Let’s look at three signs it’s time to rethink your rate structure for your freelance writing services.

1. Prospects Aren’t Biting

If you aren’t contacted by many prospects even though your site and rate chart get adequate traffic, something’s wrong. Your first thought might be that your rates are too high and that you need to lower them. But that isn’t always the case. You have to remember that rates are somewhat open to interpretation. How you want to charge clients is irrelevant. How they expect to be charged is what really matters.

Let’s say you offer blogging services. You list your rates as $75 per hour, and you can typically write a blog post in your specialty area in one hour. Your competition generally quotes per post (let’s say $100 per post for this example). The client is willing to pay that $100 per post.

Your rates are actually lower than the competition, but the prospect never contacts you. It has nothing to do with your fees being too high and everything to do with how they interpret your rate structure. For example, they might have a set word count in their head which they (wrongly) assume will take you two to three hours to research and write.

You don’t make it clear how long a post takes, how many words per post your rate covers, etc. That’s because you think you have a more adaptable rate structure to account for things like research time and different lengths.

Clients just want to know what they’re going to be billed. Your rate doesn’t tell them that without them making an extra effort to contact you for a quote (many won’t). Your competition does. They charge more. They get the gig. Yay for them! Sucks to be you.

It’s time to rethink how you advertise your blogging rates. The wrong rate structure will turn off prospects before you ever get the chance to talk to them.

2. You’re Frequently Asked to Explain Your Fees

Here’s another sign you’re using the wrong rate structure for the type of freelance writing services you provide. You shouldn’t have to constantly explain how your rate structure works. If you’re asked to on a frequent basis, it might be time to try something else.

For example, let’s say you’re trying to transition from magazine writing to business writing. You’re used to charging per word — a rate structure magazine editors are accustomed to working with. So you advertise per word rates for your business writing services. Commercial clients are much less familiar with this rate structure, so you’re asked to explain or justify your per word rates.

Your rate structure shouldn’t cause confusion. You should adapt to the norms of your specialty area. If clients are comparing writers based on per project rates and quotes, you should provide rates in the same structure. If you write features where per word rates are the norm then you should quote in that fashion. If you specialize in some area where hourly quotes are typical (I’ve yet to find a good example of this in freelance writing), then stick to that. You’ll spend less time explaining your fees and more time on actual billable hours.

3. Add-On Fees Have Become the Norm

Rate structures are about more than the way you charge. They also encompass what’s included in those fees. You have a set service level covered by your advertised rates. Let’s say that includes a draft and one round of edits. Anything beyond that incurs extra fees.

When you review recent orders you find that 65% of clients end up paying add-on fees because they request a second round of edits (minor changes to the first round of edits you completed). That’s a sign something is wrong with your current rate structure. It says the current package you offer isn’t adequate for the market you’re targeting. Your true base service isn’t actually what you advertise. This can alienate clients — not something you want to do.

In this case your best bet is to rethink your packages and rates. If you insist on keeping the current package, perhaps advertise a second package that includes extra editing time (or more interviews, or whatever clients regularly request). No one likes being charged “extra” fees for something that seems like a basic project necessity.

At the same time, you should absolutely charge more when clients increase the scope of a project. The idea is to do so using a rate structure that gives clients flexibility without feeling like they’re being nickel and dimed to death every time they hire you.

Have you changed your freelance writing rate structures recently? In what ways did you change them and why? I’m about to revert my rate structures for a few services back to my old model. Why? I noticed that prospects were dwindling for those specific services since the previous change. Originally I assumed it was because rates went up. But so did other rates, and those services continue to attract new prospects on a regular basis. I had to rethink my rate strategy. Do you?

While a few colleagues I’ve talked to are taking a week or two off during the holidays, I was surprised by how many aren’t — and not because they take big vacations at other times of the year. They echo similar concerns of not being able to go for a week or so without the income coming in or fearing that if they take time off they’ll lose regular clients.

I was in that same situation at one point, so I sympathize. But look at it this way — time off (whether you want it over the holidays, in the summer, or even both) is a perk of being paid well for what you do. If you can never afford to take time off, you probably aren’t earning enough.

