Monday's post was about damaging habits in your freelance practice. One of those habits is related to not charging enough in your practice, and that's what I'm working through today.
Setting your rates in a freelance practice is hard, though. There's no pre-determined rates (although there might be guidelines in your particular industry), and it seems like there's all sorts of examples at all points in the spectrum, from thousands of dollars per day to a few dollars an hour.
How do you know that what you're charging is enough? I think the thing that's most important is that you're charging enough if your practice can flourish while you maintain the kind of lifestyle you want. If you're feeling well-rested, are able to purchase all the equipment you need and keep it in good condition, contribute to your family and have time for yourself, those are all indications that you're at least on the right track when it comes to rate-setting. Here's a few common symptoms of not charging enough. I've had these in my practice, and they're the most common rate-related problems I've found when helping other freelancers in their practices.
Trying to work 40 billable hours a week
This is lunacy. If you're doing this, do whatever you can to stop this right away! Freelancers just can't work 40 billable hours in a week. That's over-extension for a freelancer. A freelancer has many other parts of their practice to work on in a week outside of billables. Many freelancers (and the companies they work for) assume that a freelancer can just slot in like that. But that's an employee mindset, and both you and your client need to break out of that if you're going to have a healthy relationship.
If you're working like this, you're more likely to be considered a contract employee (and are entitled to the protections afforded employees). Clients want you for 40 hours because that's how their employees work. You have billing, sales, professional development, marketing, invoicing, client engagement, and a host of other tasks to do on top of that billable time. Working 40 hours means you're adding that time somewhere, or not doing it at all. And that's where freelance practices suffer.
Worried about equipment costs
The gear you use to do your work is your most important asset. You should never be in a position where you're worried about the costs of acquiring, maintaining or replacing that gear. It's what keeps the money coming in. Without it, you can't earn.
And yet I see so many people for whom this is an issue. They're basically one bad power bar away from losing their income. This sense of scarcity is often — but not always — an indicator that your practice isn't earning enough because you're not charging enough.
Taxes, fees, travel, equipment replacement like in the point above? They shouldn't be surprises. Often new freelancers haven't properly budgeted for these expenses though, and that means that they come out of what they thought was their livable income. That means they're earning less than they though they would for the same amount of work. Which means, ultimately, that their freelance rate is too low.
How many of these things have happened to you? How do you deal with them. Have you had to increase your rates? How did that work for you? Let me know on social!