Passionate professions » are often seen as professions where anyone can get the right to get the services offered for free. As an entrepreneur, the fear of talking about money is thrown out the window. The subject is anything but taboo. The freelance rate is a means, just like a salary. I love talking to fellow freelancers, and at times I am amused or frightened by the rates they charge for their services. Amused to see people who are fulfilling their lives as freelancers. Scared to see such low rates, not proportionate to the talents they offer. So, let’s talk about how freelance rates work.
Become aware of the value of work
As stated in understanding the freelance price for a client, your work has value. Regardless of business logic, it involves hours of research, testing, time, skill, and energy. It is therefore just as legitimate as the work of an employee or other service provider. The impostor phenomena can lead to poor choices related to the perception of one’s own work. Just step back and be realistic about the market you are entering.
It is important to avoid underestimating your income. Therefore, yourself. Most freelancers, often the new ones, are afraid of selling themselves, of looking pretentious, of missing contracts, of upsetting prospects, or other beliefs. These beliefs hold freelancers back in their progress. They also get people used to accepting underpaid assignments.
Specialization is essential
There are a few ways to stand out and further justify your price. Specialization is an almost mechanical solution. It allows you to ensure the credibility of what you say, and therefore to create a close-knit community, to obtain a high bargaining power, and to be less confronted with the competition. It is an opportunity to highlight the strengths of the business. It helps to create a relationship of trust. And it allows justifying the higher freelance rate in the future 😉
Find the right freelance price point
Understand what is « value pricing »
« value pricing » is a method that allows to vary the freelance price to modulate the demand. There are books about this subject with more details, I only expose the main ideas. For my part, I use it mainly to perceive the basic need of the customer.
Often the prospect wants more than just the essence of the project and projects itself into nameless complexity, the essential question is « Why would the client be willing to pay a freelancer?« . Most of the time, the answer to this question falls into 2 categories: because of you, they think they’ll make more money; or, because of you, they think they’ll stop losing money. Rather than trying to get the best deal, you might as well think about how to bring value to the customer’s problem with your service. The prospect is looking for solutions to the identified problem rather than a service or a project.
There are four steps that emerge with the vision that slowly unfolds before you:
1 – Listen at the first meeting. The objective is to understand the client’s project: why a freelance? what cost will be left in case of non-resolution? his problematic?
2 – Establish a scope of action: what is the client’s business model? what is the impact of your action on his activity? what does he gain by collaborating with you?
3 – Propose the price: 3 different offers to avoid presenting a single price with a basic offer, an advanced offer and a premium offer.
4 – Explain the price and list the actions planned for the expected result.
Stop the useless comparison
This method makes it possible to give and receive information, to answer a problem, to open a dialogue, and to make a difference. The law of the market is based on supply and demand. Nevertheless, I do not recommend copying from the next-door neighbor. Comparing ourselves to similar activities is obvious, we all do it. But there are some reflexes to avoid urgently:
1 – Compare yourself to freelancers listed on platforms where the service is very low (Fiverr, 5euros, etc). The prices are necessarily lower because some professionals live in countries where the purchasing power is lower than in France.
2 – Avoid comparing yourself to freelancers who are at a lower stage of development or equivalent to yours. When inspiration comes from people who are more advanced than you in your field, then evolution comes naturally. It is thanks to this advice that I can increase my freelance rate without blushing.
I think it’s more interesting to compare yourself to freelancers with a lower level of development than yours to question some principles of the business; close to ours to challenge yourself; then, superior to yours to get inspired and improve. 😀
Understanding the costs of doing business in France
Find your first numbers
It’s important to understand some basics when setting your price. From the very first invoices, a good part of the income is used to pay taxes and contributions, professional expenses and to create a cash flow. Regardless of the field of activity, the freelancer is the manager of a business without employees and the costs that this entails.
Variable expenses are those that vary according to turnover or production, such as raw materials (materials, food, etc.). They include social security contributions (BNC 22.2% – EURL between 35% and 50%), taxes (you might as well opt for the Versement Fiscal Libératoire with 2.2%), the contribution to professional training (for my part it’s about 0.2%), then the tax for consular chamber fees (for my part, I don’t owe any).
The permanent expenses are the ones that are detached from the activity of the company: they are the expenses to be paid regularly (usually monthly), like rent. I make sure to separate the permanent expenses in 2 parts: the professional expenses and the property tax of the companies (CFE). The professional expenses include about 25% of my turnover: telephone package, internet subscription, mutual insurance, health insurance, professional liability, Adobe suite, etc. Some freelancers even add the workspace (coworking, private office, coffee, etc.) between 200€ and 300€ / month. Then comes the CFE, a local tax similar to the property tax (between 200€ and 2200€ depending on the town). So I’m quite happy to ride my bike, walk, or even take the streetcar 😉
Create your own case
Many times, people refer to the daily rate. For me, I approach it more as a goal to be achieved per day rather than a strict application for rates. Projects and needs are so different that it’s hard to say exactly how much time to put on the schedule.
With the elements discussed in the previous sub-section, it is, therefore, advisable to list all the elements accordingly and identify them. Thus, I suggest you follow at your own pace to find your daily rate.
- Find the actual working time:
1 – Know how many days are worked in the week.
2 – Subtract from this your days off (+/- 5 weeks / year)
3 – Subtract the days off like the sick (+/- 1 week / year)
4 – Think about the time spent on all the tasks necessary for his activity outside the mission (+/- 40% of his time)
- Calculate the desired income:
1 – Know your total fixed costs
2 – Make an estimate of the total variable expenses
3 – Add up these amounts
4 – Distribute it over each day worked
This is only my vision: a freelancer should have a minimum AER of 350€, no matter the level.
Beware of the innocence of the « contract at any price »
Some tracks are blurred because of employers taking advantage of our fragile balance. They propose to young freelancers, on long missions, to be paid on the basis of a monthly salary. This is often around 2000€/month, often sold as « royal ». Taking into account the content of this article, I hope your eyes widen and cry scandal. Well, at least astonishment.
Small calculation, even if the urge to shout « risk of disguised wage employment » is strong:
– Base of 2000€/month
– Less the charges (between 20% and 35%)
– Less professional expenses (between 20% and 35%)
This leaves about 1000€: less than the net Minimum Growth Wage (SMIC in France). Paid vacations, Working Time Reduction (RTT), unemployment rights, retirement rights, redundancy payments, precariousness bonus are not included in the calculation.
That’s why freelance rates are important and why it’s important to know how to explain them. Wanting to pay a freelancer with the salary of an employee is having your cake and eating it too. Those 2000€ are still a good plan for a full time contract based on the 35 hours of an employee?