One of the first few questions that a new freelancer often has is, “How to charge?”. You’ll soon realise there are many ways of doing this. In this episode we talk about different ways to calculate your hourly rate (read: value) as a freelancer, how this might look different across a few industries, and how we managed price negotiations with potential clients when we’re caught off guard or find it difficult to decide. Are our solutions good? You decide.
If this client is willing to work with you for the next six to 12 months. And as a freelancer, that’s a bonus because you have some kind of financial security, but then you can’t go so low till the point where it doesn’t make sense for you. So it’s good to have a minimum benchmark.
Even though the work might not be a lot, you need to factor in the mental load as well. You’re sort of like invested in that company sort of, and is definitely going to be on your mind. Because it’s just, it just takes out a lot of you.
Hey, guys, welcome to Solo Sync, a podcast for the curious solopreneur where we discover simple solutions to keep enjoying what you do and who you do it with.
I’m your host, Sarah. And I’m Jeanette and today we’re talking about how to charge. So I think this is like the first thing that a freelancer a new Freelancer always worries about, right? Not just new ones, but I think even people who have been in the field for a while are always wondering, you know, how much do I charge for this even now, like, I’ve been doing this for about five years, and I still check in with my friends to ask like, okay, is this the market rate now? and things like that.
Yeah. It’s like a never ending journey. So maybe let’s just start with a real life scenario. So someone approaches you and asks you if you can provide a certain service. Two of us are writers, right?
We also do… well I also do social media management. I’m also a photographer.
And I do a lot of editing and proofreading as well as, well uh, sometimes bartending!
They’re quite different services that we can both provide. But yeah, then they ask you, can you do this for me? So let’s say they ask, “Do you do article writing for a blog, or content for a website? I want to launch a product, and I want to be able to build content around it to educate my readers. So you say yes. And they ask, “How much do you charge?” How would you respond to that? How should you respond to that?
So the first thing I would do is probably try to find out more information. Like, what what do they have in mind? Do they just want like, a single piece? Or do they want like a whole series? Do they want maybe four articles a month? Or do they just want a one off thing? And who comes out with the ideas for the content? What kind of strategy do they have? So it’s basically finding out more info before you actually say anything.
Yeah. Sometimes we panic right? So if that happens, I think it’s important to just calm down. Always find more info first. I like that. Okay, and then they tell you everything that they know. And sometimes they actually don’t know that much, either. So you don’t have much to work with. So in that situation, like what I’ve done, I think I would just say, “I’ll get back to you” or “Let me know more” I guess.
Yeah, sometimes if it’s a field that you don’t know much about, or if it’s a totally new industry, and they tell you, we need this and that. And it can be kind of hard to gauge how much to charge for things like research. If you don’t realize that, “Oh actually, it’s quite a deep field!” and you need to do a lot of reading and stuff into it before you can actually start any writing at all. Yeah, so you need to factor that sort of thing in as well. So I guess it’s important to sort of take your time to do it.
Yeah. I would just say okay, I’ll get back to you. Yeah, just give yourself some time. Okay, so let’s say, they really clear about what they want. And it’s a specific service. I know that some freelancers already have a rate card, would you then off the bat, just quote from your rate card?
Yeah, I usually do that. I usually give a range. Like I’ll say it, you know, if let’s say its writing an article, my per word rate is around this much. So for the article you have in mind, it will probably be around this price. And then if it involves other scope of work, then the price might be higher. So it kind of gives them a gauge of whether we would be the right fit budget-wise as well.
That’s good. Although I do know that for different kinds of writing also, you may not charge per word, right? Let’s say, if it’s content writing, that’s pretty straightforward. But if it’s like, writing for a printed piece of material that’s going to be used to earn money on their behalf.
I don’t know. You know, they’re gonna really benefit from it, then you would have to think about the longevity of that value and cost. But we’ll go into that in a bit la. Now, let’s talk about like the different ways of charging as a freelancer. So just now we mentioned there’s – if you’re a writer – charging per word…
So there’s per word if you’re writer and then a lot of people do hourly rates. So even with some of my clients, after bidding for a specific job, for example, they’ll say, “How many person days do you imagine this would take?” You know, so basically, they’re trying to see how much they’re paying you per hour or per day.
