Whatever your industry, if you’re looking to be an independent contractor or freelancer (which are essentially one in the same), you’re most likely not working under a company that will determine your salary or pay. Instead, you’re probably a) working for yourself and b) setting your own rate. This can prove to be a challenge, especially if you’re starting out.
How do you figure out what a good hourly or per diem/per project rate would be? And what’s really fair to charge a client or company? These are the two biggest questions every independent contractor faces.
Determining a fair price that will get you hired is essential, but you don’t want to compromise on what you believe you deserve. You don’t want to miss out on opportunities because you’re charging too much. However, you also don’t want to settle for a price that will leave you dissatisfied or stressed given the amount of work you’ve accepted.
Whether you’re just starting as an independent contractor, or well on your way, here are 5 tips for figuring out a realistic rate. This will leave both parties (you and your employer) happy, and help you further your career by building a strong client base.
1. Create a qualifications list.
The first thing you need to do in order to figure out a realistic rate is to compile a list of qualifications. Are you starting out in the industry or do you have years of experience? Have you worked any positions that could prove your skills in a given area? Do you have a degree or certifications for a specific thing? Do you have a client list already?
Itemizing these qualifications will help you to see, visually, what you can offer. This will also help you to sell yourself and your skills as you reach out/apply for positions. Once you’ve determined what sets you apart, determine a price in your head that you feel you deserve. That will be your base rate to start researching from.
2. Research rates for an average independent contractor.
After you’ve determined a base rate from your qualifications, research. Research to see if that base rate is valid, given your area, your state, your country, and even other areas. Look into salaries of others in your field or with your qualifications. Study what specific people in your industry make hourly. (*Hint: Try to do this research through legitimate sources like GlassDoor or others, rather than reading people’s individual blogs etc.)
From this research, see if your base rate needs to shift and create an inner rational as to why it increased or decreased. This can be valuable information when you talk to clients who may ask you why your rate is a certain amount.
3. Consider taxes.
As an independent contractor, you’ll have self-employment taxes to consider, among other reductions. Remember that even if you charge a client a certain amount, you won’t make that entire amount.
Also consider what service you’re going to be charging your clients through. Paypal has a small fee for transactions, for example. Or, if you use a service like Upwork, you may have a small cut to your overall pay for using the platform.
4. Create your ideal rate.
Truthfully, this step can be done at any time, but I’ve found that it’s effective after researching to see what’s realistic. This ‘ideal’ can come from your base + what you’ve discovered makes sense for others in your field. Here’s where you can add a little more based on your qualifications, degrees, or experience.
You’ll also want to consider what kind of work you’ll produce (which may shift based upon the length, time frame, or type of project) and how much time and effort will go into creating that specific work. This may or may not shift your hourly rate or per diem rate as well.
5. Propose your rate with confidence.
After determining what you deserve, comparing to other rates in your industry, and adding any additional amounts based on project-specific requirements or duties, present your rate with confidence. If you’re hesitant, or make it sound as if the rate is flexible, then the client will notice and propose a lower rate. When you’re secure in how you present your price, it will show your client that you are confident in the work you will produce. It will also show you’re the best fit for the position.
Featured Image Credit: Arnel Hasanovic