How to Compute for an Offer Clients Can’t Refuse

Working as a freelancer can be a great business if you know how to price yourself right. Most can either charge an hourly rate or on a per project basis. It can be tricky if you don’t know what factors to take into consideration and you could either charge too little and get stuck with low rates or charge too high and lose all your clients for cheaper alternatives. After all, being a freelancer is like owning a business. There will always be competition. How can you stay above the rest? Here’s a unique way to calculate based on quality, instead of the usual hourly/per project basis.

STARTING OUT: These are how most calculators online calculate your rates.

1. Start with your desired annual income. Compute this by adding up all your average expenses per month and multiplying it by 12 months.

2. Add up the cost of doing business – office space, internet, hardware, and software costs (even if it’s just hypothetical since most freelancers work from home), alternatively you could add the cost of a coffee from the coffee shop or use of a co-working space you regularly work in.

3. Add up other living costs like insurance, self-employment tax, SSS, Pagibig, Philhealth, etc.

4. Add everything up to get desired income.

5. Get hourly rate by calculating your total billable hours by starting with your maximum working hours per year, and subtract things like vacations, national holidays, and sick days. Then you’ll end up with the realistic number of hours you could work in a year. Divide that by the total annual expenses and that equals your hourly rate.

Most people who are just starting out in the freelance world go through this computation. But for those who are a bit more seasoned, here’s something better you can do.

The problem with these online calculators is that they could get off on the wrong foot from the first step. There may be no connection at all between your desired annual salary vs. your actual value. If you have been previously employed in the same field, it’s easy to think you can make the same amount in the freelance market.

On the other hand, if you haven’t been employed previously then you would have zero reference for prices and offers. The alternative is to ask friends and spend time interviewing colleagues with a similar skillset and experience level but that would take some time. That is, if you can even find people to interview!

Here’s a better way to think about pricing

1. Get back to reality. Forget your preferred salary and see what really determines your rate is how much value you offer your clients.

2. Only command the rate your clients are willing to pay. No work at a high rate is worse than someone some work at a fair rate.

3. VALUE over time. Your rate reflects your value to clients compared to competitors and nothing else. Research the running prices of your competitors, their quality of work and compare it to yours. Check their experience level, skill, effort and see if you can do more (and therefore ask more).

How do you increase your rates?

Simple. Gain more experience. Learn new skills. Increase your value and beat everyone on effort. Be ultra-professional. 

Raise your rates if you have years of experience behind you. Stick to time-based rates if you’re just starting out.

Bonus tip: Try weekly instead of hourly billing or better yet work out a retainer billing. Shift the way you present these to clients, so you don’t get questioned about your rate. 

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