Then understanding that there are so called eight working hours in a day.
Yeah. So there’s like, I guess the most common ones would be like, hourly rates, or usually, there’s some kind of unit charge, but it’s a lot of people look at it as per hour, I think.
But it is also, some people charge per product, right? Like they have a rate card. Because what if your hourly rate doesn’t justify the amount of work going into a certain type of work? So I’ll give an example. So I am a writer, I also do wedding and family photography, I charge say, my hourly rate for writing is say 90 to 150, right, depending on what and, and I can’t be charging the same for photography, cuz, okay, I’m really bad math. So let’s go with whole numbers! So let’s say my hourly rate is 100. And this shoot takes like, two hours. And then I take another three to five hours to filter through, 500 to 1000 photos. Okay la, I wouldn’t take that much, but 500 photos. So in total, I have seven hours worth of work, which means I would be charging 700 for my photoshoot, which is like way below the market rate, right? So in a situation like that, when would you know when to charge by product?
Right. So I tend to prefer to charge by product. Like, I have a specific set of services that I want to offer, there are certain things that I just don’t do anymore, because after some years, I feel like it’s not worth my time, or it’s not something that I enjoy doing. So I’ve come up with a list of products: articles at around how many words and then maybe a website page, or editing of some copy, or maybe even SEO services. And I develop it in the sense that it’s a product, and then they pay a fixed price for that specific product.
I guess that’s something that you’ll get to learn over time la. Right? Yeah, like a freelancer.
After doing it awhile you kind of like realize, okay, this sort of work involves this amount of time, time and effort. And this is what I want to get for it.
Yeah, actually you’re right. Even with the example I gave: writing. You’re sitting at the laptop and is a lot of research effort. But photography, it’s a lot physical effort as well. Not to mention, like covering the gear that you purchase, stuff like that, right? So I was recently reading… I follow this Instagram account that really gives great tips for freelancers. And it was talking about how we should charge per client. To find out what value the client puts to that specific scope of work. So in other words, you’re not charging for the job you’re charging for, you’re charging the client. And I know a lot of people practice that here in Malaysia as well. Or maybe overseas, I don’t know, where they have tier pricing. So there’s SME, which is small, medium enterprises. And then they’ve got another tier rate for like, slightly bigger companies. And they’ve got another rate for MNCs, maybe. What are your thoughts on it?
So this is what I’ve heard from other people as well. So recently, I was talking to someone who runs a who runs a training center. So they quote differently for SMEs and like glcs are MNC is because they say like, oh, if you if you charge an SME price, the bigger company is going to think that “Oh, actually, there’s something wrong with you, you know, that’s why you’re charging so cheap”. But to me, I sometimes feel like personally, I like to standardize my rates. So it is that price whether you are an MNC or GLC or an SME. And if it’s a company that I believe in and they really cannot afford my rates, I might work something out with them, or I might even do pro bono. So you have that standard already. That’s what I found works for me. But yeah, it could be different for different people.
I think that makes sense because usually this kind of practice will come in handy if you are a full grown company. You don’t have the time to keep negotiating per client. So you need to already have fixed rates, right? And it works to your benefit that when you when you have a client who is a GLC, to know that they are going to be charged a certain rate. But sometimes, like you say, even as a company of maybe like three or five or even 20, where you don’t have time to negotiate per client, you want to be able to make rates low enough to help smaller companies. And so it’s like, okay, I’ll just give you that “SME rate”, which we’ll talk about later on: what does that mean, in context of freelancing?! Umm cool. What about retainers?
I do do that with some clients, especially those with businesses that I really like. And if they have teams that, you know, we really need to collaborate and work together on a specific project. That’s when it makes sense to have a routine, I think. So when it comes to that, I think it’s fair to go lower than your usual rate. If let’s say I were to charge 5000 Ringgit for a specific piece of work. But it’s more of something that can be done per month. I mean, the overall rate can be cheaper, because it’s being sort of paid over several months.