I’m not going to tell you exactly what you should be charging. Everyone has to set their own freelance writing rates. But no matter what your actual number works out to, remember that it should do more than cover your bare minimum expenses. It also has to account for things like vacation time, sick time, personal savings, retirement savings, and any benefits you might want such as health insurance.

So if you’re stuck working through the holidays and you’d rather not be, spend a few minutes thinking about it. This time next year would you like anything to be different? Are you being paid enough to make that happen? Are you worth more than you’re currently being paid? Whether or not 2010 is meant to be the year of the well-paid writer, it can still be the year of the well-paid YOU. Decide now where you want to be when the holidays come around again, and find a way to make that happen if you’re not already.

(Note: some posts are still scheduled to go live on AFW, and others on the  team will also have posts scheduled, so I hope you’ll check in still if you do find yourself working).

Feeling that you’re worth more is only half of the battle. Don’t get me wrong. It’s important. You probably won’t start commanding higher freelance writing rates if you don’t feel that your time is worth more than what you’re being paid now. It starts with you. It just doesn’t end there.

How can you “deserve” higher freelance writing rates?

It goes back to something else I talk about a lot here — value. Let’s say you got caught up in the extremely low-paying markets at a penny per word or less. You’re far from the only one. You probably also aren’t the only one who would love to earn more. But many of those writers never will, and they shouldn’t.

Extremely low-paying markets are often full of freelance writers who really aren’t qualified to write for a living. I’m not talking about new writers who simply made a bad business decision by targeting the wrong markets either. I’m talking about the type that can barely string a few sentences together. Maybe they just swipe content from another site and reword it (copyright infringement in some countries if you don’t have a license or the copyright holder’s permission). Maybe they know absolutely nothing about the topics they write on, and their articles amount to little more than regurgitated Wikipedia content. These writers are going to struggle to earn more than they currently do, because they don’t offer true value to clients with bigger budgets for higher quality work.

Let’s hope you don’t fall into that group. Here are a few things you can do to demonstrate increased value to clients that will show them you really do deserve to be paid more than rock-bottom rates:

1. Choose a specialty. — If you’ll write about anything and everything you’re less valuable to most businesses paying top dollar for freelance writers. Generalists might thrive in lower-paying markets, but big-budget clients often expect someone who’s knowledgeable in their niche or industry, or in the writing style (such as writing effective ad copy targeting a female audience).
2. Get some reputable clips. — Here’s a newsflash for you: the work you do for a penny per word can make you look like a joke in higher paying markets. You don’t want that work representing you. Once you show clients that you’re willing to be taken advantage of, why on earth would you think they’d happily fork over the big bucks? Many of these clients won’t even look at you if you haven’t worked similar jobs on the reputation scale. Don’t have any reputable clips you’re thrilled to show off? Consider doing some work for a local branch of a well-known nonprofit. It’s good PR for your freelance writing business, and a clip from a known organization looks infinitely better in your portfolio than a bunch of cheap content for MFA (made-for-Adsense) sites like content mills and slapped-together niche sites.
3. Build more credentials. – Whether you’re writing for a penny per word or significantly more, you might have maxed out your earning potential based on your current experience and credentials. Building more credentials is one way to add more value to your work. Let’s say you write about small business issues, but your freelance work is the whole of your experience in running a business. That’s perfectly fine if you’re talking about those types of business issues. It doesn’t make you qualified to write for people targeting more traditional small businesses though. They’re not the same thing. A certificate in entrepreneurial studies, a business administration degree, or an MBA could certainly help to close the gap.
4. Evaluate the competition. — If you want to raise your rates, now is a good time to do a basic SWOT analysis (where you map out your strengths, weaknesses, opportunities, and threats when compared to your competition). Doing this lets you see where you stand on the value front compared to competitors, so you’ll get a better idea of whether your work is worth more than theirs or not in the eyes of prospective clients. Just make sure you compare yourself to the people you want to compete against rather than the lower-rate writers you’re already in competition with.
5. Create an elevator speech. — It doesn’t matter that you offer greater value than the competition if you don’t know how to convey that to potential buyers. An elevator speech is a short description of what you do — short enough that you could give the pitch on a brief elevator ride. We’ll be talking more about elevator pitches tomorrow, and running a contest based on them through the end of this year. Check back then for more information about how to create one.

