Work In Progress — Updated 01/09/24

You texted me asking how to come up with your freelance rate! Ok awesome here’s what I think:

Unless you provide a single service (i.e. Lawyer), it’s ok to have different rates for each client and project, it’s okay to negotiate, and there’s no hard and fast rule about how you decide your rate. And, full disclosure, this is just how I set my rate as someone who often has amorphous job titles. If you have a conventional job, you can use google to find much better numbers. Anyway, here are the three numbers I start with to set my rate:

  1. The “How Much Do I Value My Time” Rate [R1]
    How much do you actually want to be paid? At the end of the day, you just need to be paid at least what your time on the project is worth. Come up with a number that feels right. For example, I had a mechanical design project with a client who I liked; the project was exciting, would not be too challenging, and I‘d get to travel for it. I decided $45/hr was how much I valued my time on the project.

  2. The “How Much Have I Previously Been Valued” Rate [R2]
    How much did someone else pay you? This keeps you within market normal and helps you know what a “fair” rate would be. If you don’t have a recent hourly rate, calculate this as your annual pre-tax salary in a similar role divided by 2,080 (i.e. 40hr x 52wks) and add a $0-$10 to account for benefits like insurance you don’t receive when freelancing. If you’re a student, think about what you were paid during an internship or look up standard salaries in your city for a similar role. So, for example, if you made $75k per year and had great health insurance, your rate for this equation could be $36+10=$46/hr . If you make $150k and had no insurance through work, it’d be $72+0=$72/hr. Again, just an estimate.

  3. The “How Much Do I Think They Can Pay” Rate [R3]

    How much do you really think your client has budgeted for contractors? And do you think it’s likely there are other people who could do the job? A major tech company will allocate more to their consulting budgets than a small ad agency. But on the other hand, if you’re the only person who can do the work (i.e. you’re uniquely capable), you can expect to command a higher rate. For example, when I consult as a Human-Computer Interaction researcher in the niche I’ve published in, my rate is about 50% more than what I charge when I work with ad agencies doing creative direction. So, say the project is design engineering for a major product and you are super experienced with the task and there’s a very tight timeline; you might calculate this rate as something huge. I.e. they really need you on the project. Maybe this is triple your “How Much Do I Value my Time Rate.” Or, on the other end, maybe this is a very generic packaging design project where there’s many folks who could do the job; here you might calculate this rate much lower, maybe half of your “How Much Have I Previously Been Valued” rate.

So now you have these three numbers and you see what fits. Let’s say hypothetically, I value my time for a project as $45/hr [R1}. In the past I’ve been valued by employers at $72/hr [R2]. I think the client can pay $150/hr [R3]. I look at this spread, and I think “Wow this is great, looks like no matter what I will make more than I feel my time is worth [R1].” Pat yourself on the back, that’s really awesome. Then, if R3>R2, I usually select the rate I offer by adding 10-25% to R2. If R3<R2, I select by subtracting 10-25% from R2.