I’m going to bet that if I asked you your minimum hourly rate, you wouldn’t be able to tell me…if you can’t, that’s a problem, but by the end of this post, you’ll be on your way to having your starter rate and getting a measurable handle on your freelance income.
What Is A Minimum Hourly Rate?
Your minimum hour rate isn’t necessarily how much you charge per hour (though depending on the kind of freelancing you do, it might sometimes be.) This number is much more useful for you as an individual, especially if you charge by the piece.
Your minimum hourly rate is simply how much you get paid for a project divided across how many hours you spent working on it — that’s including phone calls, research, emails, creating your actual product…everything. It’s useful for a couple of reasons…
- It helps you concretely understand how much work goes into your work.
- It helps you discern how much clients are really worth to you.
- It serves as a guide when evaluating future projects.
- It becomes the standard by which you value your time as a freelancer.
That last point is especially important during Reflection and Assessment month. It’s entirely too easy to burn hour after hour on “side” tasks with a client. Knowing the value of your time helps you gauge when you’re being drained. Here’s an example:
Let’s say I have client a client, Frankie Beverly. They pay me to write 500-word articles on retail news every week. They drop $100 per article into my PayPal and I can finish the article in about an hour after research and proofing.
Frankie though, is a talker and generally unorganized. Every week I get a call where Frankie wants to chat and go through five different potential article ideas and countless bits of news from LinkedIn. I end up spending a extra hour each week just managing the planning and relationship.
My other client, Basquiat Productions, pays me $50 per 500-word news article on technology in customer relationship management, and sends me a list of topics with links to other articles I should reference. Since all the research is pretty much done for me, I can finish an article in 30 minutes.
My average rate for Frankie…$100/2 hours= $50 per hour
My average rate for Basquiat…$50/.5 hours=$100 per hour
If my minimum hourly rate were $100…this means that while Frankie looks like the better client on the surface (and per word, they do pay better), for my effort, all other things equal, Basquiat pays better.
If I ever needed to make a choice between the two, Frankie’s out. I could spend that time either looking for other clients who meet my hourly rate, or possibly doing more work (making twice as much) for Basquiat.
How Do I Decide What My Time Is Worth?
This is the challenging part. Especially when you’re getting started, it can feel impossible to figure out numbers like these, and even if you have some experience, setting a number with confidence can feel like a huge wall to climb.
I’m going to tell you though, don’t worry.
This number is largely arbitrary at first. You’re going to pick one based on a little bit of concrete information, and then adjust as you go (which is true for SO many things in freelancing, so getting some practice now is a good idea.)
If you’re new and don’t have a feel for your clients yet, I suggest using how much your last or current job roughly comes out to on an hourly basis…and doubling it.
If you’re more established or want to use a more sustainable method, take your monthly living expenses and divide them by the number of hours you can, or want to work.
Just keep in mind that as a freelancer, you have to make up for insurance, retirement, vacation, and taxes. Your average rate should reflect that. As you gain more experience, build your portfolio, raise your rates (both by the piece and by the hour), and learn to filter for better clients, that number should increase.
If you have some experience and want to establish a new goal, look at some of your clients and divide out what you make hourly for each. If you’re feeling conservative, you can average them out, but I say pick the highest and use that as a target for all future clients.
So that number…Are you happy with it? Do you feel you need to make some adjustments? Let me know in the comments!