Remember, it’s never enough to think you should be paid more. You not only have to deserve it, but you have to show clients why you deserve it.

How would you feel about having your freelance writing schedule booked weeks or months in advance? Do you wish you had the luxury to be more selective in the freelance writing jobs you take on, able to turn down anything that doesn’t appeal to you?  Plenty of freelancers are already in that boat, myself included. It’s a great place to be, but a reader brought up a good question a while back in a comment — if your schedule is constantly full, doesn’t that mean it’s time to raise your rates?

The short answer is “no.” Demand alone isn’t enough of a reason to raise your rates. Today I want to talk about why, before you rush off to raise rates for 2010 just because you have adequate demand at your current rates.

Not All Work is Created Equal

Credit: alxm (stockxpert.com)

It’s true that constant demand is one sign that it might be a good time to raise rates. But that doesn’t mean it’s always true. For example, the bulk of my work comes from regular clients who place relatively large orders every month. I have a booked schedule well into the New Year. This year I only took on about five new clients due to the existing commitments. I don’t expect that to change in 2010. Yet I turn down multiple offers every single week (referring those buyers to colleagues).

Does that mean I should raise my rates with my other clients, or replace them with higher paying ones? No. Why? Because an influx of offers in no way means those working relationships would be equal to my existing client relationships. I have long-term contracts. There’s no guarantee of that with a new client. I’ve found an amazing balance between great rates and stability rivaling that of a regular full-time job. Hypothetically I could drop client A (who orders $2000 worth of content a month) and replace them with client B (who will pay a bit more). But client B might not stick around beyond a month or two, meaning I’d then have to replace them again with someone new.

Stability and long-term contracts are a huge factor you can’t afford to ignore.

New Clients Equal More Work (and Sometimes Less Money Hourly)

You also have to look beyond your base rates. You can’t think of it as “client A will pay me $450 for the project and client B will pay me $600 for the project, so I should go with the new client B.” When it comes to freelance writing rates, you have to revert everything back to hourly levels.

If you’ve been working with client A for a year, chances are good that you’re already intimately familiar with their business, products, or services. You probably know who their target market or target readers include, and you know how to tackle the project to appeal to those people. You might be able to turn that project around in 5 billable hours, meaning you’ll earn $90 per hour.

With client B, you don’t know any of that information up front. If you truly want to do your job well you’ll have to invest more time into research. You’ll review the client’s website thoroughly. You’ll look at other documentation they send you. You’ll have phone or in-person consultations with the client. You’ll research the target market / readers and how the competition successfully appeals to them. It might take you 9 hours overall with that additional work. Even at the higher per project rate, you would only be making around $67 per hour.

Unless you know up front that client B plans to be a long-term repeat client (meaning that initial time investment will pay off over time as their projects become faster to complete), the better business decision is to stick with client A. The lower rate is actually more pay per hour (and more hours to devote to other projects).

Changing Rates Sometimes Means Starting Over

Credit: Ivan Petrov (sxc.hu)

Unfortunately, there’s always the possibility that you’re at the maximum rates your current target market will pay. Therefore, if you want to raise your rates, you’ll have to change your target market. That means starting over. You’ll need to tailor your services and your value proposition to an entirely new group of potential clients, re-think your marketing strategies, and revamp your network. Do you really want to do that?

If you’re not happy with what you’re earning (such as being stuck at content mill rates and wanting to double or triple them), then do it. You have to change your market to change your career path. But in a case like mine, when you’re already earning a very comfortable hourly rate, overhauling your career targets (and all of the unpaid marketing and administrative time involved in doing that) doesn’t make sense.

So no, demand isn’t enough to signal that it’s time to raise your rates. Hating your current work, feeling taken advantage of, and being pushed to the burnout point cranking out content just to make a livable hourly wage… those are reasons to raise rates (if you can offer the value to back it up).

That said, don’t ignore the demand either. A sudden influx doesn’t always mean something. But if that increased demand sticks around for six months or more with no signs of letting up, take it as a sign that it might be time to evaluate your overall situation as a freelance writer. Only that will tell you whether or not it’s really time to increase your freelance writing fees. In the end what you should strive for is balance — rates that allow you to pay your bills, set money aside for savings or investments or leisure activities, and still enjoy enough free time that you can pursue your own hobbies and projects or spend more time with friends and family.

