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- Morgan Overholt is the founder and owner of Morgan Media LLC, a graphic design agency.
- When she was figuring out how to set her rates, she researched how much other freelancers in her field were charging for their services.
- Five other freelancers also weighed in with how they determine and set their rates, and how they communicated them to clients.
- Figuring out an hourly rate versus a fixed rate really depends on what services you’re providing.
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Making an entire career out of freelancing was never part of my life plan when I was a young, ambitious college student making barely over minimum wage and working part time at the local OfficeMax. Nonetheless, my design skills behind the print counter weren’t going unnoticed.
Over time, I became known as the store’s go-to graphic designer — so much so that customers would call ahead to see whether or not I was working that day and try to plan their projects around me.
One day, I received a call from my mom, who happened to work in the public relations office of the community college I was attending. She had received a call from a local realtor who said he was looking for me.
“He says he met you at OfficeMax, and remembered where you went to school. He says he is interested in paying you for some freelance work on the side and wanted to know how much you’d charge to make a flyer,” my mom told me. She seemed both bemused and impressed that the guy went to the trouble of tracking me down at school to avoid conflict with store management.
I ended up doing that flyer, and several others that followed, for a whopping $25 each — a dream for an 18-year-old minimum-wage earner!
As word began to spread around the small town about my cheap, yet skilled labor, I began to realize that if I really wanted to turn freelancing into a viable side hustle, I was going to need to come up with a better way to qualify my pay.
How I determined my rates as a professional freelance graphic designer
It’s safe to say I’ve come a long way from my $25-flyer days over the past couple of decades. Today, I run a small, successful freelance graphic design agency in Miami that generates almost $300,000 annually in gross revenue.
One of the biggest challenges for any newbie freelancer is figuring out how to determine their rates and how to turn that “hobby” into a “side hustle” — or possibly even a career.
So how did I do it? I crunched the numbers the old fashioned way.
First, I set three benchmarks for myself: a minimum salary equivalent rate (low-end), the average industry rate for my area (mid-level) and the high-end industry rate for my area (expert-level).
When I switched to full-time freelancing, I was earning $75,000 a year in a salaried position and living in Tennessee.
I knew I needed to at least make close to my equivalent salary on the low end just to pay my bills and make freelancing a viable option, so I made $75,000 my low-level target.
Next, I did a bit of homework.
According to Payscale.com, the average freelance graphic designer makes about $45 an hour and an expert-level designer makes about $90 an hour. So I made $45 my mid-level target and $90 my expert-level target.
So my numbers looked something like this:
Keep in mind when I made the switch to full-time freelance I was already an expert graphic designer, so $90 an hour was always the eventual target.
I also knew that the $35 an hour rate didn’t take into account any overhead or additional expenses I would incur, such as computer hardware, graphics software, and most notably, private health insurance. It also doesn’t take into account the fact that I may have wanted to go on vacation every once in a while instead of working 40-hour work weeks, 52 weeks out of the year.
But, I just wanted to be realistic when I was starting out, focusing more on viability than overnight riches.
I also knew not all of my contracts and projects would be billed hourly — some would be a fixed rate. Even when working on fixed-rate contracts, it’s always wise to have a target hourly rate in mind.
Luckily, I was easily able to blow that low-level goal out of the water within the first couple of months of business, and I hit the mid-level after the first year. Today, I earn between $75 and $95 an hour on average when working solo. When working with my staff, my effective hourly rate is closer to $150 because I’ve built in a 30% to 50% margin on top of their hourly wages.
The fixed rate versus hourly debate
Whether you bill clients with a fixed rate or hourly seems to be a hot topic in the freelancer community, with a lot of strong opinions on both sides of the aisle.
As a graphic designer who works on a lot of long-term, ever-evolving contracts, I personally find that hourly billing just works better for my business — even though I rarely quote that hourly rate to my client in the beginning. Clients who are new to the world of freelance might be easily scared off if you come out of the gate quoting a $100 an hour rate without the context of how quickly and efficiently you can work.
For instance, a more junior graphic designer would probably need three times the amount of time I would require for the same project. So even if that designer is only charging $50 an hour versus my $100 an hour, the cheaper designer will ultimately be more expensive (and likely, produce a lower quality product). So, when I’m meeting a new client for the first time, I generally speak in terms of top-line budgets and get into the hourly billing later.
We just don’t get a lot of “project-based” work. We get a lot of, “Hey, I have a ton of miscellaneous projects coming up and I need some ongoing assistance,” so a fixed rate doesn’t make sense for what we do, and we need to have that built-in versatility.
But it’s important to note that there’s no right answer on the hourly versus fixed rate debate — it’s whatever works best for you and for your business.
How other freelancers determine their rates
The other important thing to note when you’re trying to determine your rates as a freelancer is that there’s no “one size fits all” strategy.
So, I interviewed five other freelancers in a variety of fields and with a variety of experience from all over the US to gain their insights and stories about how they determine their rates.
Chris Misterek, a web developer based in Arizona, charges an average of $150 an hour for his services
Chris Misterek is a part-time web developer who focuses on web design, UX, and front-end development.
“When I first started, I didn’t have a lot of experience and honestly didn’t know how much I was worth. So, I started at $500 per website [which equates to about] $20 an hour,” said Misterek.
He shared that every time he added on a new client he would double his rate. “I figured if I doubled my rate and they said ‘no,’ at least I still had the project I was currently working on and I knew money was going to come in. The crazy thing was they hardly ever said no!” he said.
Eventually, Misterek started getting more “no’s” than “yes’s” and knew he’d reached his market limit.
