7 Tips to Help Freelancers Who Charge by the Hour
Posted December 1, 2010 in Managing Clients, Marketing
Freelance work is a numbers game. There’s only a tiny hourly cost margin between prosperity and ruin. It is a hard decision how you actually need to charge for your work. I don’t think there’s one answer to it. And neither do I think you should blindly follow anyone’s advice when it comes to how you should charge.
The best way to start is to look around and see what your competitors fellow freelancers in the same niche tend to offer–that’s what your client is likely to be used to. The next step is just trying different frequently used models. Knowing the market and knowing yourself can help you make smart choices about your hourly rate and income before you hang out your shingle.
Yes, there are many disadvantages in charging hourly, but I know from experience that in many cases you will still have to charge an hourly rate. So, in case you are trying to learn how to properly charge per hour, here are seven essential tips and tricks!
1. Do Some Research
Overcharging for freelance work will obviously turn away customers, but undercharging will undervalue your work, make it difficult to make ends meet, and drive freelance hourly rates down for all of your peers.
Before quoting your first hourly rate project, do some research on similar freelancers in your area. Ask around openly and cruise Craigslist. If necessary, pose as a prospective client and ask a competitor for an estimate–this sort of reconnaissance work isn’t rare for freelance startups.
2. Know Your Lower Limit
Now that you know how much others charge, how well will the going rate meet your personal needs? You can figure this out on pencil and paper, but FreelanceSwitch provides a thorough and convenient hourly rate calculator. It accounts for everything, including rent and office supplies, and provides you with both an ideal rate and your bottom-basement hourly rate. If you can’t break even within your market’s hourly rate range, it’s best to know early on so you can restructure your business plan.
3. Estimate Your Non-billable Contributions
How many hours per freelance week do you spend tracking and invoicing? Pitching? Following up with clients? You’d be surprised how quickly your non-billable hours add up. Depending on the particulars of your business, a 40-hour freelance workweek might include only 30 billable hours.
You can cut down on some of your administrative time by using a tracking/billing system, but you can’t eliminate non-billable time entirely. Be kind to yourself by recognizing that you can’t directly convert 40 hours of time into 40 hours of cash; plan your hourly rate with lost time in mind.
4. Learn Your Productivity Rate
Just how much of a typical project can you complete in an hour? How many hours do typical projects take? Figuring out your average productivity rate will help you to provide reliable estimates for your clients, manage your workload, and keep your income in balance.
Get in the habit of tracking your work and keeping your own stats. Popular applications can help you to record and organize the time you spend on each freelance project. Checking in with yourself will help you realize whether a particular project has become a time sink, which will in turn help you to troubleshoot work issues with your clients. You’ll also be well prepared to justify your invoices.
5. Don’t Overdo Your Productivity
I know some days you feel like you can take on the world–and you do. You might bang out client projects in a few days by working 12 to 13 hour days because you feel so great and confident. If you’re billing hourly, it won’t matter of course, because you’re still technically working the same amount of hours. This tip is more for your sanity. If you give clients the expectation that you can get a project done in a few days (regardless of the hours) they may still be under that impression when you do the same amount of hours, but on “real person” time–meaning, eight to nine hour days.
6. Enlist the Help of Other Freelancers
What services can you confidently provide yourself?
Say for instance you’re a web designer. You’re bound to get clients that want copy done once their website is designed and ready to go live. When you run into instances like these, you can either find general rates for that particular type of freelance work, tackle it yourself, and work it into your hourly rate, or ask another freelancer what they charge. Then, you can either bill the client separately for each service (yours and whatever freelancer’s you’re contracting) or roll it all into one cost.
7. Schedule Lunch
The prospect of beginning a freelance business is energizing and exciting, and you might be looking forward to spending uninterrupted hours on your projects. Avoid the assumption that you’ll consistently have that novice buzz. You need coffee breaks, lunch breaks, sick days and time off. If your hourly rate and workflow can’t support reasonable downtime, your freelance career will burn you out.
Remember that a good boss treats his or her employees well in order to get top productivity from them. This holds doubly true for the self-employed.
Your Turn
Do you charge an hourly rate? What tips do you have for other freelancers?
Image by dpicker
Related posts:
- Why You Should Never Charge Hourly
- How Should Freelance Writers Determine What Price to Charge?
- Get Your Clients to Stop Comparing Rates
- 5 Essential Ways To Turbo-Charge Your Productivity
- Productivity Tips for Freelancers with Toddlers Underfoot
About the author: Sonia Tracy is the content editor for PsPrint and editor of PsPrint Design Blog. She likes to write, do yoga and make nerdy “Star Wars” and “Simpsons” references. PsPrint is an online commercial printing company specializing in brochure printing. You can follow PsPrint on Twitter @PsPrint.