Finding that balance might seem like a dream to some, but I can tell you it’s absolutely attainable. As with most things freelancing, all it takes is a bit of business sense and planning.

Uh oh. You may have committed a major freelance faux pas.

Do you ever wonder how the “big dogs” got to where they are, where they can charge just about anything they want for their copywriting or other freelance writing services? They didn’t do it by competing on price. And neither should you! Ever! I mean that – NEVER!

(Newsflash: even the not-so-big-dogs running successful careers, who you’ll probably never hear about, don’t compete on price.)

What is Competing on Price?

First let’s be clear on what we’re talking about here. When I say never market your freelance writing services based on price, I mean that should never be your selling point, your USP (unique selling position / proposition), etc. You shouldn’t brand yourself the “cheapest” type of freelance writer you happen to be. You shouldn’t build your reputation around low rates.

I do NOT mean you should never lower your rates (sometimes sales make sense, sometimes you really may have set your rates too high for your experience level or target market to start with, etc.).

I do NOT mean you should never mention your prices unless pressed by a prospective client – they’re still a part of your overall marketing mix.

I mean you should never mistake your price (or your client’s cost) with “value.”

Why You Shouldn’t do It

How many hours do you have in a day? Sometimes I feel like I must be missing out on something with the way some freelance writers I see throw their time around – they must have a secret stash.

A reality check, shall we?

Your TIME is your most valuable asset when you work as a freelance writer!

Let’s say it again.

Your TIME is your most valuable asset!!!

That’s a concept no freelance writer has an excuse not to understand. That’s something every freelance writer should have been absolutely clear on before they jumped into freelancing. If you didn’t, oops! You didn’t plan very effectively. Better to remedy that now than continue making career-killing mistakes, right?

You need to understand that your time is a finite resource – in other words, it’s not unlimited. You’re not Wal-Mart. You can’t streamline to “mass-produce” service hours the way you can mass-produce cheap products. Any smart service marketer understands this – do you? Let’s break it down some more.

What You Shouldn’t Do – An Example

Let’s assume you work a total of 40 hours per week (remember the difference between working hours vs. billable hours from when I was teaching you how to effectively set freelance writing fees?).

Now let’s look at things conservatively, assuming you’re still a new freelance writer with a lot of startup work to deal with – you may be spending 50% of your time working on administrative tasks and marketing and only the other 50% on actual billable hours for client work – those are the hours your rates will be (or should be) based on.

So you’re down to 20 billable hours per week. That’s not really a lot, is it? Let’s look at a worst-case scenario, based on a common sad scene in the webmaster world – We have a writer (let’s assume their quality is decent, but they’re just clueless on handling the business side of being a freelancer). They churn out $3 300-word articles, jamming five articles in per billable hour.

That’s $15 per hour (not to mention a hell of a jam-packed and hectic schedule). To some folks that doesn’t sound too bad – $300 per week with a full schedule of freelance writing gigs. For many (if not most of us here), that’s a pretty lousy wage to earn for full-time working hours, isn’t it? (We’ll get to that oh-so-persistent “global market” argument soon enough.)

This writer chooses to write at very low rates simply because they decided they wanted to be a “Web writer” or “content writer,” and they saw writers with similar titles targeting webmaster clients, bidding on being the cheapest even if they know they can’t realistically get by on what they’re earning. I’m sorry, but this writer would be an idiot. Let’s help them out.

How Target Markets Play Into the Pricing Question

I know you’ve heard me go on and on (and on) about choosing the right target markets here before. You cannot market your freelance writing services effectively if you don’t have a specific market in mind, and if you don’t understand their needs and desires and what your services can do to fulfill them.

When you start working as a freelancer, you begin building an image around your name and your work almost immediately – just about everything you do contributes to this (your website, your network, your portfolio, your rates, etc.). Shaking an image, once developed, can be a very difficult thing to do.

If you assume charging insanely low rates now is OK because you can “always raise them later,” you’re being naive – very naive. The reality is that most freelance writers FAIL! Raising rates by any significant margin is not easy to do. It means completely starting from scratch in the bulk of cases. Why? Because the market you target with your low rates is NOT the same market you’ll need to target to build a steady stream of work at significantly higher freelance writing rates.

