How to price services as a freelance creative
I always remember this particular conversation I had with a potential client. He ran some sort of health business and approached me looking for someone to manage the blog on his site. His main goal was to seriously boost his SEO ranking.
We quickly set up a time to talk over the phone.
At first, he came across really gruff. He was very clear about what he expected from blog content. I knew right away, he didn’t really know how much time and effort goes into a successful blog. But I was willing to give it a go, and hopefully educate him in the process.
After out chat about his business and what he needed, I told him I’d ‘run some numbers’ and get a quote back to him by the end of the day.
Now, quoting is not my favourite thing to do. I usually spend quite a lot of time figure it out. It’s really why I’ve moved into selling packages, instead of services. But more on that another time.
So I spend quite a lot of time tallying up how much I needed to charge for this. I mean, it was a pretty big job. Consistent, but there was a lot of work and a lot of expectations to meet.
The moment I nervously sent off the quote, he called me.
I answered, excited to hear from him so quickly.
He straight out told me I was joking to think that I could charge so much for each blog post. He scoffed and spluttered in my ear. I think about this conversation a lot, and although he was trying to get me to budge, I didn’t. I stood my ground, I told him, this is what I’m worth.
Although at the time, it was horrible feeling to have someone laugh in your face. If I’m going to be honest, I cried that night. I felt defeated and worthless. But when the next morning rolled around, I picked myself up and sat at my desk, and kept working.
That conversation, for me, was my biggest fear with quoting on a job. And I don’t think I’m alone.
I’m into my fifth year of being self employed, and I still, to this day, find pricing, quoting and invoicing challenging. I’m constantly doubting my worth. Even with this foolproof pricing strategy behind me.
The truth is, if you struggle with pricing like I do, you’ll always struggle with it.
Offering a creative service is no easy feat. But charging for it is a whole other thing. But if you don’t charge right, you’re not only damaging your own potential success, but the industry too. Because if you charge less than industry standards, then you’re just confusing business owners out there that are searching for creative magic and help.
The hardest part is that working for yourself is personal. It’s hard to separate the business from it. No matter if you’re a creative like me, a plumber, a personal trainer, we all put a lot of ourselves into every job. So pricing our services feels like putting worth on ourselves as human beings. And because of that, we’re a little terrified that someone will scoff in our faces and tell us ‘you’re joking’.
Starting out, it’s hard to even understand where to begin with pricing. I have friends who’ve started on $20 an hour, not taking into account that it actually cost of running a business, and we’ve all got taxes to pay, superannuation (if you’re a fellow Aussie). $20 an hour, will get you into trouble—trust me. And hell, you’re worth so much more than that.
Finding your hourly rate
First things first, you need to find your hourly rate. Here's my simple guide how to calculate what you need to be making in order to survive life's expenses.
Calculate the yearly cost of all your bills (rent, utilities, phone, internet, car insurance, health insurance, etc)
Calculate your weekly expenses (food, petrol, public transport, gym membership, etc) x by 52, which will give you your yearly cost
Calculate your yearly business expenses (website hosting, domain, email, accounting software, yearly accountant fee)
Add all these yearly costs together.
Add 40% to that amount to cover taxes and superannuation (9.5%). This is the absolute minimum you need to earn to be able to survive every year.
Divide your yearly cost by 52 weeks, divide that number by 5 days, and divide that number by 30 hours. This number is your hourly rate. This is assuming you’re working a 40-hour week. Now, I know I’ve told you to divide by 30 hours, but that’s assuming you’re not going to be working on billable client work 40 hours every week. This gives you 10 hours of non-client work, eg. commuting to and from meetings, time spent on marketing and signing on new clients, etc.
So, if you’ve done all the calculations and end up with a low hourly rate, don’t feel like you have to use that number. Use any hourly rate that you feel comfortable with, as long as it’s above your calculated hourly rate. Just make sure you’ll make enough money to pay for your life expenses and running your business.
