The United States’ inflation rate of around 7.5% has made it clear that freelancers must consider raising their rates to offset rising costs and sustain their businesses. Adapting pricing strategies is essential to maintain financial stability and grow revenue.
Freelancers who feel uncertain about raising their rates should focus on creating a clear plan. While there’s no one-size-fits-all formula, success comes from setting an initial rate, observing client reactions, and adjusting to align with business and financial objectives.
This guide focuses on actionable pricing strategies and best practices to help freelancers in the United States confidently determine and update their rates.
Setting Your Rates: Hourly, Project, or Value-Based Pricing
Pricing methods play a significant role in shaping a freelance business in the United States. The three primary models to consider are hourly pricing, project-based (fixed) pricing, and value-based pricing. Here’s a breakdown:
- Hourly Pricing: Charging for each hour worked. This is straightforward and works well for tasks with unclear scope or duration.
- Project-Based Pricing: Offering a fixed rate for an entire project. Ideal for well-defined deliverables.
- Value-Based Pricing: Pricing is based on the perceived value of the work to the client. This model often results in higher earnings when the impact of the work is significant.
Hourly Pricing
Hourly pricing is a straightforward model many new freelancers use to set their rates. It involves determining an hourly rate and multiplying it by the hours spent completing a project.
Freelance Jobs Suited for Hourly Pricing
Project-Based (Fixed) Pricing
This model involves charging a set rate for an entire freelance project. Instead of focusing on hours worked, payment is tied to the final deliverable.
It works best for projects with well-defined goals and helps clients in the United States plan costs more effectively. Freelancers also benefit by knowing their expected income upfront.
Examples include freelance web design or mobile app development projects with clear deliverables and timelines.
Value-Based Pricing
In this model, freelancers charge based on their work’s value to clients. Setting rates requires understanding client needs, budgets, and the potential business impact.
The focus is on results—such as boosting efficiency or increasing sales—rather than just tasks completed.
For example, a digital marketing freelancer might use this approach by showing how their campaigns drive revenue growth. This model works best for experienced freelancers who can prove their value and command higher rates.
Step-by-Step Guide to Leveling Up Your Freelance Rates
Establishing freelance rates can seem challenging, but it’s essential to strike a balance that reflects your value and attracts clients. Use this guide to determine a rate that works for your business and aligns with client expectations in the United States.
1. Evaluate Key Questions to Define Your Freelance Rates
Ask yourself these questions to establish a strong pricing strategy for freelance work. Analyzing the answers will help you determine competitive and sustainable rates:
- What is the minimum income required to maintain your lifestyle?
- What is your financial goal as a freelancer?
- What are other freelancers in the United States charging for similar services?
- How does freelance income compare to a full-time employee’s salary in your field?
- What expenses are tied to running your freelance business?
- Are your skills currently in high demand?
- What is the value your work provides to clients?
2. Set Your Annual Salary Goal as a Freelancer
To establish a sustainable freelance career in the United States, start by setting a clear annual income goal.
Consider personal and household expenses, whether freelancing is your primary income source or a supplement, and any savings requirements. Once you have a target, calculate your hourly rate based on this goal.
Example Calculation: $50,000 Annual Salary
- Target income: $50,000 (pre-tax)
- Work schedule: 40 hours per week, accounting for 4 weeks off annually (vacations, sick days, and other absences)
- Available work hours: 48 weeks x 40 hours = 1,920 hours/year
- Hourly rate: $50,000 ÷ 1,920 = $26/hour
This figure assumes all hours worked are billable. However, non-billable tasks—like invoicing, client communication, marketing, and administrative work—reduce your billable time.
To adjust for this, factor in these tasks when determining your rates, ensuring your earnings cover both billable and non-billable hours.
3. Adjusting Freelance Rates Based on Billable Hours
Freelancers typically split their working hours between billable and non-billable tasks. A common ratio is 60% billable hours and 40% non-billable hours.
