If you’ve been following awhile, you probably already know that I’m a full-time traveler who makes a living as a freelance content strategist and copywriter. I quit my last job to freelance full-time in early 2011, which means I’ve been self-employed for almost eight years now.
In the past few years, I’ve joined a lot of online groups for freelancer writers and strategists. And I’ve noticed that one of the trickiest things for people when they’re first starting out is figuring out how to price themselves.
I don’t blame them. I had a hell of a time figuring it out at first, myself.
But now that I have a better handle on things, I thought it might be a good time to take you through the numbers. Because the methods people often use (calculating hourly rate based on a full-time job, for instance) could actually leave you in a bad financial position.
Instead, consider this…
Figure Out What You Need…But Don’t Stop There
The advice I’ve seen most often is this: calculate your living expenses first. Figure out what you need to survive before you start figuring out what you’ll charge.
What are your monthly expenses? Before you know how much you need, you’ll need to know how much you spend. And most people don’t really track that.
So don’t guess at this number. Start tracking. How much are you actually spending per month or per week?
Let’s say your answer is $2,000 a month, which is $24,000 per year.
Now, let’s say you plan on taking four weeks off each year including holidays. That means you have 48 weeks left to make your living. $24,000 divided by 48 means you need to make $500 per week at a minimum to make ends meet.
Yay, hooray! That’s not too bad, right? Only, it’s definitely not everything you need to factor in…so hold onto that number and let’s do some more math…
Factor in Taxes & Healthcare
Fun surprise (read: not-fun surprise): As a freelancer, your tax and healthcare bills are likely going to be a whole lot higher. If you’re in the US, chances are your employer has been paying half of your social security contributions. They’ve also got you on their healthcare plan. As a freelancer, you pay the full social security amount, which means that tax is now double. Your health insurance will probably double (or even triple) as well.
So, on top of that $500 per week, you’ll also need to make enough to pay taxes and health insurance premiums.
Now, before I do a little off-the-top-of-my-head math on this, it’s worth noting that I am not a tax professional. Before you take the leap into full-time freelance, I recommend consulting with someone who is. Often they’ll do a cheap or even free first consult where you can ask some preliminary questions.
Okay, back to the math. So, in general, for freelancers, when you purchase things specifically for your business (conference passes, a new laptop, post-it notes, etc.) you can write them off at the end of the year (which means you are not taxed on that amount). So if you spend $4,000 on computer equipment and conferences for your business, that $4,000 is not taxed.
In our earlier example, you needed $24,000 per year to cover expenses. So let’s say $4k of those were business expenses, which means $20,000 is taxable.
Now, income tax.
The first $9,000 or so will be taxed at 10% ($900). The rest (up to just under $38k) would be taxed at 15%. So if you made $20,000, that means about $11,000 of that would be taxed at 15% ($1650). So the total here would be about $2550 in income tax.
Social security tax is another 15% or so. 15% of $20,000 is $3,000.
So, add both those up and you’d owe $5550 in this scenario.
Which means you actually don’t need $24,000 per year just to make ends meet. With taxes, you now need at least $30,000 (and keep in mind that you’ll be taxed on that new $6k too, so you’ll actually need even more).
[Again, your specific tax situation might be different and it’s worth talking to a tax pro. It’s also worth noting that I’ve rounded up and down to get the above numbers, so they are not precise, and the thresholds for different percentages change yearly. So, again, consult a tax pro on your specific numbers. Don’t assume my math is exact for your situation.]
Now, health insurance. This one’s tricky because preexisting conditions, state of residence, etc. make a huge impact. So before you do the math on this, you’ll need to figure out what your options are in your state.
But for the sake of the math I’m doing here, let’s say your health insurance is going to be $400 per month. That’s $4800 per year, which pushes you up to needing at least $35,000 per year, though, to be safe, let’s round that number up to $40,000.
And if this is starting to feel overwhelming, don’t fret! Commanding higher rates as a freelancer is not hard. What I’m trying to do here is make sure you get a realistic picture of where you need to set hourly rates. There’s a reason freelancers make double (or more) than salaried employees do per hour.
Which brings me to another important consideration…
Don’t Assume You Can Work 40 Hours Per Week
Okay, so in our scenario above, you need to make at least $40,000 per year to make ends meet. With four weeks off, that means about $850 per week. So, at first blush, if you divide that by 40 hours, it looks like you could charge about $20 per hour and do just fine.
But here’s the catch: Not all freelance hours are billable.
Billable hours are time you can bill to a client. When you’re writing for them or meeting with them or coding their website, for example.
But there are lots of business tasks that can’t be billed to clients. Marketing. Updating your own website. Sales calls. Attending conferences. Drawing up invoices. Chasing down late payments (by the way, always build in late fees for this reason!). Etc.