Yeah. And there’s value in the longevity of the job and the chance to build that relationship with the client as well.
Yeah. And I guess something we can talk about later on is cash flow. In another episode!
Yeah, I think, you need to factor in the scope of work if you’re going to do that. And at the end of the day, have a minimum benchmark, right? Because let’s say you really like the client, you believe in their cause, you want to do the work, you love the job. So all that kind of lines up for you. And then you know that, okay, this client is willing to work with you for the next six months, six to 12 months. And as a freelancer, that’s a bonus, coz you have some kind of financial security. But then you can’t go so low till the point where it doesn’t make sense for you. Because the thing about retainers is that sometimes you’re not going to be… yeah, you have a scope of work, but you’re not going to be like terribly calculative about it as well. You’re almost like a part timer where in that sense, I would say like you really build that relationship with them. So it’s good to have a minimum benchmark and not go lower than that. Just in case.
Yeah, totally agree. Because even though the work might not be a lot, you need to factor in the mental load as well. So it’s like, you’re sort of like invested in that company, sort of, and is definitely going to be on your mind. You know, that’s why I’ve sort of cut down on retainer work. Because it just takes up a lot of you.
That’s true, you will kind of be expected to prioritize them. You’re right. I always forget about mental load. Sometimes we quantify our value in terms of the actual, physical skills that we’re doing to produce the final outcome of that work. And then we forget like, Oh my God, why is my brain is so tired today?
So speaking of extra, one thing to remember as a freelancer is also, you know, the fact that you don’t have all the extra benefits that come with having a full time job.
Like, you know, your medical benefits and sick days. Yeah. And EPF and SOCSO that normally your employer will pay for you, right? So I guess that’s something that you need to calculate into your hourly rate as well. How do you do that?
Okay, let’s talk about how to calculate our hourly rate. So let’s say you’re moving from your full time employment to being a freelancer. One way to do it is you can just factor in how much you’re earning for the entire year, and just say, I want to keep earning that same amount. But you might mark it up a little for the following year la. To factor in inflation rates. So you take that amount you minus off all the non-working days. So generally, you have 22 working days a month, not counting your Saturday and Sundays. And then you’re supposed deduct, even days that you want to take holidays on throughout the year. So let’s say you tell yourself, and it’s really up to you, right? If you say okay, I want to take like the whole month of December off. Okay la, so you minus that, and then you divide that by the number of days and hours. And that’s how you get hourly rate. But then you were saying we need to factor in these added benefits. So I read somewhere and I think It makes sense that you can calculate it, like down to the last cent if you like. You already know how much you need to pay for EPF, how much your company pays on your behalf and how much you pay. So you factor that in for SOCSO. So maybe you want to take your previous company’s medical benefit as a benchmark, which is not realistic, because you’re just starting out. But you can give yourself like a leeway of… I don’t know, how much does it take to even now just go to the clinic and get very basic flu pills? You’re already paying at least 75 Ringgit, sometimes. But that being said, you should have your own health insurance, and we can talk about that in a different episode. So you will kind of calculate that. But when it gets too much, then I would say based on what I read, just mark it up by 25%. That will be a pretty good benchmark. So you have what you want to earn for that year, mark that up by 25%? And then divide that by the number of working days and billable hours. What do billable hours mean? So if there are eight, actually there are nine working hours in a day, right? To be really honest. So you’ve got nine working hours in a day, including that one hour lunch. So ask yourself, how many hours out of those nine hours are you really doing work? And things like answering emails or doing administration may not be considered actual work? Unless you are a comms specialist, then answering emails is THE work, you know. So maybe you take two hours of every day. So you’ve got seven hours left minus your lunch, you’ve got six hours left, so those six hours are your billable hours. So you divide the amount of money you want to earn for that year divided by the number of working days divided by the number of billable hours. And that’s how you get your hourly rate.
That makes so much sense. Like I’ll be honest and say that I did not do it that way when I first started out!
I think nobody does!
