5 Real Reasons Why You Don’t Earn What You Deserve as a Freelancer

You’ve been reading the freelancing blogs and forums. Everyone else seems to be making a good living, but you’re still really struggling.

Yet, you know that you’re good at what you do. What could be the problem?

In this post, I’ll examine five common reasons why freelancers don’t earn what they deserve. You may find that one of these reasons fits your situation.

Reason #1. You Plan for too Many Billable Hours

Although you charge by the project, you have a basic hourly rate in mind when you estimate projects. You may have taken a former or desired monthly salary and divided by the number of working hours in a month.

If you did that, your basic hourly rate that you use to estimate projects is too low.

Let me explain. While most months have about 160 working hours (40 hours/week x four weeks), you won’t be able to bill for all 160 hours. Here are three reasons why:

  • The feast or famine cycle. The cycle is real. There will be days when you don’t have work and you need to plan for them.
  • Unbillable time. We all have time we can’t bill a client for. Think about the time you spend to fill out quarterly tax forms, for example. You can’t bill a client for that.
  • Marketing. Marketing tasks can take a lot of time, but usually aren’t billable. Recently, I spent over three hours on a proposal and didn’t get the project.

If your basic hourly rate takes all of this into account, let’s take a look at your estimating skills.

Reason #2. You Don’t Know How to Estimate

Poor estimating skills are another reason that freelancers often don’t earn what they deserve.

If your target hourly rate is $50.00 (a random figure) and you estimate that a project will take four hours, but it actually takes six hours then you’ve just lost a $100. (Four hours x $50.00= $200 versus Six hours x $50.00=$300)

This is very common problem. Many freelancers underestimate the amount of effort a project will take. You can overcome this problem by:

  • Keeping accurate records of how long it takes you to do tasks
  • Making sure that you really understand the scope of the project

If estimating and billable hours aren’t the problem, then maybe you’ve forgotten to account for your overhead costs.

Reason #3. You Don’t Think About Overhead

Every business has overhead costs, and freelancing businesses are no exception.

As a freelancer you likely have:

  • A phone system
  • An Internet connection
  • Computer software

And those are just a few overhead expenses. I’m sure you can think of more.

For traditional employees, their employer covers all of their overhead expenses. However, as a freelancer, you are responsible for the overhead costs.

That means that you should consider these costs before you set a target hourly rate for yourself.

Another common reason that freelancers don’t earn enough is because they don’t have good negotiating skills.

Reason #4. You Don’t Know How to Negotiate

Are you afraid to say “no” to a client or to challenge the terms they offer? Many freelancers are.

But negotiations are a key part of doing business.

In many cases, a client has some flexibility in terms of price and scheduling. But you’ll never know that if you don’t negotiate. Learn how to negotiate effectively and earn more.

The final reason that freelancers are underpaid is because they are too nice.

Reason #5. You Are Too Nice About Late Payments

Many freelancers are far too nice about late payments. They’re afraid to confront a client who owes them money.

But a client who doesn’t pay on time can actually cost you money. Here’s why.

If you’re like most freelancers, you’re not independently wealthy. Freelancing is how you earn your living.

When you don’t get paid on time, it often means that you can’t pay your own bills on time. It may even mean that you have to pay late fees or be charged additional interest.

So, if a client isn’t paying as agreed, don’t be shy about asking for what he or she owes you.

Your Turn

I’ve listed five factors that can keep freelancers from earning what they really deserve.

Is one of these holding you back? Can you think of any others?

Share your answers in the comments.

Image by Thirteen Of Clubs