How Much Should I Charge?

As a rule of thumb, an independent contractor needs to charge three times the hourly rate of someone on payroll. That's because the freelancer pays twice as much payroll tax (see Taxes), works on his own equipment, provides his own benefits (see Insurance), and is not guaranteed 40 hours per week. For example, if a designer with your experience in your area makes $20 per hour as full-time employee, you should be charging $60 per hour as a freelancer. If you are working in-house on your client's equipment you'd charge two times the employee's rate, or $40 in this example.

From that baseline you have the option of two alternate tracks. If you are aiming to increase your market share and client base, you can charge somewhat less than the going rate. That will help you win projects that are desirable but have smaller budgets.

You can also charge more than the going rate and position yourself as the premium designer. Many factors other than price will be involved in this decision, because clients will be expecting a deluxe experience, and of course, top notch work from you.

Throughout my career I have known when it is time to raise my rate when I feel overly busy and stressed. By raising my rate, I make the extra stress worthwhile and lose the clients that are too cost-conscious (or I never acquire them in the first place). The quality of my work has continuously improved, my experience has grown, and I have invested in tools that allow me to work more and more efficiently. That justifies a steady increase in rate. For me rate increases take place almost every year. I have also been able to win more prestigious projects and work with more desirable clients as time progressed. The route I have chosen is to always be seen as a good value, not the cheapest, but the best for the money spent. Because I am a value designer, I have been able to weather recessions better than the boutique designers.

Be careful not to undercharge. If your estimate is too much lower than your competitors' you will not be taken seriously. This has happened to me a a time or two. I lost bids because my estimate was too low.

In all my years in business, only a couple of times did I receive any comment after a rate increase. Both times they were from clients that I felt I had outgrown anyway. One of the keys to moving smoothly into a higher pay range is to do a higher level of work than you are being paid for. When you start charging the higher rate, you won't get any complaints because you are already exceeding expectations. If your goal is to charge $100 per hour, start doing work that excellent now for whatever rate you can get. You will achieve your goal sooner than you think.