Ask ten freelancers how they chose their rate and you will hear ten different stories, many of which start with a guess. Guessing low is the most common mistake, and it is hard to undo once clients are used to a price. A better approach starts with your own numbers, checks them against the market and then chooses a pricing model that suits the work. Here is how to do that step by step.
Step One: Work Out Your Minimum Rate
Your minimum rate is the figure below which freelancing does not make financial sense. To calculate it, you need three numbers.
Your target annual income
Start with what you need to live on, then add savings and a buffer. Remember that, unlike an employee, you usually pay for your own holidays, sick days and retirement contributions.
Your business costs
List everything the business pays for in a year: equipment, software subscriptions, internet, insurance, professional fees, training, marketing and any workspace. Include an estimate for taxes based on your local rules.
Your billable hours
This is where many freelancers go wrong. Not every working hour can be billed. Time spent on admin, finding clients, invoicing and learning is unpaid. Many freelancers find that only around half to two-thirds of their working time is billable, so estimate honestly and subtract holidays and time off.
The formula is then straightforward:
Minimum hourly rate = (target income + business costs) ÷ billable hours per year
Keeping accurate records makes this calculation much easier; our guide to small business bookkeeping basics explains how to track income and expenses from day one.
Step Two: Research the Market
Your minimum rate tells you what you need. The market tells you what clients in your field expect to pay. Useful sources include:
- industry associations and professional bodies, which sometimes publish rate surveys;
- conversations with other freelancers in your niche, who are often willing to share ranges;
- job postings and freelance platforms, keeping in mind that platform rates can be lower than direct-client rates;
- prospective clients themselves, by asking about their budget early in the conversation.
Look at people with similar experience, skills and location to you. A specialist in a narrow field can usually charge more than a generalist.
Step Three: Choose a Pricing Model
Once you know your floor and the market range, decide how to package your price.
| Model | Works best for | Advantages | Watch out for |
|---|---|---|---|
| Hourly or daily | Open-ended work, ongoing support, unclear scope | Simple to explain; you are paid for every hour | Earnings are capped by your time; clients may watch the clock |
| Per project | Well-defined deliverables | Clients know the cost upfront; efficiency rewards you | Scope creep if the brief is vague |
| Retainer | Regular monthly work for the same client | Predictable income and planning | Needs clear limits on hours or deliverables |
| Value-based | Work with a clear business result | Price reflects the outcome, not hours | Requires confidence and a good understanding of the client’s goals |
Even when you quote per project, estimate the hours behind it so you know your effective hourly rate stays above your minimum.
A worked example
Imagine you want a certain yearly income and you know your annual business costs. Add the two together. Next, count your realistic billable hours: take the weeks you plan to work, multiply by the hours you expect to bill each week, and be conservative. Divide the total by those hours, and the result is your floor. If the market range sits comfortably above it, you have room to position yourself; if the market sits below it, you may need a more specialised offer, a different client group or lower costs.
Revisit this calculation whenever your costs or goals change, because a rate that worked two years ago may no longer cover your expenses today.
Step Four: Present Your Rate With Confidence
How you share a price affects how it is received. Put quotes in writing, describe what is included and what is not, and set out payment terms such as a deposit and due dates. Offering two or three packages at different levels lets clients choose rather than simply say yes or no.
Avoid apologising for your rate or dropping it the moment a client hesitates. If the budget truly does not fit, adjust the scope rather than the price.
When and How to Raise Your Rates
Review your rates at least once a year, and whenever your skills, demand or costs change. Being fully booked for months is often a sign your price is too low. For existing clients, give advance notice, explain the change briefly and thank them for their business. New clients can simply be quoted the new rate.
Explore more planning and productivity ideas in the business section.
Frequently Asked Questions
Should beginners charge less?
Many new freelancers start a little lower to build a portfolio, but your rate should never fall below your calculated minimum. Consider a short introductory discount with a clear end date rather than a permanently low price.
Is it better to charge hourly or per project?
Hourly suits work with an uncertain scope, while project pricing suits clearly defined deliverables. Many freelancers use both, depending on the client and the job.
Should I publish my rates on my website?
It depends on your field. Showing a starting price filters out clients with very different budgets, while keeping rates private gives you room to tailor quotes. Some freelancers list packages with “from” prices as a middle ground.
How do I handle clients who say I am too expensive?
Ask what budget they have in mind and offer a smaller scope that fits it. Some clients will not be a match, and that is fine; protecting your rate leaves time for clients who value your work.
Run the numbers for your own situation before your next quote. You can find more practical guides on Rashywings.com.