If your rate is higher than you feel comfortable with, then consider getting a part-time job on the weekends (there is no shame in this, you'll find a vast majority of freelancers start out this way). Or, consider what you can cut from your yearly, monthly and weekly expenses. The freelance life is not a lavish life, but it’s certainly worth it in the long-run.
Finding your industry standard rate
It’s always a good idea to check and see what other people are charging in your industry. This can be a little difficult. I've found most freelancers I know are often happy to share their rates with you.
Otherwise, I like to use PayScale. So, let’s say you’re a junior marketing assistant, according to PayScale, the average annual salary in Australia is $45,561 (including taxes and super). If this number fits in your yearly expenses, then that’s a great place to start. Just divide by 52 weeks in the year, and then divide that number by 30 hours a week. Remember to always keep time up your sleeve for un-billable things like working on your business.
Also, don’t be afraid to add to the industry standard! When you’re paid a salary, you have colleagues to help with your workload, managers to liaise with stakeholders, accountants to deal with finances, and on and on it goes. When freelancing, you’re doing it 100% yourself, giving it everything you’ve got—you deserve to be paid accordingly.
Why you definitely should NOT quote your hourly rate
I know, we just figured out your hourly rate, and now I’m telling you not to use it?… Stay with me here.
You’ve got two choices here. You can either,
quote your hourly rate and how long the project should take, or
quote what the project cost as a whole.
As you can already probably guess, I recommend going with choice two.
When you quote out at an hourly rate, you’re putting value on your time. But when you quote out for a project, you’re putting value on your work. It not only becomes easier to talk about but it’s less personal and sounds far more professional.
Plus, costing out by project is how the big agencies do it.
How to quote out a project
Write out every single step included in the project. Even the little, nitty gritty things like file preparation or uploading videos to Google Drive. Don’t forget to add project management to the list. This is something easily forgotten, but often takes up a lot of your time. Project management includes all the emails, phone calls, presentations, and so forth.
Later on, you’ll add these steps into your quote, to help give your client a better understand of what value they get for their dollar.
Estimate how many hours each step will take. Be generous with this. It’s very easy to underestimate how long things will take so always add more time. Don’t write your estimated hours on the quote—they’re for your eyes only.
Multiply the total number of hours by your hourly rate. And there you go, you’ve found your projects value.
How to quote and invoice a client
First of all, I recommend setting up either a business bank account or a seperate bank account. All invoices will come through that account. This makes it easier to keep track of what’s coming in and going out every month. If you’re using your personal bank account, it’s easy to miss when a client doesn’t pay you—which happens, often.
If numbers and maths aren’t your strong suit (don’t worry, me either), then I would highly recommend using online accounting software. It took me years to do this, and I really REALLY wish I had done it sooner.
Accounting software automatically keeps track of what’s coming in and out of your business bank account. It allows you to create and send quotes and invoices, and even takes the pressure out of calculating your taxes. (Aussies: it even calculates your superannuation and HECS debt for you!). It does everything for you, making your life easier. All you have to worry about is paying yourself #dolladollabillsyall.
There are so many account software tools out there, it can be a little daunting. I know a lot of people who use Xero. I’ve used it before too. It’s great for companies that have inventory and a lot coming in and going out of their bank accounts. I couldn’t recommend Xero enough for those bigger more complicated businesses.
But Xero did’t work for my small creative business.
I moved across to Rounded and highly recommend checking it out if you’re a creative freelancer.
I’ve also tried MYOB and Freshbooks—both weren’t right for me.
Almost all online accounting software offer a 30-day free trial, so definitely try a few before settling.
Now, accounting software comes at a cost, and it ain’t cheap. But if you add the yearly expense into your hourly rate, your client work pays for it.
If you’re no no place to pay for a tool to manage your finances for you, you can send some pretty good-looking invoices and quotes through Canva’s templates.