How to calculate how much to charge per hour
Charging the right freelance rate will make it easier to achieve your dream income as a freelancer, while also paying for the additional costs that you might not have thought about when leaving your job to go freelance.
Setting the right rate can be hard, especially if you’re looking transitioning from a side hustle to full-fledged freelancance income.
Want to know how to calculate how much to charge per hour as a freelancer?
Here’s a few of our top tips for working out how much to charge your freelance clients.
- 1 Don’t charge your client hourly
- 2 Weekly charging in practice
- 3 When to stick to hourly rates
- 4 How to raise your freelance rates
Don’t charge your client hourly
If you’re a consultant, don’t charge you clients on an hourly basis, like “April 2018 – 72.8 hours @ $100/hr = $7280”. And, don’t charge them on a monthly basis like “April 2018 – flat rate $7500”
Charge your clients on a WEEKLY basis. You can still send them a single invoice at the end of the month, but do it like this: “April 2018 – 3 weeks @ $2500/wk = $7500”
The reason for this is that if you charge hourly, then you will often get nit picked over hours. Your clients will feel like they are trying to “rush” to use your time to the fullest, and if they see you (or think that you are) slacking, they may get upset. They may ask questions and worry that you are billing them “by the minute” (like a lawyer does), or they may try to cram as much work into as short a period as possible. It’s not comfortable for you and it makes them constantly wonder if they are getting their monies worth. It’s possible that the person hiring you might compare their “hourly wage” to yours, which you don’t want.
If you charge monthly, then you are an employee in the mind of the client. An employee works 40 hours a week, 4 weeks out of the month. They are going to try to use all your time, even if you have other clients. They will get upset if you aren’t available for everything they need. And, the person hiring you will say “hey, this guy is making double what I take home every month!” and that isn’t a good mindset to put them in.
By charging weekly, you make it clear that your time is valuable but that you aren’t trying to “nickel and dime” the client. You don’t have a clear hourly wage, so it’s not as easy to “price shop” you against a full or part time employee, and the hiring manager doesn’t as easily process the fact that you’re making more than them. You also make it clear that you are not a “full time employee” and that you aren’t available for everything at their beck and call.
Just tell your clients that you bill on a weekly basis for your work; the weeks when you work for them, you’ll bill them. Clarify that it’s OK for them to send you a quick email here or there and that you won’t charge for those, but that project work and similar, you’ll need to be paid your weekly rate.
Try it with your next client, you may be pleasantly surprised at the results. From my experience, people seem to really like the idea – they feel like they are “getting a deal” by not paying you all month (even if you end up billing for 4 weeks), and you feel like you aren’t “on the clock” being rushed to do as much as possible.
Weekly charging in practice
It can helps to see how this works by giving you some scenarios for freelance work you might do and how you would charge clients.
Let’s say you work in web development and some weeks a client might have something small (~$50 of work), another week a huge project (~$700 of work) and sometimes a project that spans multiple weeks (~$2,000 of work).
How would you convert this to billing per week without having a variable per week price?
Since you’re only sending the invoice and calculating your “hours” at the end of the month, bundle all that up in to 2 weeks of work.
You did 1 full week of work, and a fraction of a week of work, so that would be 2 weeks.
If it’s a client who may be price sensitive in that situation you could bill them for like 1.5 weeks, but try to just stick (as often as you ca) to billing in round 1.0 week blocks.
Obviously if it was a 30 minute, $50 job, then maybe just let that slide (and point out to the client you aren’t going to bill them for it) for goodwill
How would you figure out what a “week” is worth with variable amounts of work each week?
In this case, you could just take an average of what you bill them in a month and then convert that to weeks and then hope it evens out in the end.
In this case I either see me screwing the client when there isn’t much work (not comfortable with that) or getting screwed myself.
Screwing the client is what you want – but not in a bad way.
You want to get paid for the work you do, but you don’t want to allow yourself to be abused. Your client wants to pay for the work you do, but they want to pay as little as possible.
Hourly lets them pay as little as possible. Monthly lets you be abused. Weekly is the fair way of doing it – some weeks they get 110% of their monies worth, and sometimes they only get 75%.
At the end of the day it’s just business and you need to look out for your own business above everything.
When to stick to hourly rates
If you are getting a new client because you know the person and they know exactly what they are paying for, working hourly is okay.
If your client base know how much time it takes to get certain work done, then this is a safer option.
The only time you might not bill hourly is for small one-off projects from clients outside of your field who don’t know how long jobs typically take.
You could do this as a “minimum billable time” sort of thing that you can bill a flat rate for.
We have heard of consultants do something similar. They say “I will do $XXX rate for up to the first 20 hours. That will let us prove that we are a good fit to keep working together. If it’s not a fit, you’ll pay for exactly what I worked and we can part ways, but if it is a good fit, then it would just be $XXXX for a monthly retainer and everything will be taken care of”
Obviously, we would recommend charging weekly rates, but the idea is the same – doing a “trial run hourly rate” first.
How to raise your freelance rates
Looking to raise your freelance rates?
Simply calling up your client and saying “I’m raising my rates for $50/hr to $75/hr so the next invoice will be higher” is the wrong way to do it.
Raising it slowly over the next 6 months or telling them “In 2 months, my rates will raise to X due to an increase in operating costs for us this year, we’re just giving you some heads up” is a better way to do it.
Everyone knows that things get more expensive over time, this is generally called inflation.
Just don’t surprise your clients and you’ll be okay!