And even now I’m sort of like, feeling my way along as well. I always think like, more money is better!
Yeah. And I think it changes also over time. I mean, of course, because as inflation goes up, you need to factor that in. I took a while to learn this as well. I have been freelancing on the side, even as I had a full time job. And I never bothered to calculate my hourly rate, or rather, I just didn’t know, you know. And then last year, I calculated… oh sorry, two years ago, when I started full-time freelancing, I calculated my hourly rate, just based on what I was earning, taking home every year. I didn’t factor in my EPF, or my SOCSO. So I was really losing out. And don’t forget to save up pink tax! Okay, is there anything else we need to factor in when we’re calculating our hourly rate?
I think if you’re offering like super different services, you know, how earlier you spoke about how you do like writing and photography. When, when offering these different services, I think the hourly rates can actually get really different from each other. Right?
Yeah. Because of the different amount of effort that is put into it. I would say, okay, so when does calculate your hourly rate not apply? Sorry, it always applies. But when do you not charge based on your hourly rate? So when your services are different, how do you value that right? I would say put a value to your time, compare it to the market rate. So there is a market rate… you need to talk, have conversations with people, find out what other people are charging. One way to do this is talk to other freelancers, if you don’t have a single freelancing friend, within the industry, go online, find out what’s going on. But I know that like for certain regions, these resources are quite scarce. And it’s really difficult to just… there’s a lot of material on this topic in the US. And it’s really hard to just take what they’re advising and then convert it to Malaysian ringgit, it’s just difficult. But what you can also do is talk to friends who are full-time workers whose company hires freelancers and find out “How much did your company pay that person?” You know, that’s one way of doing it. So that’s how you get your market rate, I guess. And then let’s say, you know, how do you put a value to your time I would factor in things like years of experience, your unique creative angle, that’s really hard to put a value to but at least know that it’s something you value la right? The time spent and, and I mean, maybe even the cost of your gear. So with writing, it’s not so bad. You’ve pretty much got your laptop to cover, I guess. For photography, it would be your camera, your flash. You want to be able to set yourself a time limit and say in six months or three months, I want to be able to pay this off with what I’m earning. Yeah, pretty much that I would say.
Yeah, I guess for me, you know, my skill sets are quite different in range. I think one is writing, which is very much like knowledge kind of work. Whereas, if I were to go bartend at a party or something like that, it’s something that’s very service, F&B related. And the hourly rates are honestly, quite different from each other. So that’s something that I have to take into consideration as well. I guess how much people are willing to pay for a specific service… determines the market rate. And that determines how much you can charge as well.
Yeah, that’s right. You know, I will say this, I mean, at the end of the day its also a question of ethics. There are people who just charge so much just because they can, because the market rate is just increasing. And, I mean, I’ll just speak for myself here. Like, at least in terms of photography, I’m a photographer. I might not be the best out there, I may not have had like 10 years of experience. I do have 10 years of experience, it’s just that very minimal experience compared to full time photographers. As someone who’s paying another photographer to take my photos, there’s only so much that I think you should be paying for a photographer. I really struggle even… getting married, you’ve got so many things to pay for on your wedding. And to be able to say, I’m going to be paying 10k for one photographer, there’s so many other things to pay for. Are you really in that range? That socioeconomic range? You know, can you really afford that? And so I think you need to also ask yourself, put your customer first also, and not just think about yourself sometimes. I can’t quantify that. It’s just an attitude to have.
What about for things like that you’ve never done before? You know, like, it’s a paid job, you’ve never done it before someone approaches you with it and says, Can you do this for me?
Okay, it’s something that I have always wanted to do. And to try something I think that I can do, my answer is yes, I can do it. The question is, am I going to do for free or get paid, right? I think when I was younger, I used to just do things entirely for free. Because I felt that I had no experience. And so there’s no reason for them to pay me. And I was not competent. Obviously, I felt that when someone pays you the the pressures added on. But over the years, I’ve learned that even if you have no experience, just the time used to figure something out, people should value that time, and I valued at time. So I would still want to get paid like a minimum fee, right?