In other words, by charging too little (not enough to cover what you need to get by) in the beginning, you’re not investing any of your time into your career – you’re wasting it and forcing yourself to do double the marketing work in the long run. That’s bad business.

At the same time, it can be very difficult to convince higher-paying clients to take you seriously once you’ve built your reputation in a low-paying market. What you’re demonstrating to those “better” clients is that you don’t understand the concept of value – the value of your own work as it applies to the needs of the client (and those paying bigger money don’t want to work with writers who don’t understand their value and role in the client’s site, publication, or project).

Cost vs. Value

Let’s talk a bit more about this “value” thing that a lot of Web writers specifically overlook. “Value” does NOT mean “low prices.”

Value, to a client, is when you can offer them something that will address a need or desire, and give them some sort of return that exceeds what they’re paying in the long run. That doesn’t mean “cheap.”

For example, let’s say we have a client looking to hire a sales letter writer for a high-end product selling for $2000. They post an ad looking for sales letter writers, and get two responses:

1. Writer A is a relatively new sales letter writer with no official marketing background (to understand marketing and sales copy). They offer to write the sales letter for $500 and promise a 3-day turnaround.
2. Writer B is an experienced sales letter specialist with a strong history of conversions for clients in similar high-end markets. They put in an offer for $5000 and at least a two-week turnaround period.

Can both of these writers offer some value? Sure. The client would need to sell just one copy of their product to earn a profit on the first writer’s work, and only three to earn a profit on the work of the second writer. BUT – being able to earn a profit faster doesn’t equate to more “value.”

Let’s look at what might happen in each case (and don’t give me the “well, Writer A might have been a great sales letter writer and just building a portfolio” crap – in MOST cases, your rates speak volumes about your abilities both in writing and marketing, both essential in copywriting, and NO ONE should ever assume they’re going to be, or get, the exception to the rule).

A few months go by with the sales letter being live, equally promoted by the client in each case:

1. Writer A’s letter has brought in 10 buyers overall, for a total of $20,000 – a profit for the client of $19,500. Doesn’t sound too bad, does it?
2. Writer B’s letter, however, has brought in 30 buyers because the writer, being a specialist with a lot of experience in this kind of product line, knew how to persuade and sell to the client’s own target market. The client earned a total of $60,000 – with a profit of $55,000.

Hmmm. So that’s why people are willing to pay bigger money than bottom of the barrel rates. There’s a greater overall return when they go with writers who can prove their “value” to the client – in this case the need to drum up sales through the highest conversion rates possible.

“But copywriting is too easy,” you might be thinking. “Clients earn directly through conversions, so it’s easier to demonstrate value. What about things like Web content?”

There are many types of value that your work may have with your target clients. Here are some examples that cover a variety of writing types:

• Your writing will lead directly to sales, sign-ups, registrations, subscriptions, etc.
• Your writing will lead to significant exposure.
• Your writing will help them build or improve an image.

What other value points can you think of?

Let’s look at a few specific examples:

• Copywriting (for a newsletter subscription sign-up page) – Even if they’re trying to get free sign-ups to a mailing list, your work has value because of what they can later do with that large subscriber-base, such as newsletter ad revenues or later sales.
• Press Releases (Press releases are designed to bring exposure – companies want to get their name “out there” in front of their own audiences, and your writing fills that need and therefore has value to the client.)
• Authority Web Content / Articles (High quality content can help the client build an image as an authority source, which can later lead to higher traffic and therefore better ad conversions, more incoming links and word-of-mouth / viral marketing amongst readers, and even more lucrative private advertising deals.)
• SEO Web Content / Articles (Articles solely focused on SEO have value too – and beyond $5. Your articles aren’t just site candy – they bring in search engine traffic, and possibly links. That traffic is one of the main influencers in how much your client is able to then earn from their site – the more earning potential they have – due to your well-optimized content – the more value your work has).

The Global Market

Very little bores me to death more than hearing people go on and on about the so-called global market of freelance writers on the Web. It’s complete BS. Why? Because those who believe that don’t understand the basic of markets (which we’ve discussed above). They look at the Web as one global market for writers, and that just isn’t true.

