One thing that freelancers struggle with is setting rates for their skills or services. If you set your rates too low, You are cheating yourself. If you set them too high, you won’t get much work.

The first step to setting rates is to calculate the amount you need to pay for all your expenses annually. These expanses include personal costs such as housing, food, any debts to be paid and business costs such as money spent on interest, phone etc., In addition to above, other costs such as taxes, insurance, retirement plan and savings also to be included to get total expenses.

Second step is calculation of billable hours in a year. For all practical purposes we consider that we work 8 hours per day, 5 days per week, 46 weeks per year (after deduction of weeks spent for vacation, holidays and sick time). Now, gross time available per year = 8 x 5 x 46 = 1840 hours.

It is unlikely that we will be spending all 1840 hours available in a year for doing projects only. A portion of this time would be spent on activities like administration,sales,meetings,travel etc.,to run the business.Considering a conservative estimate of 25% of gross time for doing these duties, we will end up a net billable time per year as 1380 hours.

Third step is calculating hourly rate.

  1.            Hourly rate = Total yearly expense / net billable time per year
  2.            Add 20% margin to above rate to get your final hourly rate.

Now compare this rate with prevailing rate in your region for such work in same field. You can get this information from your colleagues doing similar freelancing jobs. Or ask a friend to get quotes from your competitors. Above information can also be got by visiting Forums, chat rooms, Networking groups etc.,

After comparison you will come to know the competitive hourly rate you have to fix for your freelance services.

There are two ways to calculate your charge, One way is by the hour, Another way is by project.

In the first method you charge your client by multiplying the hours spent on the project by your competitive hourly rate.

The best way to calculate project rate (second method) is to spend some time scoping out what you will deliver. This means splitting project into several segments and calculating the would be time to complete each segment accurately. Now add up all the timings to get total hours required to complete the project.Multiply this total hours by competitive hourly rate calculated earlier to arrive at project price.

However, this method may work against you if the project scope creeps beyond your original expectations. To overcome this you have to include special clauses in contract itself to be at safer side.


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  6. The best way to calculate project rate (second method) is to spend some time scoping out what you will deliver.

    Can you please elaborate on this, sir?


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