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Determining what to charge for your services can be very a difficult decision. “It will forever dominate your destiny”, as Yoda once said to Luke in Star Wars. In my experience, you do not want to start your hourly rate too low, because once you land a few larger clients you will have great difficulty migrating them to a higher hourly rate (that is, if you decide to charge hourly). What you charge hourly should reflect what the market would bear. So in other words, you should try to charge as much as clients are willing to pay ….. This sounds straightforward, but what do clients want to pay? You need to do some research, and find out what others are being paid with similar skills sets as you. There are a few Web sites that will help you determine what hourly rate other freelancers are charging. Two salary calculators that I have used in the past are available at www.salary.com and www.monster.com.
All of the information you find online regarding salaries and hourly rates should be taken with a grain of salt. In the creative business people can charge a lot more for their services if they have the creative portfolio to back it up. Below is a graph of how much I charged hourly as my career grew. You will notice that the more name brand experience I obtained resulted in an increase in my hourly rate.
0 – 2 Years – $15/hr
Small flyers for print, university department Web sites, PowerPoint slides
2-4 Years – $20/hr
Local small business Web sites, Bell Canada
4-6 Years – $37/hr
6-8 Years – $45/hr
Chevrolet, Various small business’s
8-10 Years – $80+/hr
Toyota, GM, Ford, Lexus, Amnesty, CBC.ca
As you can see there is a direct relationship between what I was paid and my experience. I would not use this as an absolute rule though. Very talented people can jump out of the gates making “mondo-cash”, but this is rare.
Even now people tell me that $65-80/hour for what I do is very cheap. I know other freelancers who charge upwards of $100/hr for their work. Once again, it all depends on your talent and experience. Someone with loads of talent can get far. Remember though, it is hard as a designer not to be excited by your own work. So you need a reality check every now and then.
Fixed price or hourly?
This is always a question I wrestle with, even in my own freelance business. For quite a long time I charged hourly for my projects. The problem I found with this type of billing was that the client rarely wanted to pay me for the extra hours it took for fine-tuning. It was always a struggle telling them that there will be a “scope change” if they made any more changes to a design or added more interactivity to a Flash piece. I have found most of the time I would set an hourly rate, but end up charging a flat fee for the project, regardless if I went over a few hours. So I switched to a flat fee pricing structure.
Why I switched to fixed fee pricing
Takes out the stress
Clients can depend on a fixed project price and not worry about additional charges. I can relax and not worry about how I am going to claw an extra four or five hours pay out of my client when they go beyond the project timeline. It makes for a better client relationship.
Easier to increase price over time
Fixed pricing does not mean my clients get to change the scope of the project and still pay the same price. However, fixed pricing does enable me to go over (or under) a few hours without sweating it. I always buffer the time by several hours to ensure that the client is paying upfront for “expected” changes. Also, after you work with a client for some time, you will understand how demanding they are and adjust your pricing to reflect the changes they typically request.
Foreign currency exchange rates
A lot of my clients are based all over the world, and I live in Canada. So when a foreign currency is worth more than the Canadian dollar, I make more money on every transaction. The problem with hourly rates is when the Canadian dollar becomes close in value to the foreign currency, such as the US Dollar. I actually loose money. If I were still charging hourly for my projects it would be difficult to adjust my hourly rate upwards to compensate for the exchange rate. Because I charge a fixed price per project, I can increase my rates without causing too much concern for my clients.
Typically your clients will not mind paying between ten and thirty percent more if you keep them really well serviced. I cannot stress that enough to people starting freelance for the first time. You can easily recall poor service when you eat at a restaurant, and the concept is the same in any business venture. Doing freelance is no different, and you need to bend over backward for your clients. This means quickly returning phone calls, prompt service and quality work above and beyond. If you follow through with good service you will not have as much trouble raising your rates with existing clients. They do not mind paying more, so long as they value your efforts.
photo (c) Ian Britton – FreeFoto.com
When I started working as freelancer, I was charging flat rate and clients had no problem. But suddenly one of client felt price bit higher and told me to charge hourly, I did some calculation and came out with rate of $10 per hour. Clients have no problem now and I feel no difference in pay. I feel you are right that now clients will no be happy if I increase my hourly rates but if I have to then I will do it.
Great post about an issue that affects all freelancers. I’d like to add a downside to using flat fees: estimating the cost upfront. While clients paying hourly still want to know how long you think a project will take, it’s a little bit more stressful when you’re charging a flat fee.
Also, another website I found useful was HotGigs. I wrote a quick review here:
Very interesting and informative article. Im a big fan of flat fee as I tend to jump from project to project as a theme or idea hits me. Stopping the creative flow to record the hours spent on each project as I move about would be too time consuming and distracting. I find I usually am just over in hours compared to flat fee but i dont mind this as it usually all works itself out in the end. It also gives me a little room for bargaining or negotiations on price for those budget conscious clients.