If you assume you’re going to be billing 40 hours each week, chances are you are going to be working your ass off to hit that billable number.
I’m lucky because I worked for an ad agency before going freelance, so I was already well aware of billable vs. unbillable time. Even as an employee (and thus not wearing as many hats) and even working over 40 hours every week, I wasn’t hitting 40 billable hours per week.
If you’re planning on working full-time and shooting for 40 hours per week, start by shooting for 20 – 30 billable hours and see how things go. See how much time you spend on the non-billable stuff. It’ll vary a bit based on your industry, the kinds of clients you work with, how long each client project generally is (you’ll spend less time on sales, for instance, if you’re signing year-long contracts vs. taking tiny projects and having to generate new clients every single week).
So, in the scenario we’ve been calculating so far, you need $850 per week bare minimum. Let’s say you can get 25 hours of billable work done per week. That puts you at a minimum freelance rate of $34 per hour.
And that doesn’t account of savings, emergencies, sick days, etc.
Which is why you should raise it…
Take That Minimum Rate and Round It Up
That bare minimum rate is just your starting point. As a freelancer, there are always up times and down times. There are sick days (for which you are not paid) and emergencies and times when clients all seem to fall off the planet. It’s part of the gig and it’s part of the reason you can’t stick to your bare minimum rate.
In fact, I wouldn’t even think of that as the bare minimum rate. Instead, I’d round up and consider the rounded number the bare minimum. Financial pros recommend saving at least 10 – 15% of your income for retirement and emergencies. They’ll also tell you as a freelancer you should have six months of expenses stocked away just in case.
If you round that minimum rate up to $40 and you save $6 for each hour, that’s 15%. If you round up to $50, you give yourself a little more space to breathe, especially during the slow times.
And if you need permission to push it higher, here it is: Push it higher! Freelancing is up and down, even when you’re experienced. Even after years of doing it. Shit happens. Life happens. And not every month will hit your numbers.
Which brings me to another consideration…
Compare to Industry Standards (And Raise Your Rates)
What are other freelancers charging in your industry and for your skill level?
Because here’s the thing: What you charge isn’t actually about expenses. That math is important because you need to know your minimums. You need to know at what level you would no longer be making ends meet.
But when it comes to actually setting prices, it’s a much better practice to look at industry averages and go from there.
Because if the industry average for mid-level copywriters is $75 per hour and you charge $40 per hour, not only are you cheating yourself, but you’re also hurting the industry, pushing averages for highly skilled work down unnecessarily. If you want to beat the competition on price, go for it! But $70 per hour still beats the $75 crowd without seriously undervaluing the work that you do.
Because clients don’t care about your living expenses. They care about the value you brought to their project. They care about results. If you saved the client hundreds of employee hours, you should be charging based on that value, not your living expenses, however modest or not-modest they may be.
So, how do you figure out industry standards? Ask around. Talk to others in your field. Contact people with similar experience and ask for an estimate. Reach out to peers in industry groups and ask if there are any recent surveys or articles on the topic.
For copywriting, I’d say $50 per hour is pretty junior-level. $75+ is mid-level. And senior copywriters, especially those with strategy skills or technical know-how, command $100+. The most I’ve personally seen charged was $150 per hour for a senior copywriter, but I’m sure that’s not the actual cap.
Charge Per Project, Not Per Hour
Finally, now that you’ve got a sense of hourly pay, throw that out the window.
Kidding. Sort of.
At the end of the day, at least for content work, it’s a better plan to charge per-project or per-article than per hour.
It’s great for the client because there’s no mystery. There’s no fear of going over budget. They know what they’re paying you up front.
And it’s great for the freelancer because it incentivizes productivity. If you estimated that an article will take five hours and you’ve charged the client $500 for that article ($100 per hour), if you can find a way to get it done well in only four hours, now you’ve made $125 per hour. If you estimated one round of revisions with the client, but you nail it on the first try and the client doesn’t have any revisions for you, you make more money for your time even though you aren’t charging the client more.
As someone with mental health challenges, I also find this approach takes the pressure off. If I’m having an off day and my tasks are taking longer, I don’t have to feel guilty or worry that I’m overcharging a client. Set pricing makes it easier to forgive myself and move forward on tough days and to incentivize myself to work hard on good days.
Now, one last caveat if you plan on charging per-article, per-project, etc.: You need to be very specific about what that price includes. How many rounds of revisions will you do for the client? How many words will an article be? How many articles or pages will you write? Will you source photos for the client? Etc. Be extremely clear up front about the scope of the project and get the client’s signature on your scope of work. That way, if a 1,000-word article starts to turn into a 3,000-word whitepaper with five expert interviews, you can go back to the client and say hey, we’ve changed the scope on this and the new price will be X.