“But, I didn’t just take that as a hard core fact … I learned how to communicate my value better and started adding value to the things I already did,” said Misterek.
Today, Misterek charges a flat-rate price based on the value of his services, and how much the client stands to profit off of that work, which allows him to earn an effective $150 an hour on average.
“It takes some time to dial in to how much a client will make off of the work I put into their project, but making an effort will really help to justify what you charge and take your prices out of the ‘subjective’ context. It’s like going from saying, ‘I feel like I’m worth this much,’ to ‘I know I’m worth this much,'” he explained.
Latasha James, a social media marketer in Michigan, charges an average of $80 an hour for her services
Latasha James is a full-time social media marketer who started freelancing in 2014 and made the switch to full-time last year.
“When I started freelancing, [my rate] was much, much lower. As they say, you have to start somewhere,” said James. “I don’t regret working for $20 an hour in the beginning, but I wasn’t making much profit after realizing I had to save for taxes, retirement, etc. I quickly doubled that rate, and continued to raise it as I felt it was appropriate.”
Today James prefers fixed-rate projects and retainers but still offers hourly services on occasion depending on the circumstance, and earns an effective hourly rate of about $80.
“My hourly rate is still a bit low, in my opinion, but I don’t offer hourly very often. I usually find it more beneficial for both myself and my clients to work out a package/project rate. I use that hourly rate for out-of-scope work in addition to packages,” said James.
James determines her prices based on her target income goals.
“I started freelancing mainly because I wanted a change of pace and to break from the normal 40-hour work week. While I still work a lot, I like not having to work that many hours if I don’t want to,” said James.
She started with a target annual income and worked backwards. Doing the math, she found that she’d have to work way over 40 hours each week to reach her income goal if she charged just $20 an hour.
As an expert in her field, she also knows the value of her services, and prices accordingly.
“Am I doing something quick that has a short shelf life? Maybe my rate is a bit lower. But if I’m building a social media strategy a company will use for the rest of its days, that is structural, important stuff and should be priced as such,” said James.
She advised freelancers not to sell themselves short. “Your time is valuable, and it’s the only resource that we simply cannot get back,” she said. “Very rarely do I get a flat-out ‘no.’ Sometimes I’ll be asked to negotiate down or remove components of the project, but if a client really wants to work with me, they will at least be willing to have a conversation.”
She also suggested doing your own homework as it applies to your specific field.
“Another thing I look at are averages,” she explained. “Upwork has great resources on average rates for different roles, and sites like LinkedIn, Glassdoor, and Payscale can be valuable, too. I don’t want to dig myself into a hole of being the most competitive, but I also don’t want to price myself so high that I’m not competitive at all.”
Kathy Keating, a social media marketer in Massachusetts, charges an average of $125 to $150 an hour
Kathy Keating has been a full-time freelancer since 2008, working in high-tech public relations and communications.
Keating prefers to work on a retainer, and bases her rates on current market values for freelancers with a similar level of experience and her client’s budget.
Her process includes identifying the client’s goals, estimating the number of hours required to achieve those goals, determining a fair rate for the project, and asking her client to provide information about their budget.
“If the client presents a range, offer two to three retainer options,” she suggested. “The lowest retainer price option outlines the base-level activities from the master list of needs and goals. A second medium-priced option will achieve most of the activities, and the final option includes all of the activities.”
While she said she always keeps her target hourly rate in mind when calculating the cost of those retainers, she warned against leaning too heavily on hourly work because it can hurt both the client and the freelancer.
“When you bill by the hour, on paper, a freelancer earns more for being inefficient and inexperienced,” she explained. “Instead, freelancers and clients should embrace the retainer model based on estimated hours, experience, and the freelancer’s ability to achieve goals … This business model is a win for the freelancer and the client because it’s based on outcomes, not output.”
Matthew Corrales, a graphic designer in New Jersey, charges on average $50 an hour
Matthew Corrales transitioned into full-time freelance graphic design last March.
“I determine my rates based on experience in the field I’m working in, as well as previous projects,” said Corrales.”When I first started, I would just look at a project and immediately give it a price tag. Now, I take the time to examine what my work and skills are worth to my clients.”
Corrales prefers hourly rates because of the versatility it provides to the client, should the scope of the project vary.
“Since I do [a lot of] video and motion graphics, each project has a lot of moving parts, and I typically anticipate multiple iterations and revisions,” he said.
Holly Johnson, a writer in Indiana, charges on average $100 to $300 an hour
Holly Johnson is a full-time freelance writer who has found a niche in finance, travel, and education.
“When I started writing full time in 2013, I took on a lot of lower paying jobs at first,” she said. “Over time, I was able to drop lower-paying clients and pick up [clients] who pay more and offer more consistent work.”
Finding that consistent work has been the key to Johnson’s success.
“I spend very little time pitching, which lets me spend the bulk of my working time writing for money. I am also willing to write about anything. Over time, this strategy really does pay off,” she explained.
Johnson prefers flat-rate work, but like many writers if the occasion calls for it also charges by the word (usually in the $.50 to $2 a word range). But like so many other freelancers, she always keeps that target hourly goal in mind when quoting projects.
“I typically like to earn $100 to $300 per hour when I work, so I agree to flat-rate work that helps me achieve an hourly rate in that range. That probably seems like a huge difference, and it is, but the reality is that I can’t earn $2 per word for everything,” said Corrales.
She added, “Most people would balk at my hourly rate and refuse to pay me $300 per hour. But my clients don’t know how long my work takes me, and really it’s none of their business. I do an excellent job on all my work, and that’s all that matters in the end.”