Freelance writers often ask me questions about my rates. I laugh and tell them they get to set their own rates, and not to depend on me to set a value on their time. Most of them don't think that's funny and go away frustrated, so, I thought I would take a minute to tell you exactly how I calculate what work is worth to me.
Start From Your Cost of Living
Add it up. The groceries, the car insurance, the light bill, the taxes, the business expenses, everything. Now add 5% cushion for lean times, which will come. This is your base level needs assessment total. This is what it takes to simply maintain the life you now lead, without any improvements. It's also known as a good place to start.
• Add on for vacations, gifts, and any other expenses you might reasonably encounter along the way.
• Put in 15 to 20% for retirement savings.
• Allow yourself some room to grow, say, 10%.
The number you get from this, should be your goal, at least for now. Let's take a look at what you do with this from here. There are several options for pricing, and each of them is calculated slightly differently.
I rarely, in fact never, do write for an hourly rate. It is just too hard to justify and, frankly, I am too fast. My rate would be astronomical on paper. It is, however, the safest way to get good value from a client. It's a guarantee of a certain price for your time spent on their work. To set your hourly rate, follow one of the following formulas. You can do this for either the survive, or thrive budget numbers mentioned above.
• Divide your survival budget number by 50, allowing for at least two weeks of vacation time. Then divide by 40 hours in a week. Add 15% for time spent marketing, negotiating and record keeping, etc. This is your base hourly rate, the minimum you can work for without slowly going broke.
• Divide your thrive budget number the same way, this is the number you are shooting for.
• You can also decide to work by more or fewer hours. You really can decide how much you want to work. To get this to work out, make your last division by the number of hours you want to work in one week.
• Calculate how much you need by the hour, whether you will charge this way, or not, it will be the basis for the other two methods.
Here is a little secret. The higher your rate, the less work you have to do. Let it sink in. The higher the rate, the fewer the customers you have to find, woo, land, and keep happy. The higher the rate, the less research, typing, editing, re-editing, and emailing you have to do. Which is easier, find five ten dollar an hour customers, or one fifty dollar an hour customer?
Look at the numbers. It would have to be five times harder to find a fifty dollar an hour customer to make the ten dollar an hour customer make sense. It isn't. If it takes you one day to find a ten dollar customer, you could spend up to five days finding the fifty an hour customer and still get ahead on the first job!
Charging by the Word
This one will be a little trickier to calculate for the beginner. You don't know what you are capable of yet. You don't know how long it takes to write a blog post, or a brochure, etc. You need to know this in order to set your rate this way. But once you have fifty or more projects under your belt, you should have a pretty good idea, then this becomes an excellent way to price.
1. Calculate how many words are in the project. An average blog post is 350 to 500 words. An average page of book type is between 280 and 320. Be sure to account for every single piece, even the fifty word landing page, etc.
2. Keep a running tally of how many words you can reasonably write in an hour. For me, this varies based on the type of content and how heavily I believe it will be reviewed, in other words, how likely are they to ask for revisions if I don't make it perfect the first time?
3. Divide your desired hourly rate by the number of words you will produce in an hour. This gives you a minimum place to start. For example, if you write a thousand words an hour, and you want to make $50 an hour, you need to charge at least 5 cents per word.
4. Add 20% for all the other stuff that goes into it, for 6 cents per word. ( If you want to work that cheap, contact me, if you are any good I may have some work for you, LOL)
Charging by the word is a good way to go if you are doing a lot of little projects, or some ongoing work for one client. It maintains consistency. They know what to expect their cost to be, and they can plan accordingly. This is the model most likely to get you add-on work. Since they can calculate the cost themselves it is easy for them to add a few more pieces.
*Tip: be prepared to defend your word count! In other words, write tight! Some frugal business people will try to squeeze you on this rate, “You could have said all that in a hundred words, and it's 150, I think we need to edit that down before I can accept it.” Write your agreement to include a page/word count and make them stick to it. In fact,always over-deliver by giving them about 5% more than agreed upon to make it feel like a deal.
Charging by the Job
This is my personal preferred favorite method of pricing. It gives clear expectations on both sides. The client knows exactly what their cost will be, and you already know exactly how much your paypal account will grow by.
• Start from your hourly rate. This is usually the baseline for every pricing structure since it is the easiest thing to quantify.
• You can also start from your word rate, if you know how many words the project will be.
• Figure up about how long the project should take. Don't forget to add in for research, editing and rewrites. Factor in any other prep, or delivery costs and times.
• Multiply the project length in hours by your hourly rate, and add 10 to 15%. You will almost always underestimate time, especially in the beginning.
• If you started from a per word rate, multiply that times the length of the project, plus 10 to 15%.
This is the easiest pricing structure to get advances on. There is a set price and getting half up front is perfectly reasonable. With the other two structures, that can be tricky, unless you have agreed to complete a specific number of words, or limited yourself to a set number of hours.