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35 Comments
bill
December 1st, 2010 at 10:05 amIn my freelance writing-editing business i generally charge by the hour for research and revisions on the writing side because those functions are easier to track. For writing projects i charge by the word for articles and white papers or by the manuscript page; for short blog posts i charge a flat fee.
the editing/copyediting side is bit more complicated depending on the complexity,scope and size of the project. In most cases I’ll try to estimate the time i’ll spend on a project (including level of editing needed, research, fact-checking, formatting, conferencing etc.) and then propose a flat fee for the entire project. i find that most clients prefer this as it avoids wrangling over hours and keeping constant track of every minute i devote to the project.
Craig
December 1st, 2010 at 1:22 pmMaybe I’m bucking the trend, but as a freelance designer I prefer billing on a ‘by the hour’ basis.
It’s beneficial for me because I know my hourly rate and there’s no question that I will ever be caught short charging a fixed price for a project and then it over-runs.
For my clients, they will only pay for the time I spend building their website and nothing else – they know that they are receiving the best value for money, not paying for me to do my accounts or browse FreelanceFolder.
Danielle
December 1st, 2010 at 1:26 pmSame here.
For typical projects I have a set price list that I think are competitive, or even on the cheaper side of things.
I find that usually people pick one of these options and start customizing it to meet their requirements for that project, in which I manipulate the price to match what I think is fair for my work, and their budget.
It’s difficult because each project is so different, as is each client-that you really have to gauge what exactly they need, are willing to spend, your time, etc…
Lots of Factors!!
Love your blog! :)
Brandi
December 1st, 2010 at 2:03 pmI mostly charge by project. But even when doing so, it’s a good idea to track how long projects take you. This way you have a better idea when quoting someone who prefers paying you by the hour.
Lucy Smith
December 1st, 2010 at 3:28 pmI charge by the hour because that seems to be the done thing here in NZ. When I first started, I emailed a bunch of copywriters under an assumed name, and every one of them gave me an hourly rate, which I then used to decide my own hourly rate (somewhere in between the guy working out of his garage and the former ad exec). I could do a per-project rate but I’ve found that people seem to prefer hourly; clients, small businesses especially, can balk at a flat rate of $1000 for something, but if they know that’s a bill for 12 hours’ work they’re more amenable.
The trick is, of course, to do your estimating and quoting properly; I usually add on a couple of extra hours to cover contingencies, more if it’s a big job or I can smell revisions by committee. And I have a minimum charge to cover the little jobs…however small the job, the admin time (scoping, emailing) is the same.
Lucian
December 1st, 2010 at 4:23 pmI charge fixed pricing when I build websites for my clients, however I charge hourly for maintenance work or when I need to fix / finish projects done by cheap developers.
For example, I estimated anywhere between $300-$800 to fix one of that type of project. in the end took my like 17 hours to fix and add the quality polish. Charging hourly in this case, was fair for me and I earned $1200 instead. Conclusion I’ve got: I always over estimate my productivity.
Florante
December 1st, 2010 at 7:08 pmI grew up in my freelance work through bidding sites like oDesk and Elance and found the hourly work serves me and my clients better. I tried project based billing and ended up working longer and client keep on demanding for more. I understand that there should be proper setting of expectations on the project coverage, but if you are working on your rating, you’ll end up like a hostage and the only ransom you can do is to give in to their demands.
Stephanie
December 1st, 2010 at 8:50 pmJust like Florante I get my client projects from oDesk. Since the only way for payment to be guaranteed is by working on hourly projects, I find working hourly a much better method when charging my clients. For direct clients, I’d give them a quote on the entire project which includes research, the writing process, and 2 sets of revisions/editing.
TLC
December 1st, 2010 at 9:04 pmI’m hopefully going to wrap up a Web site for posting tomorrow, and thank God we billed this hourly. The owner has added sooooooo much to this project, if we’d billed a flat rate, we would have been way off! My designer/editor hours will be almost double what I originally estimated; I know the programmer will be over, too. We had to put a bunch of things he’s requested on hold so we could finish the Web site, so phase 2 of this project, which originally was about one-third the cost/size of phase 1, has grown to be as large or larger as phase 1.
I see merit to both ways of billing. When I bid by the hour, I give a detailed proposal that outlines tasks and an estimated number of hours, and make it clear that it’s only an estimate. When I bid by the project, I make sure the scope is clearly defined and that if things are added, it will cost more. And either way, I get a 50% non-refundable deposit up front.
Ace Media
December 2nd, 2010 at 12:05 amThough I charge per project basis, the calculator was perfect for an estimate.
I spend 2 days to start and finish a website but end up 10 days providing support for it since I provide support for free, Thinking of providing support at an hourly rate.
Mitch
December 2nd, 2010 at 1:43 amI find your last 3 points very pertinent to me. I’m not necessarily a freelancer as much as an independent consultant (I know, semantics), but I find that I put lots of straight hours into projects that wear me out, I almost never ask for any help from others that I know could handle parts of what I do, and only recently have I started remembering to schedule lunch and breaks so I can step away and clear my mind before pushing forward again. Of course that’s only during the day, and since I tend to stay up really late working on things, I might have to start scheduling that time as well.