There are MANY markets for writers. Some will have cheap international competition for gigs, but most do not. (And for the record, I know writers from India and other countries who charge much more than many American or UK-based writers do, because they’ve put in the effort to master the language and they can offer a specialized skill set desired by English language publications. So never assume you “should” charge low rates just because you have a lower cost of living – price on your needs and the value to your clients; not on external factors).

What most people are talking about when they say things like this is the demand for super-cheap Web content written solely for search engines. Even when the clients say they want perfect English, they don’t. They just want the best they can get for as little as they can pay. Many can’t even tell if something is written in “proper” English. These clients are made for the writers who market only on price, because they both don’t understand what value is. These are the little kiddie types of clients who just want to say they “make money online.” Others are ones who intentionally exploit writers by trying to convince them their work isn’t worth much. You don’t need any of those types of clients on your roster.

Not All Clients are Worth Convincing

Should you try to convince clients like those that it’s worth paying you more? Probably not. In some cases, it won’t matter because the client simply can’t afford to have professional work done, whether they understand the value or not. Others are so afraid of taking a risk for that value that they probably don’t belong in business for themselves anyway. And with others still, you’re simply replaceable.

Your job as a service provider is to demonstrate value, and find clients who understand that enough to pay at least the minimum rates you’ve set for yourself. You need to find the right market segments.

There’s no reason to feel like you should have to compete with low-rate writers, just because they seem to get a lot of gigs. Those gigs aren’t worth much in the grand scheme of things.

Would you rather cram 10 $5 articles into your schedule or one $50 article? How about one $200 article? Yes, if you charge more, based on your actual value, you’ll get fewer gigs. That’s the beauty of it! Smart writers will always do less work and earn more money. So if you’re not there already, start re-thinking your strategy and join the ranks!

In Summary

Marketing services based on price is a stupid thing to do, and a sure way to kill your writing career in the long run. If you ever want clients to value your work, you need to value it yourself first.

Related Reading

• Setting Freelance Writing Rates the Right Way
• Why Should Clients Pay You More Just for Doing Your Job?
• Why Should People Hire You to Fill Their Freelance Writing Jobs?
• How to Get High Paying Freelance Writing Jobs
• 5 Reasons Your Writing Career is Going Nowhere
• When to Turn Down Freelance Writing Jobs
• How to Choose a Specialty as a Freelance Writer
• The “Global” Writers’ Market
• Three Easy Ways to Kill Your Freelance Writing Career
• Working Yourself to “Death” – How Many Hours Should You Work as a Freelance Writer?

Common Freelance Writing Rate Strategies

• Per word
• Per project
• Per hour

What The Writing Rate Types Have in Common

Whether you prefer to charge for freelance writing jobs per word, per project, or per hour, you’ll still need to account for an hourly rate. Finding the most appropriate hourly rate is really the key to setting freelance writing rates. Once you have that number, you’ll simply charge accordingly. If you charge by the hour, that’s easy enough to do. If you charge by the word or by the project, you’ll need to estimate the amount of time a project would take or how many words on average you’re able to write (not just how quickly you can type).

Working Hours vs. Billable Hours

In order to find the best hourly rate for yourself, you’ll need to understand the difference between working hours and billable hours. Working hours include every hour you work (assuming a “typical” full-time work week, we’ll say that’s 40 hours). Billable hours, on the other hand, are the number of working hours that you can actually bill out to clients, minus the hours spent marketing and on administrative duties.

Billable hours are often approximately, or a little more than, half of your total working hours if you’re not neglecting anything on the admin and marketing side. To simplify the numbers, let’s round it to exactly half, and say that out of a 40 hour work week, you would have 20 billable hours. Now we have something to start from.

Salaries vs Yearly Freelance Earnings

It’s easy for a freelance writer to say “I earned $50,000 at my old day job and I got by fine, so I want to set a goal to earn the same amount from my freelance writing full-time.” What’s harder is understanding that the two numbers truly aren’t comparable, and they can’t be interchanged as easily as that.

