Business

How to set your daily rate as a freelancer

March 29, 2022 by Panama Harris

Looking to land your first missions now that you’ve set out as a freelancer?

Before you seek out new customers, you ought to take a moment to define the scope of your services and set their respective prices.

As a freelancer, it’s common practice to charge an average daily rate (in France, taux journalier moyen or TJM). This is basically what you expect to be paid for a day’s work.

But sometimes it can be hard to find a good point of reference on which to base a fair rate.

Many freelancers intentionally lower their prices out of fear of driving potential clients away, but as a result they miss out on excellent professional opportunities.

Don’t fall into the trap. It’s normal to worry about pricing yourself out of decent work, but by underselling yourself you’re undermining the success and long-term sustainability of your business.

So then, how do you set your rates as a freelancer? What are the guidelines for charging a fair price? And what are good habits to cultivate in order to justify raising your TJM?

This article shares all the details.

Things to have sorted before setting your freelance TJM

Calculate the time it takes to manage your business

It’s rare as a freelancer to work for one or more clients for an entire month. You’re the boss of your company, and that means you have to set aside some time to perform the routine administrative and commercial work that your business requires.

That means you have to:

  • handle your billing (building out quotes, invoices, order receipts, etc.);
  • manage your accounting;
  • fulfil your administrative obligations (declaring your business income, tracking your VAT withholding, etc.)
  • find and maintain leads for new clients (responding to requests, holding a series of calls with potential clients, getting informed about the project and taking the time to appreciate the unique challenges your clients’ businesses have, coming up with an appropriate offer that responds to the clients’ needs, undergoing any eventual tests, etc.)
  • manage your communications (website, updating your portfolio, etc.)

And that’s not all. Many freelancers work closely with technology, so they need to continuously refine and expand their skillset to stay current. It’s to prove that not only are they competent at their work, but also that the services they offer are relevant to today’s context.

💡 Good to know: Do you want to work as a freelancer but not spend too much time on admin and accounting for your business? Opt for hiring an umbrella company. Their wage portage services place you in a status somewhere between that of a salaried worker and an independent contractor. You’re linked to the company by contract and they give you the same advantages of salaried work (minimum salary, paid vacation...). They also handle billing and following up with clients. In exchange for these services, they take a commission on your billables.

Plan for slower periods

It’s normal that some months are slower than others as a freelancer. Some periods can bring lots of work, others - less so.

You may even decide it’s time to take some time off for a vacation to reset the clocks. But contrary to a salaried worker, you don’t have the benefit of paid vacation. If you don’t work...you don’t get paid.

These dips in activity are completely normal as a freelancer. Which is why you need to offset these losses by factoring in these “slowdowns” into your TJM.

Estimate your professional and personal costs

1. Professional costs

It’s very important to remember that your company’s revenue is not your salary or pay. Just because you have a TJM of €400 doesn’t mean that €400 goes directly into your pocket. In order to calculate your actual take-home pay, you need to deduct professional costs from your company’s revenue.

Among the most common costs associated with freelance work, there are:

  • social charges;
  • tax payments (income tax, VAT, CFE [Business Real Estate Taxes] etc.);
  • your complementary health insurance, or ‘mutuelle’ (which is 100% your responsibility to pay, contrary to salaried workers);
  • your professional insurance (in France, for example, assurance responsabilité civile professionnelle, assurance multi-risque...)
  • professional costs directly linked to your line of work (computer equipment, subscriptions to software or other tools, coworking membership, training fees, business account fees, etc.).

💡 Good to know: how much you pay into social charges varies according to your legal status. Something to consider when you choose your status as a freelancer.

You understood right: the difference between your company’s revenue and your net pay can vary considerably. It’s up to you to compare numbers and set the right price for your work so you can know exactly how much you’re taking home.

2. Personal costs

Before you set your rates, take some time to identify your monthly costs. How much do you need? What’s your budget? Don’t forget the steady expenses like rent, bills, food, credit cards or loans, social activities etc.

Figuring out all these costs will allow you to realistically determine your minimum salary (i.e. how much money you need to be able to live comfortably). It’s vital to have a clear picture of your required budget in mind, especially when just starting out, so you can better avoid nasty surprises at the end of the month.

How should you set your Average Daily Rate (TJM) as a freelancer?

There are three major criteria to consider when calculating your TJM: your skills, the market and the complexity of the job.

