Work Online? My Insight Into Setting An Hourly Rate

By Dan

As a freelancer, when I started out one of the most baffling aspects of the job to me was setting an hourly rate. I hadn’t really given it much thought, I just knew I wanted to develop websites and that I needed clients. When I got my first design gig and I got an introductory email asking me to reply with a few details and my ‘hourly rate’ it struck me that I had no idea what to charge.

It can be one of the most odd situations to jump in to, especially if, like me, you came in to this from a pretty bog standard job where your pay cheque came in at the end of the month at its usual rate. It can be easy to set your rates too high for your experience, but even more so it’s possible to undervalue your own work and take a rate far lower than you should be.

How I Figured It All Out

Eventually I settled on a rate of $15 an hour, I’d not done much designing before and I’d never billed hourly so all of this seemed exciting to me. Back then I was primarily helping out affiliate marketers get designs completed, coded and running on a CMS of their choice. Things seemed pretty sweet, since my job before that was minimum wage and low hours, I was getting paid a bit more than in my previous job and I was enjoying the job to an extent.

Eventually, through connections with my main employer, I scored a couple more gigs with more affiliate marketers in need of a web developer to solve old problems and come up with new solutions to their technical problems (primarily involving user and click tracking, split testing, rotation of ads to geo-located users and so on).

Freelancing quickly became more of a few-hours-a-day part time job, growing until I was doing almost full time hours – still on my first rate of $15 hour. It dawned on me that I was working quite hard but still not making that much – enough for a 17 year old to get by on, but not enough for the amount of time and effort I was putting in. I raised my rate when I was 18 to around $20 an hour and sure enough money went up and the clients I had weren’t too dazed by it. At first I thought they didn’t mind the increase because I was doing a good job – but after a bit of research it turns out they didn’t care because I was still cheap.

Now I’m sure there are some nifty developers out there working for $15 an hour or $20 an hour, but I decided to have a look for myself by asking a few developers in the same situation what they were earning (primarily over forums). I also visited a few multi-developer or ‘studio’ websites and sent in requests for their rate for standard work. Much to my surprise I got prices back that were double mine, some higher, by people or studios with portfolios no bigger than my own.

Starting from blank the problem I had, and that a lot of us have, was that I started with no reference point to charge from. My initial rate of $15 an hour was just a figure I plucked out of the air that seemed like it’d be a good rate. In fairness, I didn’t have much of a portfolio to show off, but even after my portfolio of work and references grew and grew, my rate didn’t.

I realised things weren’t working out when I was working solid days with some weekends just to keep up my payments on my car insurance, travel costs and fairly low-cost lifestyle. Of course it’s easy to forget about the rate and the first thing I did was take on even more hours.

An important lesson for freelancers is that as your experience and portfolio grows, so too should your income. After all, you can command three figures an hour if you’ve got a track record of producing some of the best known WordPress themes in the world that double profits, but you can’t charge in the high double figures if you’ve got no proof that you’ve done this before and know your stuff.

Where To Start From

So if we all start from blank, we’re all destined to start off getting ripped off, right? Not at all. Let’s say you’ve created a few splash pages and they’re pretty flash. You enjoy designing this kind of work and you love to see what small changes can make in split testing to gain higher profit. The first thing to do is seek out what others are charging. In the same way that different car companies have similarly priced cars in each range, it’s important to find out what clients typically pay for this kind of work.

The first port of call should be a job board or similar where you can search for ‘landing page designer’ and see the typical rates associated with this line of work. It’s important to remember though, that just because someone is charging $65 an hour doesn’t mean you can follow suit. The individual might have a portfolio full of well established work and glowing testimonials. Search for freelancers with similar skill levels to your own in order to get an overview of what the competition are charging.

You may be surprised at how much more you could be earning by actually doing a bit of research into what clients are willing to pay for this kind of service. Of course everyone will always have differing rates, but everyone has differing levels of quality and output. For example what I charge now (which I won’t disclose) for doing something such as converting a PSD into a WordPress theme is a lot more than what I charged when I started out because I have a track record and a portfolio (which ironically is actually down for a redesign right now) which I can use to backup what I can do. As well as this I have multiple clients that can be contacted for testimonials to attest to my work of which I’m quite proud.

How Much Quantity Over Quality Can You Take?

When you’re first starting out, your rate will never be life changing. It’s generally a good idea to charge a little cheaper at first to get some work under your belt, your reputation on the up and some pieces you can put in your portfolio. What you need to keep an eye on here, something I forgot when I first started out, is how much cheap work you want to take on. I ended up doing months of low paid work even though by this point I had some big name affiliate marketers using my work just because I enjoyed having so many hours to work as it felt like I was raking it in.

You may be surprised after upping your rates how many clients will stick around. You might also be surprised by how many are outraged and declare that your services are not worth the extra cost of a Big Mac meal an hour. Some clients may decide to look elsewhere for cheaper work, but in the long run these are the clients you don’t really want to cling on to.

