Rates: Are you charging enough?

by Rheanna Chou
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4 arguments against charging what you’re worth and why they’re nonsense

A few years ago I overheard a conversation between two of my coworkers who also freelanced on the side. The conversation was about rates and what each of them was charging for their work. They were both equally talented graphic designers, but one of them, we’ll call him “Dave,” was charging much more for his work than the other, whom we will call “Mary.”

The conversation went something like this:

Mary: How are you charging so much and still getting work? Every time I try charging anything above cost my clients go somewhere else.

Dave: I’m OK pricing myself out of work. I know how much I need to make for the job to pay my overhead and still make a profit. I refuse work that doesn’t do that for me.

Dave was OK pricing himself out of work. And I didn’t blame him. It’s also the motto I’ve built my freelancing career around.

The reason Dave worked this way is because otherwise, he would never make any money. People are always looking for a bargain and they’re perfectly happy to pay as little as you will take for you work. It’s just good business to them.

Unfortunately, it’s not good business for you. You see, what you’re willing to accept will become your standard. So set your standard high and always be re-evaluating your rates. Chances are you’re not charging enough. If you’re not sure how you should be charging, check out this post for some options. 

There are several arguments I’ve heard for why freelancers should charge less since I started freelancing, and I’d like to discuss why they just don’t make sense. Let’s get into it.

1. Taking bottom-of-the-barrel rates to start out

I’ve heard this argument so many times. Freelancers who are just starting out shouldn’t be so picky about the work that comes their way — even if it barely pays, or doesn’t pay at all. This is ridiculous. Even new freelancers deserve fair compensation for their time.

For one, most freelancers I’ve known are not new to their trade. In fact, I’ve never met a freelancer who was new to their trade. Sure there are varying levels of experience but there is existing experience. Your rates should reflect your level of experience and what the market can sustain.

Secondly, accepting work that doesn’t meet your bare minimum rates based on experience and market value, will not help you earn better paying work. A client who wants to pay you next-to-nothing today is not going to magically pay your desired rates tomorrow.

The exception to this rule is a client who agrees to a temporary rate and a short-term contract with the intent to renegotiate once they’ve gotten a feel for your abilities. I call these probationary contracts and I’ve taken these on with varying degrees of success.

These contracts need to be well outlined from the start. The client needs to know how much you expect to make and how long you’re willing to work at a reduced rate before renegotiating. Sometimes clients just aren’t sure about you and need to see you in action.

But exercise caution entering into these contracts because sometimes it’s simply about budget, and regardless of the quality of your work, the client can’t pay more.

2. If you were working for an agency you’d be paid much less

Yes, salaried workers are paid a lower rate than freelancers doing the same job. And that’s because they are guaranteed 40 hours a week, plus benefits. Freelancers take on projects and even when we work long-term contracts, we’re not spending 40 hours a week on one client.

Freelancers spend only the time it takes to complete the work and then we move on to the next thing. Realistically we might only spend 4 hours on a project. If we make the same per hour as the full-timer, we’re making a fraction of the pay for the same work. It doesn’t make sense.

For a project to make sense financially, it needs to pay well enough to compensate for things we’re not getting. Namely, guaranteed work, job security, or benefits. This translates into a higher hourly rate.

For these reasons, your rates should not reflect what your full-time salaried counterpart would make. And if we’re honest, if a company needed another full-time employee, that’s what they would be looking for. Instead, they’re looking for a freelancer and are usually prepared to hire one at freelance rates.

I’ve really only seen clients looking for full-time work from freelancers a handful of times. And those times, the clients would have been better off hiring a salaried employee. They were not prepared to pay freelance rates, but expected quality work and 40 hours of time dedicated to their projects. That kind of arrangement just doesn’t make sense to most freelancers.

3. You should just take on more work

My husband once asked me why I couldn’t just take on more projects at a lower rate to make more money. He’s a car salesman and this is a tactic dealerships use to boost sales and hit sales goals during slower times of the year. And it works for a sales force of 125 people.

But for freelancers, not so much. Yet that’s what many people try to do. But this is inexperience talking here. The idea that one person can simply take on more work to meet their earning goals is a doomed endeavor.

Freelancers can’t push volume — that’s a quick way to burn yourself out for very little reward. Instead, we charge higher rates and push value and benefits. Quality over quantity is the game we play to meet our goals. And quality work demands higher pay.

4. There aren’t a lot of jobs that pay my rates

Wrong. There are just way too many jobs that expect top-notch work for free. This is the noise you have to sort through to find the gems.

I have had plenty of clients come to me on UpWork, a freelancing site that connects clients and freelancers, wanting work for next-to-nothing. And I’ve turned them down 100% of the time. They’re just not worth it because there’s no profit in it — let me show you.

UpWork takes a percentage of my earnings — 20% on the first $500 I make with each client and then 10% on everything I earn after that. So if I agree to a rate of $3 per article I write (an actual offer), and I write five articles per week, my earnings are $15, less 20%, which comes out to $12. And then I’m taxed on that at both the state and federal levels.

Still working with the above example, let’s assume I’ve put an average of three hours into each article — so 15 hours. Which means I’ve made .80 cents per hour. Who on earth can survive on that? No one I know.

Even if I double my article output to 10 articles per week, at those rates I’m still not making any money and I’ve maxed out my availability. I have no more time to take on better paying projects. And I still haven’t factored in any overhead — things like licenses, the software I use and more.

However, knowing I can’t make a living on those rates, I pass those jobs up entirely and focus solely on the ones that meet my rate requirements. Let them sucker someone else. I have bills to pay. And while, the paying jobs are fewer and far between, when they come along, they’re worth it. I end up making the money I need to pay my bills and make a profit, and I spend less time doing it than I would working myself ragged at the rates above.

Building your career without sacrificing your rates

Being a successful and well-paid freelancer (to me well-paid and successful are synonymous) means committing to your goals and passing up jobs that don’t align with them. There’s really no way around it that I’ve found.

But it isn’t as bleak as it may seem. There are clients out there who value your time and are willing to pay for work. Wait for them. Keep bidding on jobs and stick to you guns because once you find your first good client, your next good client isn’t too far behind.

Price your work based on your experience and the current job market — you may be new at freelancing but you are not new at your job, so don’t settle. Don’t compare your rates to those of your full-time counterparts because it’s an apples to oranges comparison. Ignore the jobs that don’t pay your bills because they never will. And most importantly, don’t be afraid to price yourself out of work, you’re really pricing yourself out of clients who aren’t right for you.

 

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