotiations regarding obligations

If you want to submit a realistic estimate, you need to find out more about each and every task you should do in advance. Therefore, it’s crucial that you talk to your clients and ask them to provide you with as many details as possible for every point in the project specification.

Let’s use the aforementioned example of a freelancer designer one more time. If they’re given a task to create an original brochure for a small business, it’s important to determine who provides materials for that task. For instance, if you have to find photos for this purpose on your own, that feature should be included in your project estimate.

Moreover, clients often provide designers with copies that don’t meet the basic standards of a commercial brochure. So, tell the client to hire a professional copywriter if they want their brochure to look professional. If they don’t pay attention to your request, inform them that you’ll find the right person for that job, but it will incur some additional costs. Add these features to your estimate, as well.

Get to know your skills

Now we get to the key stage of an estimate-giving process. Your entire project will depend on self-assessment. This is usually a big deal for beginner freelancers because they still don’t have a clear view of their own abilities. When you’re in charge of your own projects, it will take some thinking to be able to assess your skills.

For starters, bids on less demanding projects. In line with that, a designer should start with logos for small businesses rather than large websites.

Such a moderate approach to freelancing will yield two major benefits. On the one hand, you’ll learn more about yourself and the way you manage your time. On the other, smaller projects can be done within a shorter period of time.

Hence, you can make dozens of such deals and build a distinguished portfolio in a few months’ time. As a result, you’ll have something to rely on when negotiating work conditions with your new clients.

Provide work time details

When you’re writing an estimate, you need to bear in mind that this document won’t only affect your work process and your obligations pertaining to it. It will also serve as the base for invoicing and the total sum charged at the end of the project.

For all these reasons, the largest part of your estimate should contain details on the time spent working on each and every task within that project. Therefore, don’t forget to add these time features to the estimate:

  • Meetings with clients – Not only that meetings are important, but they’re the crucial prerequisite for future work. Thus, apply your hourly rates to these occasions, as well, and add them to your estimate.
  • Brainstorming / Source research – Although methodology varies from field to field, every freelancer will need some time to come up with original ideas for their projects. Hence, these hours should also be included in your estimate.
  • Practical work – The essence of every project, your practical work hours and specifications should take the central part of your estimate.
  • Materials – Online freelancers might have additional expenses for some special software licenses they need for their projects. On the contrary, offline freelancers will have to cover the costs of materials used for their work. They should all include these features in their estimates.
  • Fine-tuning – Inform your client that they’ll have a chance to make some changes once the project is finished. However, limit the number of client’s interventions (more about it later in the text). They certainly won’t be too happy with paying you dozens of additional hours for fine-tuning.

Your estimate should contain various time-related details so that your client can have an insight in every single second you’ve spent working on their project. Furthermore, back up your estimate with some firm evidence gathered with time-tracking solutions. They will be extremely helpful for inexperienced freelancers who still can’t assess how much time they need to finish a project.

Deliver precise milestones

As you’re composing your estimate, consider breaking your project into several milestones. You should suggest this option to your client in one of your meetings before you start making an estimate draft. Furthermore, express an idea that each of these milestones should include payments for the tasks finished up to that date.

As a result, you’ll be rewarded for your accomplishments as you work. Also, your client will get regular feeds on the project progress.

Apart from that, adding milestones to your freelancer efficiency kit will keep you self-disciplined in every project you’re working on. Since freelancers don’t have any firm time anchors, like fixed work hours, they should set their own little orientation points in time. Milestones are a perfect way to achieve that goal.

Protect yourself from excessive changes

Depending on the type of the niche, freelancers are asked to make a different number of changes while working on their projects.

Some clients are able to recognize when they overdo with additional requests. However, others don’t possess that level of self-awareness. Rookie freelancers should take great care of this issue, so as to avoid working their socks off for entry-level rates.

What you should do is explicitly specify in your estimate how many changes a client is allowed to make after you submit the final version of a project. For instance, if a designer has followed all the instructions from the client’s specification list, but the client has changed their mind in the meantime without informing the designer, they can have a serious misunderstanding.

Therefore, speak your mind during the negotiations and don’t give in. By doing so, you’ll protect yourself from unreasonable requests and show a high level of self-confidence, which is something businesspeople will appreciate.

Leave out indirect work

Although we’re on the same page with freelancers, when it comes to charging, it’s important to be fair and realistic in your estimates.

In addition to your skills and efficiency, your reputation is the third most important factor for a successful career. Therefore, if you populate your estimate with inaccurate information, you’ll lose your client’s trust. To avoid such a misfortunate outcome, leave out any research that isn’t directly related to your project. For instance, if you spend a whole day upgrading your LinkedIn profile or reading materials unrelated to the project, you shouldn’t charge for those hours.

If you want to retain a positive public image, learn how to separate working on projects from the time you spend improving your personal skills.

Nevertheless, your client might insist that you learn how to use a software tool you’ve never seen before. In that case, you should charge the time required to master those new skills.

When should you work for peanuts?

It goes without saying that freelancers depend on every single cent they make. It’s an uncertain type of work, so they should be assertive when they’re charging their clients.

However, sometimes making an exception is a more reasonable solution. For instance, if your work has been noticed by a renowned design studio, you should make a one-time reassessment of your charging policy. They might suggest that you collaborate with them on a certain project for a lower amount of money than you’d charge as a freelancer.

At first, this might look like underestimation. Nevertheless, it could turn out to be more beneficial for your portfolio than any price you’d set. Namely, when your future clients see that you’ve worked with such a renowned company, they’ll be more inclined to pay you higher rates.

So, take all the factors into consideration when making such decisions. Sometimes working for peanuts will pay off through more lucrative deals in the long term.

How can an estimate reveal a bad project?

As you keep expanding your knowledge and gaining more experience, you’ll gradually realize that you don’t have to accept every project you bid on. In some cases, it’s better to skip a project than to torture yourself working with a complicated client.

Giving an estimate is the right moment to make such a decision. In line with that, if a client asks for a significant discount when you send them your estimate, it’s a clear sign you shouldn’t work together. Moreover, if a client is too nitpicking about your estimate details and insists on too deep clarifications, you shouldn’t waste your time on them.

Of course, your decisions in such situations will depend on your financial and work conditions. If you have a regular inflow of new tasks and projects, you can afford refusing a project once in a while.

However, if your budget and projects are at low tide, you might need to agree to some unattractive projects. Nevertheless, don’t every go below the price that ensures a dignified living for a contemporary freelancer.

Creating an informative and sincere estimate is the backbone of every business collaboration. Due to their work independence and freedom, freelancers can apply different rates in different situations. However, they should do their best to always provide their clients with comprehensive estimates for their effort. When the rules of the game are set at its beginning, no room is left for misunderstandings.

Therefore, implement our ideas in your estimates and ensure steady professional growth.

Mark Thomasson
Mark is a biz-dev hero at Invoicebus - a simple invoicing service that gets your invoices paid faster. He passionately blogs on topics that help small biz owners succeed in their business. He is also a lifelong learner who practices mindfulness and enjoys long walks in nature more than anything else.
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