If you’re racking up 30 billable hours a week at $15 an hour then before any costs or tax are taken in to account, your weekly income is $450. If you were charging $20 and hour then you’d only need 22.5 billable hours a week to make the same. Even if you do lose a few hours of work a week, chances are you’re still in profit.

The Difference Between A Pay Rise And A Demand

What I’m trying to imply here is that as a freelancer you have skills which are required by a client that either does not have these skills, or does not have the time to apply them. Therefore the client wishes to loan these skills from you for an agreeable rate. You might think that charging $10 an hour is great for doing some PSD to HTML work or similar, but the reality is that it’s probably taken you 1-2 years to get good at this in which time you’ve not been earning. If a client was to do this work themselves, they’d have to dedicate a long time training and practicing just to get their site completed – why would they even give that a second thought when they could pay someone a day or two’s work to get it done.

This doesn’t mean that you should up your rates right now, no matter what you’re earning, telling clients to accept it or get lost. All it means is that if you haven’t modified your rates in a while, feel unhappy with your income or you’re just getting started and feel like you’ve chosen the wrong rate – there is no time like the present to look in to it and change.

Usually if I change my rate (I’m happy with mine at the moment) I’ll send out an email to my active clients that I’m likely to be working with in that time, notifying them of the change that will be taking place on a date I provide (usually the next month or 30 days after). Then when taking on new work, I quote my new rate. This means I have a transitional period of around a month where I slowly move all of my work over to my new rate. Clients have 30 days to get rid of me, although no one has yet, whilst at the same time I don’t look like I’m striking over my outrageously low wages.

Overall

Rates can be a nightmare or a dream come true. Getting them right is key in order to function properly as a freelancer and make a sustainable living. It is easy to underprice ourselves, especially when you consider the time it has taken to pick up a lot of these skills, but it’s also important to make sure we’re not pricing ourselves out of the market. A couple of hours research and questioning can help us figure out where our rate squares up to similar freelancers and assists in giving an overview of whether to increase or decrease rates and workload.

Your Say

Have you had any trouble setting yourself an hourly rate? How did you overcome this issue? Do you have any tips or tricks for aspiring freelancers? Let us know in the comments!



9 Responses to Work Online? My Insight Into Setting An Hourly Rate

  1. Design 311 says:

    As a starting freelancing, web developer I thought this article was very interesting. Good job. I’m currently working on a project for free, just to get my portfolio filled up a bit. I have time enough anyway and I believe a filled portfolio is more likely to get me more clients.

    Asking the rates of other freelancers and web developers on forums seems like a good idea, maybe you could share some of these forums? Or are they top secret, just like your rate? :-)

    And while you’re at it, which job boards would you suggest?

    Thanks.

    • Dan says:

      Finding others to ask is no secret at all, you can make connections by simply visiting sites like Forrst, Dribbble and reddit.com/r/web_design – there’s plenty of places. It’s great to make connections in these kinds of communities as they’ll be of no end of use once you get going.

      As for job boards, the best kind of clients in my experience are the ones that hunt you out specifically – by word of mouth. If I do use a job board, I tend to use the one at FreelanceSwitch among a few others.

  2. Parag Shah says:

    I have worked as a freelancer, and I totally agree with you when you say “it is easy to underprice ourselves”. I think the reason is – whenever you become an expert in something, the task seems very easy to do, so it becomes hard to put a higher price on it (from out own perspective).

    However, it helps to remember that something seems easy because you have invested a long time sharpening your skills, and that investment is worth a lot to your clients.

    Good luck with your work.

    • GSP says:

      Also consider the value of what you’re providing to clients – if the client stands to make a million bucks from your work, you should bill accordingly.

      It’s surprising how quickly the value of web design adds up – if your site refers two new customers a year to a contractor, that’s a few thousand right there. If the client can’t see that, find another client – there’s enough out there who understand and respect the value you provide to make it worth chasing clients who don’t value your work.

      • Design 311 says:

        Interesting point of view, I hadn’t looked at it that way yet. Websites could indeed be very good marketing tools. So they bring in quite a good income if they’re properly optimized and shared with others.

  3. cevon says:

    Thank you for a great post.

  4. Zac says:

    Nice post, another informative and enjoyable post :)

    A few years ago my friend and I tried stepping into the web design business after a client was referred to us. The client simply needed a website, and it was our first job. Despite that though, we charged $30 an hour, which was (now quite surprisingly) perfectly acceptable to our client. We finished the job in around… four or five hours and promptly received our payment.

    Interesting that we were able to charge that much, especially considering it was our first job and that we were 16 and 14 at the time.

  5. Claire says:

    Not long ago, I read somewhere:
    “If you don’t feel that the price you charge is too high – at least a little – you’re not charging enough!”
    This I try to keep in mind every time I qive a quote, or I know that I will sell my work too cheap. This despite the fact that my country is more expensive than most, and thereby my rates are not always as internationally competitive compared to what others charge in i.e. Australia or USA.
    Even so, I do have international clients at times :)

    Thank you for a great article.

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