Get clear about your skills

Before you go out and start landing your first jobs, it’s important for you to get clear about your skillset. Whether you’re a freelance designer, engineer, web developer, consultant or project manager, you need to ask yourself some key questions, such as:

  • What training have you gone through?
  • What is your level of experience? Have you already worked on freelance projects in this field?
  • If you’ve only just started out as a freelancer, have you already done this kind of work as a salaried worker?
  • What is your client portfolio?
  • Do you have a particular area of expertise? If so, in what? What are your strengths compared to a peer freelancer in the same field?

This will give you a better grasp of the extent of both your abilities and your weaknesses. It will also generally help you better position yourself in terms of price (not to mention you’ll have a list ready to justify your rates to prospective clients).

Observe the market

It’s useful to have a point of comparison when setting your rates as a freelancer. This is why it’s important to keep an eye on the job market in your field. You can examine the rates other freelancers are charging in your industry (engineers, consultants, illustrators, writers, web developers...) who have a similar profile or level of experience.

You can start your market research by examining freelance job platforms like Malt, where daily rates and experience levels are publicly displayed. Which brings us to another related point: try to avoid referring to less-reputable websites, as they’ll often put forward foreign candidates whose rates are much lower than the local average to attract inquiries.

Don’t shy away from networking with other freelancers in your industry to get a sense of the job climate. Generally speaking, the freelance world is rather cooperative and most people are happy to discuss the particulars of their line of work. You may also want to contact freelancers with more experience for inspiration and to better understand how they adjusted their rates over time.

Don’t have any experience (yet)? That’s completely normal - you have to start from somewhere. You can start off at a slightly lower rate to sharpen your teeth on your first projects. And - bonus - as a result you’ll have great material for your portfolio. Soon enough you’ll be raising your rates.

Factor in the complexity of the mission

Your rates should also take into account how complicated the proposed mission may be. Certain contracts have very particular demands and challenges.

Let’s take as an example a graphic designer who has been asked to revisit a company’s visual identity.

This project will take quite a bit of work. It’s not just designing one or two logos - it’s completely restructuring a brand. This could very well mean a series of back-and-forths, along with some requests for reworks. There may be some last-minute emergencies or tight deadlines, which may require the designer to be readily available for consultation (or maybe even work some nights, etc.).

It goes without saying that these potential demands need to be folded into the price.

Don’t be afraid to start outlining the scope of a project from the moment you first exchange with a prospect. Ask all the pertinent questions that you think will allow you to picture exactly what might be expected of you. That way, when you sign the contract, you’ll know what your client wants from you and you’ll have set your prices accordingly.

2 good habits for raising your daily rate (TJM) as a freelancer

As a freelancer, your rates don’t stay fixed. They evolve with you as you gain experience.

Here are some good habits that will help you raise your rates.

Good habit #1: Develop your skills and become an expert

Freelancers need to constantly hone their skills to stay relevant and propose the best possible services for their clients.

Taking that concept a step further, you ought to differentiate yourself from other freelancers by getting into a niche expertise in your field. By developing your skills in a very specific sector, you’re building the gravitas to easily gain prospective clients’ trust.

And the more your skill is rare, the more value it has on the market - which further justifies a higher rate.

Know that certain freelancers have several arrows in their quiver. Having multiple marketable skills only makes your profile that much more interesting to prospective clients, with certain companies even prioritizing hiring “multi-purpose” freelancers.

Good habit #2: Build your reputation as a freelancer

It’s vitally important to grow your reputation and develop an audience as a freelancer. By doing so you gain credibility and increase your visibility with businesses in your industry.

Once you become well known in your field, clients will approach you directly and request your services. Having more prospective clients means you can reasonably raise your prices. It’s as easy as supply and demand.

But how do you build your reputation as a freelancer?

One effective way to build your reputation and establish credibility is to create content that’s relevant to your industry.

You can easily share your content on the web via:

  • blog articles;
  • social media posts;
  • videos;
  • podcasts, etc.

Any platform is possible. What’s important is that your content needs to bring value to your target audience. This further establishes your credibility and expertise in your field.

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Now that you have the keys to setting your rates as a freelancer, it’s time to move on to the next step: finding your first clients.

Don’t know where to start? We have a complete guide to help you find and secure your first contracts.

Are you a freelancer looking to open a professional account for your business? Discover Qonto, the business account that simplifies your everyday finances as a freelancer.

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