For Those Who Live Outside the US
Okay, so the above numbers were based on someone who would be paying US taxes and health insurance rates. If you don’t live in the US (or if you’re planning to get the hell out soon), you can tweak that math. There are places where taxes are higher and places they’re lower. And pretty much everywhere your health insurance will be lower.
So, for example, in the States, my lowest health insurance option (which covered almost nothing) was about $300 per month. In Europe, I pay about $160 (for much better coverage).
How One Freelancer Handles All This
Okay, so let’s talk real-world, shall we?
In case it’s helpful, here’s what this freelancer does:
I’m a senior-level copywriter and content strategist with experience that ranges from content strategy to UX copywriting to SEO. I do a lot of case studies, blog posts, websites, and content audits. I specialize in tech, healthcare, and other industries that need a bit of technical expertise and the ability to translate complicated topics for the layman. And I’ve been a professional copywriter for upwards of 15 years.
My usual hourly rate is $100 and my bare minimum is $90 (which means that’s what I charge non-profits or close friends).
I almost always bid per-project or per-article, but give clients the option of requesting additional work at my hourly rate.
I work part-time and shoot for 10 – 25 hours per week (billable and non-billable time included). Sometimes I push beyond that for a long-term client or a rewarding project, but in general you’ll find me working 3 – 4 mornings per week. I also try to take a full month off each year.
My goal is to save 50% of my income before taxes. So that would be 50% that can go toward living and business expenses (including travel) and 50% that goes toward taxes, emergencies, and retirement. I don’t always hit these numbers, but I set my goals high because the more I can save, the less likely I am to panic during slow times or big unexpected expenses.
Questions? Confusion? Anything I can help with? Drop a comment below.
Want to know more about my own freelance journey? Here’s a behind-the-scenes peek.
Thank you for this article. Very helpful! The part about tax considerations brings back uneasy feelings from early in my career, the only time I ever worked freelance. I was young and green and didn’t file properly, which made for a very frustrating next year or two.
I’d like to get some freelance experience, aiming to ramp it up as I approach semi-retirement. I’ve written various types of copy (web content, marketing copy, user guides for the many proprietary and third-party tools we use) for years and years, but as an employee within a company.
Can you suggest online job resources where a beginner might have a shot at landing a project? I tried one big name site, but it was chock full of people low-ball bidding and I never got a nibble. I expect they make their money mostly from people subscribing to bid.
I do plan to reach out to a friend (small media/video businessperson) and an acquaintance (copywriter) for their thoughts – but wondering if you can suggest companies you feel are legit.
I think your best bet when you’re starting out, if you can swing it, is face to face. I landed my first freelance gigs because of in-person connections. Does your city have a Chamber of Commerce? See if they have business meet-ups. Check out Meetup.com and see if there are any meet ups in industries you’d want to work with. Tell people you’re starting a freelance business and ask if anybody knows anybody who might need your services. Email past colleagues who have moved onto new companies and ask if they can connect you with said company’s marketing person.
Those would be my first steps! A lot of the online resources are (as you mentioned) so overcrowded and underbid.
In addition to in-person networking, I’ve also had good results with having people reach out to me because of articles I’ve published on content strategy or copywriting topics (both through my own blog and on other sites), so another strategy might be to see if you can guest post or pitch articles on sites where your ideal clients might be reading.
This article is super informative! I recently started freelancing, and it’s great to know that you charge upwards of $100+ per hour. That’s my ultimate goal, and it’s nice to have a number to aim to.
Thanks for the insight. I really appreciate it.
Glad to help!
I love your blog, Gigi. You share the meaty stuff that a lot of other creatives and freelancers aren’t totally transparent about.
Thanks for all the good info about developing rates.
Although I am still working at a documentary photographer, I’ve been doing some work as a virtual assistant and discovered I enjoy it and have some good skills to offer.
Since I don’t live in the US, but want to target US businesses and perhaps business owners in other countries (but not the country I currently live in), do you have any ideas for how to target them? I plan to reach out to small business owners I know and a few friends, but I thought you might have other ideas.
Hey! I work with clients across several continents and for me the best sources of business have been in-person networking, content marketing, and (interestingly) industry Facebook groups. I don’t think you have to do anything differently than you would if you lived there, though do make sure you have an easy way for clients to pay you across borders and do make sure you’re clear about your availability if there’s not too much time zone overlap. Hope that helps!
I’m just starting to start as a freelancer, this article is very timely! Thank you for these tips! (Sorry for my english, I’m just starting to learn english too :))
Glad it was helpful!
Talk about a breakdown! This article was informative and the breakdown was explained so well! Hence, the fact that you are a writer. Thank you for sharing this information!