Using this ratio, freelancers in the United States can effectively calculate their hourly rate and make informed decisions about projects.
Calculating Billable Hours
- Total annual working hours: 1920 (based on a full-time schedule)
- Billable hours: 1920 × 60% = 1152 hours
- Non-billable hours: 1920 × 40% = 768 hours
- Example rate calculation: $50,000 ÷ 1152 billable hours = $43.40/hour
Balancing Billable and Non-Billable Time
Freelancers must allocate their time strategically to maximize revenue:
- For smaller projects, charging a higher rate compensates for additional non-billable hours.
- Long-term or large projects can benefit from adjusted rates, offering discounts while ensuring profitability.
- Evaluate the balance between time spent on billable work versus non-billable tasks like marketing, administration, and client management.
Freelancers targeting clients in the United States should consistently assess how their billable time aligns with revenue goals. By understanding and adjusting their rates, they can ensure sustainable growth and profitability.
4. Incorporating Freelance Expenses Into Your Rates
Freelancers need to account for business expenses when setting rates. Start by listing all costs, totaling them, and adding this amount to your income goal. Adjust your hourly rate to ensure expenses are covered. Here are common expenses to consider:
- Insurance and licenses
- Taxes
- Equipment
- Office space or rent
- Software subscriptions
- Marketing and advertising
- Freelance platform fees
For example, if expenses total $10,000 annually, and your income goal is $50,000, your target increases to $60,000. Using 1,152 billable hours annually, your rate becomes $52/hour.
Freelance rates are often higher than regular salaries because freelancers cover additional expenses.
Clients expect this since they avoid costs like employment taxes and benefits. These adjustments are necessary to sustain and grow a freelance business effectively in the United States.
5. Know the Market Rate for Freelance Services
After calculating a rate that meets your salary goals and expenses, compare it to the market.
Research what other freelancers in the United States charge for similar services. Platforms like Upwork and Glassdoor offer insights into hourly rates for freelancers.
Ensure your rate aligns with market trends:
- If your rate is too high, reassess expenses or salary expectations.
- If your rate is too low, you might be undervaluing your expertise.
Finding a balance between market expectations and your financial needs is key to creating competitive rates.
6. Assess Your Value
Setting rates requires understanding the value you bring to clients. Consider how your experience, skills, and portfolio demonstrate your expertise. These factors justify your pricing.
- Experience: More years in your field means you can charge higher rates. For example, a freelance web developer with 10 years of experience typically earns more than one with two years.
- Skill Set: The breadth and complexity of skills affect pricing. A programmer proficient in multiple coding languages can charge more than one, specializing in just one.
What to Do When a Client Rejects Your Freelance Rate Increase
Sometimes, a client might refuse even after presenting a strong case for your rate increase. Here’s how freelancers in the United States can handle this situation effectively without jeopardizing their business:
Part Ways with the Client
If the client can’t meet your rate and is significantly below your desired pricing, it might be time to end the relationship. Prioritize clients who value your work and pay rates that reflect your skills.
Follow the termination terms in your contract and keep the process professional. This option is ideal when sticking to a low-paying client prevents you from pursuing better-paying opportunities.
Negotiate a Middle Ground
If completely parting ways isn’t appealing, try negotiating a rate that works for both sides.
For example, if your goal is $750 per blog post, but the client can only commit to $700, decide if that compromise aligns with your business goals. It’s a practical way to maintain the relationship while still increasing your earnings.
Adjust the Scope of Work
When a client has no budget flexibility, consider reducing your services. For instance, keep your current rate but deliver less.
If $600 per blog post is the maximum they can pay, clarify that you’ll no longer provide extras like sourcing images or conducting interviews. This approach ensures your time and effort remain aligned with the compensation provided.
Conclusion
Freelancers in the United States can secure better rates and long-term success by pricing strategically. Knowing your value, negotiating wisely, and making adjustments when needed help protect your income and grow your business.
The right approach ensures you’re fairly compensated while building strong client relationships.