Lior Broshi
December 2nd, 2010 at 3:06 am1. Use a time tracking software to keep track for each task you do while working, even it’s a project which pays globally and not by the hour – this way you can tell if this project is `profitable` and how much did it `pay by the hour`. I even use it to track my administration and finance activities.
2. Use a global timer (such as ManicTime) that can tell how much time did you spend on the computer, how much time you were on lunch etc’…
3. Use a well-organized To-Do software to keep track of all the tasks for each client.
Bastian Heist
December 2nd, 2010 at 3:21 amJust like Ace Media, I prefer a mixed calculation. I typically work with a fixed price and a fixed hourly rate which I will charge in case of unplanned additions. This way, both parties know what they’re talking about and there are no unpleasant surprises. Of course, you need to be extra careful for feature creep.
helium
December 2nd, 2010 at 4:01 amWe use time tracking (even for week/month long projects) because it provides a breakdown of how long certain tasks take and serves to educate the client. When clients see how long things take and understand the work involved it is easyer to explain (when the want the MUST HAVE feature) that it will take X hours or days, or if they are hesitant they can get a minute by minute breakdown of how there money was spent.
Web Designer
December 2nd, 2010 at 5:17 amHello,
Nice one moreover always try to build up long term relationship.
LC Pallot
December 2nd, 2010 at 7:58 amI used to charge an hourly rate but it always used to cause problems. My advice is where possible deal in half day units. It is so much easier to deal with in terms of organisation and billing. If the client only needs one or two hours work then they have to fit in other work to make up the time. It might sound impossible to sell but if you are good and strict then they will accept it.
Corwin Hiebert
December 3rd, 2010 at 12:07 amOver the past three years I’ve been morphing my clients to a more value-based payment system (yes, I must confess, after reading Alan Weiss’s book). It’s gone very well actually – I’m a big fan. BUT when required I still track my time using the Freshbooks project timer (very cool).
Sponsi
December 3rd, 2010 at 5:59 amFor the past 3-4 years I tried to charge per project because sometimes you make something which is far better than usual, you do the work faster than usual people, etc. If it’s something big and will give the client a lot of money because of its main ideology, why charge per hour? You can make some systems in 10 hours but they will be worth whole a lot of money because of its inner value. Then comes your contribution to the project because rarly the client knows everything that needs to be done. If you give your own experience, then it’s like additional value.
On the other hand, a lot of people like such calculations and I started to comment on that recently. “That will be about XX hours so…” etc. but most often I start with… describing steps of the project and then I set fees for all the milestones. I think this is between hourly charging and whole-project charging and makes sense both to the client and to me.
Katharine
December 3rd, 2010 at 11:15 amYou can get a general idea of the hourly rates charged in your industry by checking out the web sites of professional associations for your industry. For example, my industry is publishing (I’m a freelance copyeditor of books and peer-reviewed journal articles), and I always keep abreast of rate charts posted online by various editorial-related and publishing-related associations. For links to many U.S. and some international associations in my industry, see the “Business Tools” page of the Copyeditors’ Knowledge Base, housed within my web site on this page: http://www.kokedit.com/library_CE3.shtml
Carel Bekker
December 3rd, 2010 at 12:23 pmAfter 20 years in the hourly-paid world I created an iPhone App to help me manage hourly rates. It shows profit, daily rate, weekly rate, monthly rate and even converts to other currencies. More info here: http://blog.beyond438.com/2010/10/28/best-iphone-app-ever-consulting-rate-calculator/
Kelsey
December 6th, 2010 at 10:32 pmI feel like some days are really productive and others are just…blah.
Paolo
December 9th, 2010 at 10:23 amEach project is different, every client is different.
I do not use the same hourly rate with everyone: an ambitious project costs more, a difficult customer will pay more. To help me I use x4todo: to do list, time tracking estimates, invoices and more.
Words by Keystroke
January 10th, 2011 at 2:13 pmUnfortunately, many clients are now focusing too heavily on cost vs. quality; a few weeks ago a client emails me to get my best price and finally, in the end he went with a foreign writer. I didn’t think too much of it until he just emailed me asking if I could do some editing which really turned into a re-write. So basically, he has just overspent his budget and went past his deadline when he could have just chose my company.
Clint
April 12th, 2011 at 11:19 pmI am very attentive to time-tracking. It really comes in handy for bidding future projects. I try to generate weekly time sheets so I can see exactly how much time (billable and non-billable) I am spending on a project. A couple of years ago I came across the Eternity app for my iPhone. It’s a great tool for tracking your time. And you can export reports via email in a CSV format.
http://twitter.com/redfoxmedia_inc
percetakan
March 19th, 2012 at 8:18 amHello there, I found your site via Google while looking for a related topic, your site came up, it looks good. I’ve bookmarked it in my google bookmarks.
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