To get a more realistic number, you would need to figure out your real “cost” in your former full-time job. Think of it from the company’s perspective instead of yours (because as a freelancer, you’ll be playing that role). For example (assuming a US-based writer)…

Your full-time gross salary would have included your portion of taxes, benefit payments, retirement savings, etc. on top of the net take-home pay. Use that as a starting point. Now add on any Medicare and social security taxes the employer had to pay for you as their employee, any contributions they made towards benefits or retirement, the cost of any supplies or other expenses they covered that made your work possible, etc. Now you have a more realistic number regarding what you would need to earn as a freelancer to be in a comparable situation. That number can be significantly more than your gross salary – in this example, let’s say it works out to around $70,000.

You Won’t Always be Working

We’ve already covered the full-time working hours versus billable hours and the real salary you would need to earn to live a comparable life, so you may be thinking that setting an hourly rate is now as easy as dividing $70k by 52 weeks in a year and then by 20 billable hours (which would work out to a little over $67 / hour). But you would still be missing a vital part of the equation.

It’s highly unlikely that anyone is going to work 40 hours per week, for a full 52 weeks in a year. I always suggest deducting a minimum of two weeks to cover a short vacation and a handful of personal or sick days. So at a maximum, I would suggest you factor your hourly rate based on 50 working weeks rather than 52. In my own case, I prefer to take more time off when possible (for short trips, seeing family, getting things done around the house, etc.), and try to account for extra for holidays, so I base my own goals on 45 working weeks.

You Will Have Slow Times

It’s highly unlikely that you’ll never have a slow period in your work. Because of that, the rest of your billable hours throughout the year need to account for any possible lapses. I’d personally suggest that you tack on 10-20% to your income goal we established earlier, or subtract another few weeks from your expected working weeks to get a more realistic calculation that won’t leave you scrambling for extra income later.

Let’s Crunch the Numbers

Given the example we’ve been talking about, we have a freelance writer who’s looking to set their freelance writing rates based on 20 billable hours per week to earn $70,000 with an expectation of 45 working weeks (using that rather than 50 to account for the slow periods instead of adding a percentage onto the goal gross salary). So the hourly rate would be calculated like this:

$70,000 / 45 working weeks = $1555.56 per week

$1555.56 per week / 20 billable hours per week = $77.78 per hour

or

Salary Goal / Working Weeks / Weekly Billable Hours = Hourly Rate

Adapting Your Hourly Freelance Writing Rates

You now have an hourly rate established which you’ll need to earn to reach your yearly income goals as a freelance writer. Now all you have to do is adapt that hourly rate to fit the pricing model you prefer (per word, per project, etc.).

For example, if you want to charge per project, and you know that it takes you an average of ten hours to research and write a comprehensive business plan for a client, given this scenario, you would charge $777.80 per business plan. I would actually suggest that you round it up to $800, not only because it makes for easier billing and marketing, but also because rounding up a bit helps to account for any “problem clients” who may take an unusually large amount of time to get you what you need for a project, or who may demand excessive edits compared to others. In this case, if you really wanted to round up more to account for those things, you could charge a flat $1000. Keep the risk level of each type of project in mind when you figure out your per-project rates.

As another example, let’s look at setting a per-word rate with the above scenario. Let’s assume that you know you can write about 1000 words per hour within your niche specialty with proper research and editing. Simply divide the hourly rate by the 1000 words you can write per hour on average, and you’ll get a per-word rate of approximately $.08 / word. Again, I would suggest that you increase it slightly to account for any slow periods where you may not be able to fill your full 20 billable hours – so in this case, let’s say $.10 / word. So if someone hired you to write a 500 word article, you would charge them $50.

Keep in mind that these estimates are going to work much more effectively for a freelance writer who’s a specialist in their niche (because they’re intimately familiar with the best research sources for the topic and how much time the research on top of their existing knowledge would take) as opposed to a generalist who can’t always know the amount of research needed or where to go for it, who won’t be able to write as quickly because they’re familiar with a topic, and who will likely have to spend more time editing and fact-checking. It would seem then that a generalist should charge even more. However, clients are rarely willing to pay more for a general writer than an expert in a niche (meaning niche specialists can choose to charge a premium rather than just what they need if they want to). It’s just something to keep in mind, and another case for specialization in your freelance writing career.