I think you’re bringing your knowledge from other fields into what you’re doing as well. So that’s what you’re getting paid for too.
Yeah, that’s right. You’re getting paid for YOU la. Yeah, they asked you and no one else, you know. There’s definitely something you can bring to the table. So how to charge for that? I don’t know. How do you do it?
So what I’ve usually done is, I guess I have a very lackadaisical way of dealing with this sort of thing. I don’t plan for it. I just take it as it comes. But I guess the closest example would be when I started bartending. And it was something that I had learned, I went for class. And it was something that I wanted experience doing as well. And at the time, I just took whatever was offered. It was below I think, like below minimum wage, but I felt like it was a learning experience. And it really was on the ground practical experience. And that had value for me as well. So I guess that’s something that very freelancer, I mean, it’s a very individual thing. Like, what you need to think about, I think, is what you really want to get out of the experience.
What you’re getting in return la.
It’s not always about money, right?
Yeah. It’s not about money all the time. Sometimes you might get interesting connections.
You’re right, you’re right.
Yeah. So it’s always looking for other value as well. And then trying to balance that out with how much you need to survive, you know, tomorrow.
Okay. You know what that makes, total sense. So the thing is, you’re still valuing yourself, but you’re asking yourself, what can I get for what I value and it might be in terms of monetary benefits or in other benefits, that can actually go quite far. I like that. It’s good. One thing I struggle with, though, when it comes to doing something new is how to estimate the time it takes.
Yeah, that can be hard. Sometimes you can gauge but even the best effort can be like, you can be wrong sometimes. And it takes more time than you anticipate. But I feel that helps you learn as well, for the next time this sort of job happens.
Just live and learn. Right?
Yeah, but one thing I’ve realized is that whatever you estimate, mark it up. Because you’re usually wrong!
Yeah, yeah. I always underestimate the amount of time it takes to do something. I forget that energy levels is a thing as well. So, you know, maybe I can churn out an article in two hours or three hours and then … eh actually I don’t have the research done for this. Then I spend another five hours researching. Before I know it, its been eight hours. And I’m so tired and then I’ve got other things going on in life. Yeah. So really think about that.
Yeah. And then the other thing that is always difficult when speaking to a new client is when they want to negotiate.
Oh my gosh.
Yeah, what are some of the things that have been said to you? And how do you respond to them?
They always say like, Can you give me SME price? Haha.
It’s like their passive aggressive way of saying, I need a huge discount!
Yeah. What about you? What else?
Um, one of the things I always get is Oh, for this rate, I can hire a full timer.
Oh, my gosh. And then you just say to them, Yeah, go ahead.
Yeah. Usually, that’s my response. Like, yeah, if you can hire a freelancer then yeah, go ahead. Yeah, sorry. A full-timer.
And we mean that, right? Because it’s true. As much as we would really like to help you, we cannot be that full-timer for you, because we’ve got our own business going on. And it does make more sense for you, you know? Another thing I hear well, I guess it all boils down to how… individual clients la… and there are some clients that just say, Oh, can you just go cheaper, I just don’t have the budget for it.
Sometimes you got to appreciate those as well. Like, at least they’re really straightforward about it.
And then you can say yes or no.
Oh, hey, so here’s a question, right? Do you ask people… do you ask them… What’s your budget? Do you bother asking the clients what’s your budget? Okay, and hear me out. I feel that if you were to say that, you’re setting yourself up, to meet their benchmark, or to disappoint them. So let’s say you really have an idea of how much you’re going to charge, but you’re really not sure where this client is coming from. Then you ask them, oh, what’s your budget, and then you find out that their budget is like half of what you would charge, then that puts you in a really sticky situation, because then it’s like, you already know what their budget is, why we used to go ahead and charge like, quote, something that’s completely out their budget. It’s kind of rude, right? But yet at the same time, I don’t know. Is that beneficial? Asking that question?
Right. So this “What’s your budget” question? I usually ask after they’ve already told me what kind of work they want done. So when they tell me their budget, I’ll say okay, I can’t do what you want for that price. But we can work on something smaller first. Or I can recommend someone a bit more junior for you.
