Whatever freelance industry you are in -- WordPress development, web design, writing, or something else -- setting your rates is probably high up on your priority list.
The fact of the matter is, most freelancers just don't know how to set their rates. Whenever a prospect approaches them with a job request, most will just charge whatever they think they should -- they don't do the due research before responding with a quote.
Bad, bad idea. You need to set your rates beforehand, independent of what a client asks you to do. Here's a quick guide (plus a cool formula) to help you set your freelance project prices.
Think In Hours
Don't think in terms of the size of a project.
Think in hours per project.
If someone approaches you with a freelance writing gig, set your price according to how many hours it will take you to write the article, rather than the actual word count of the project.
That way, you can ensure that no matter the project size or type, the time you put in is being compensated for on your terms.
Work Out Your Minimum Hourly Rate
Your minimum hourly rate is the very lowest rate you are willing to work for that will allow you to live your desired lifestyle comfortably.
Depending on your background and if you live in the first, second, or third world, this sum will vary greatly from freelancer to freelancer. I've personally set my minimum hourly rate to $30/hour. In other words, I don't take on projects that don't allow me to earn a minimum of thirty bucks an hour.
Now let's be clear - your minimum hourly rate is not the exact rate at which you will be working on every project. It's just the absolute minimum you'll work for. If you are asked to complete a WordPress development project in a background you have lots of experience in, you should charge close to your minimum hourly rate, simply because the work isn't difficult.
On the other hand, if the project will take a lot of complex research and coding, you'll charge quite a bit higher (at least twice as much) as your minimum hourly rate.
The Freelance Formula - Figuring Out Your Expenses
Here's a neat formula to help you calculate your minimum hourly rate from Tom Ewer (slightly modified) at Leaving Work Behind.
[(personal overheads + business overheads + desired savings) / hours worked] + tax
If you are planning on freelancing full-time, then this equation is vital to your success.
Personal overheads are your yearly expenses, like rent, groceries, insurance, medical bills, and all the other things that allow you to live your lifestyle. In the average first world country, this figure will probably be close to $25,000 per year for a family.
Business overheads are the expenses that go along with your freelance business. That might be buying WordPress themes and frameworks, hosting and domain costs, premium plugins, subscriptions to paid job boards, and any other investments into your freelance business.
WordPress and website developers will find themselves with larger business overheads than writers or graphic designers, due to the nature of the work. For our example, let's settle at $2000 per year.
Lastly, figure out how much money you want to put into your savings account per year. $10,000 a year would work for most families.
$25,000 + $2,000 + $10,000 = $37,000 per year.
The Freelance Formula - Deciding The Number Of Hours You Wanna Work p.a.
Decide on how many billable hours you want to spend per day on your projects. This does not include the number of hours you spend per day chatting with clients, marketing your services (which is important), or building your own Internet business on the side (which is very important).
I'm the type of guy who loves to work -- I prefer setting myself down on the computer with a project to work on instead of eating out at an expensive diner. I love what I do.
Thus, I like to work quite a bit -- 8 hours a day. Excluding a month and a half per year for vacation and sick days, that works out to 1688 billable hours per year -- a reasonable figure.
I divide my yearly expenses ($37,000) by 1212 to work out my minimum hourly rate.
$37,000 / 1688 = $30.78 per hour.
Add 20% tax, at that's a total of $36.94 per hour.
$30.78 x 120% = $36.94 per hour.
The minimum I should be working for is $36.94 (my personal hourly rate differs since I live in the third world).
Negotiating This Rate For Your Projects
Working out your minimum hourly rate is just the first step -- you need to be able to negotiate the rate (or anything upwards of it) with clients on your projects.
To start, you should never charge by the hour. All your projects should be based on a flat fee -- $2,000 for a custom WordPress theme design, $100 for logo design, etc.
The reason for this is that most contractors will want to pay less than what you'd like to earn at, as you've probably already guessed. You might deem $60/hour a fair rate for a difficult project, but your client might be thinking that $30/hour is quite enough.
When you charge a flat fee per project, your clients don't know how much you are earning per hour, and that's to your advantage.
If a client approaches you to code a complex design, he/she might think that $40 per hour is fair compensation. He/she estimates that the project will take ten hours to complete, so the offer is for $400.
Unbeknownst to the client, however, you have done something very similar before, so the design will only take you four hours, max, to code. You earn $400 at $100/hour.
If your client had known this, they almost certainly would have tried to negotiate a lower rate.
Stick To Your Rates
It's often tempting to lower your hourly rate to snag a few more jobs. After all, the wider your net, the more fish you catch, right?
Wrong. As you lower your rates, the competition only gets fiercer. There are a lot more apples at the bottom of the barrel than at the top. Fix your rates high and keep them high -- that way, there's less competition, and you're still making more money.
If you work at $15/hour when your minimum hourly rate should be $30/hour, you are shortchanging yourself of an extra $450 a week! (assuming that you work six billable hours a day)
You're working at 50% efficiency when you could be earning twice as much at 100% efficiency.
Stick to your rates.
Remember that there's a market for BMWs, and there's a market for broken-down Fords.
Which do you want to be selling?