Would you… which comes first? Asking the client’s budget or telling them your ballpark figure?
It really depends. I don’t think that I have like a fixed formula for like what I say first, but… Oh, so in one of my most recent cases, I actually did it in the same sentence. Like, “This is what I charge, tell me what your budget is”.
Haha! How did that go?
She’s like, oh, okay, let’s talk about it. Okay, so I guess that that already helps you to sort of gauge, okay, this client can sort of see themselves paying that amount. So it helps to make your pre-work conversations more efficient as well. So you don’t waste time. I’ve gone to meet clients for like three meetings. These were not my clients, but
you were subcontracted?
Yeah, like a subcontractor. And it’s like, we’re pitching for a job. And I’ve gone to three, three hour meetings. And then eventually, nothing comes out of that, or the clients are like “Hmm-hawing” about the price, and I’ve realized that those are just not efficient and not something that I want to do necessarily.
Yeah, I wish I could understand where the clients are coming from when they refuse to mention what their budget is. Sometimes I would feel maybe it’s because they don’t have a very high budget, and they’re just feeling like they would rather find out how much you charge in case you charge less than their budget, so that they don’t lose out on that. Or sometimes… I really don’t know.
Yeah, so I guess that that brings us to, if they really can’t pay what you asked for, they just really don’t have the budget for it or they don’t want to, but you need the job. You know, what do you usually find yourself doing in that situation?
I’ve been in those situations quite a few times. I think it always starts that way. Okay, so ideally, like you would say, don’t ever put yourself in that position.
Yeah. I’ve always been on the school of thought that everyone needs a “F*** off fund”. Like, whenever you don’t like the situation you’re in, you have enough of a runway to say “F*** off”.
Yeah, but I guess sometimes, we don’t plan for it. And I mean, everyone’s got a different financial situation. They might not have had time to have much savings for… um, so they need the money, or it could be a bad month or season? Well, I would say, if you’re really desperate, you can take the job. Take it in, with dignity, but manage your expectations. You have to just know that this is a learning experience. And I guess, by going through that, by going through the motions, after that, you will come out a wiser person. You will know that no matter what, I’ll never do that, again, for free. For such a low rate, it’s not worth my time. And to avoid such a situation in future, I will make sure I have savings. Right?
Yeah. Or sometimes you might find a really valuable client out of that situation as well.
Oh, that’s true. Build a relationship.
Yeah. Because they might really just not have the budget for it. And if you ask yourself, even if you’re not in a place of desperation, you see that what they’re doing, the work that they’re doing is valuable, and it’s something that you’re interested in, you might want to say yes, even though it’s a lot lower than your usual rate.
Yeah. And who knows, like you say, you could end up growing with them and their business. And just having the attitude of wanting to add value to your client as well, wanting to support them, because you believe in what they’re doing. And, you know, if the relationship is good, and if the business model makes sense, I guess, as they grow in their business, then you have more money to pay everybody, you know. Themselves, you and whoever else they’re working with. Right?
I think this discussion has been really interesting. I like talking about it every now and then. So what are our key takeaways?
I would say the first thing to remember is, know your value. Not just in terms of what you can do, or how much you want to charge, but like, what you bring to the table.
Who you are as a person, right?
Well, and I think that gets better over time.
Yeah, it’s something you learn. And I guess that that brings us to our next takeaway. You win some or you learn some.
Yeah, no one’s a loser. You don’t lose out anything. And that’s what makes just the journey of freelancing so interesting. It’s a never ending journey right?
It’s an adventure.
It is! It’s a life long lesson. I love it. Great.
We hope you found this episode useful. And if you have any other questions, Jeannette and I would love to chat.
Yeah, so feel free to email us at firstname.lastname@example.org, that’s hello at S-O-L-O S-Y-N-C dot X-Y-Z or send us a message on Instagram. Our handle is @solosyncpodcast.
Give us more ideas of what you would like us to discuss next.
Thanks for listening.