How to estimate for freelance work is something you have to get right. Too little and you’re not making enough. Too much and you get no work. In this article, I’m going to break down exactly how to estimate your projects so you make what you need to live your best life, while ensuring your prices are competitive with the rest of the market.
The Importance of Getting Your Freelancing Estimates Right
In 2013 when I started freelancing, I was faced with a challenge: I had no clue what to charge for my work.
At the time I didn’t have much proof that my work would get results for my clients, and I hadn’t yet figured out how to leverage that inexperience into larger paydays (this dives into that concept, if you’re interested).
Add in a few layers of imposter syndrome that’s common to beginning freelancers, and I had a recipe for bad clients, low pay, and too many people with a claim on my time.
I quickly learned that my work was getting results, and the right kinds of clients were (1) glad to pay for it, and (2) were a whole lot better to work with.
Why Charging More Attracts Better Freelancing Clients
You know the old adage “you get what you pay for.”
This is an example of a decision-making shortcut (aka, a heuristic) that helps humans avoid analysis paralysis.
Think about it: if we had to weigh the merits and problems of every decision, we’d never do anything. Go back in time 10,000 years and that could be the difference between getting eaten and bringing dinner back to the cave. Not good.
Now, you can’t just raise your prices and get good clients. There has to be a reason clients are paying what they pay.
But if you charge $25 an hour for work you should be charging $150 an hour for, you’ll be miserable.
At the risk of overgeneralizing, here is what I’ve experienced in almost 10 years of freelancing:
The $25/hour Freelancing Client
In my experience, a person who’s buying your services at this level either (a) can’t really afford you, or (b) isn’t used to working with someone like you and doesn’t know how to act.
For Person A, they need your work to produce results. For me as a copywriter, that meant that hiring me was a Hail Mary pass they gambled would pay off in big profits . . . oftentimes so they could pay my bill.
Pro Tip: get paid an amount up front that you’d be happy with if the client stiffed you for the rest of the bill.
From the Brian Stachurski Freelancing Book of Wisdom
This meant they stressed every detail. They criticized everything. And they’d lose their minds if the results weren’t the “lottery winnings” they’d banked on.
Person B is just as bad, but in a different way.
Mainly, they don’t know what they want.
This was the kind of person who will say, “I don’t know, this isn’t what I want. I don’t think this will work.”
I’d reply, “Okay, what do you want?”
Their answer, “I’m not sure, but I’ll know it when I see it.”
All for $25 an hour.
And they’ll argue every hour you charge.
This kind of client will make you beg for your old W2 job back.
But don’t do it, because with just a little bit more effort, you can attract . . .
The $150/hour Freelancing Client
This is where you want to get to.
Someone who’s paying at this level understands that they’re not the expert . . . that’s why they’re hiring you.
They want results, but they’ve reached a level of success where they know that not every project works out 100% perfectly.
Sometimes you have to iterate, and that’s just part of the game.
This doesn’t mean they’re not demanding — they are — but when you handle your business like a professional, they will respect you. This is the kind of client you want to work with.
Why Does Charging More Attract a Better Group of Freelancing Clients?
Two reasons . . .
First, heuristics. There is an assumption that you get what you pay for. So people who can afford to pay your high hourly rate (or flat fee, if that’s the route you go), will often gravitate toward freelancers at the higher end of the pay scale.
Second, price serves as a quality filter. Higher-end clients will often ignore freelancers who charge too little because there’s an assumption that those are less experienced, lower-quality freelancers.
This doesn’t mean they’ll hire you because you’re expensive. However, this level of client may include you in the group of 3-5 other freelancers that they interview for the role.
So, back to the question of . . .
How to Estimate For Freelance Work
And the question behind the question here is really, what do you need to make for the project to be worthwhile?
This is an incredibly personal question, and depends on your financial goals, your vision for what your life should look like today versus next year (or 3 years from now), and the part freelancing will play in fulfilling that vision.
Here are a few questions to make your estimating your rates easier:
- Is your freelance work full-time or part-time? Does your freelancing work need to pay all of your bills, fill your savings account, fund your marketing efforts, make payroll for the freelancers you hire?
- How much money do you need to make? I like to think of this as an annual amount, and then break it down into quarterly and monthly revenue goals.
- How many hours a week do you want to spend freelancing? Maybe you only want to work part-time, but you want to earn a full-time income . . . it’s all up to you!
Once you answer those questions, you have what you need to reliably estimate your projects.
Here’s are a few examples of what this can look like . . .
Assumptions
Before breaking down the estimates, let’s start with some assumptions:
First, I want to make $75,000 per year as a freelancer. Not a huge target, but good enough for me.
Second, I don’t want to work more than 20 hours per week, and I want to take every June and December off to travel.
Okay, now let’s break this down . . .
Estimating Your Hourly Rate as a Freelancer
If the kind of freelancing I do lends itself to an hourly rate, then this is an easy equation.
Just take the amount of money you want to work per year, and divide it by the number of hours you want to work in a year.
Remember our assumptions: $75,000/year freelancing, with no more than 20 hours worked per month, and no work at all during June and December.
Before we can move on we need to figure out how many hours per year we’re going to work.
First, how many working hours are there in a year? Based on a 40 hour week and 52 weeks per year, that’s 2,080 hours if we were going to work full-time.
But we’re only going to work 10 months, so let’s remove those months from the equation. (We’re not going to be too detailed with this, we’ll just subtract 8 weeks from the 12-month year of 52 weeks, leaving us with 44 weeks we’re willing to work.)
44 weeks * 20 hours = 880 hours available for freelancing.
Now let’s divide the annual revenue we want ($75,000) by the number of hours we’re willing to work (880), and that gives us $85.23 per hour.
And maybe we want to round up to $90 per hour just in case we don’t work a full 20 hours per week at that rate.
But what if a client wants to pay a flat fee per project?
Estimating Project-Based Fees as a Freelancer
If you’re just starting out as a freelancer, this is a little trickier. You may not get this right at first, so it’s critical that you track your hours. Otherwise, you won’t know if you’ve under or overestimated the amount of time it will take you to complete a project, which is the crux of whether you’re charging correctly for project-based fees.
Here’s how project-based fees work . . .
Let’s say you’re a web designer and your client says they want you to build them a new site.
Based on what you talked about with the client, you believe it will take you about 65 hours to do the work.
Knowing that there are always hidden challenges in every project, you increase your estimated hours by 15% so you have some cushion.
65 hours * 15% = 9.75 “cushion hours”
Rounding up to 10 hours, you estimate about 75 hours to complete the project.
So what do you quote?
75 hours * $90 = $6,750
(You might also add materials costs, or stipulate that the client pays for additional expenses.)
Estimating a Retainer For Freelance Work
Retainer deals can be fabulous for ensuring steady freelancing cash flow, but for them to make sense for you, you need to have a good sense of how long it takes you to do particular jobs.
How you come up with a retainer is similar to estimating flat rates for project-based fees.
For example, a client you’ve done some videography for wants to get you on retainer.
The types of projects they talk about shouldn’t take you more than 40 hours per month. Again, estimating about 15% – 20% more hours than you think (because projects always take longer than you think they should), you estimate 48 hours.
This brings your retainer to 48 hours * $90 for a monthly retainer of $3,600.
A Note About Scope Creep
One way working hourly protects you is when a freelancing client adds to what they want.
Basically, they expand the scope of the project beyond what you agreed upon.
This is scope creep, and can kill the profitability of your retainer and project-based projects if you’re not vigilant.
My advice is to not agree to doing additional work — even when it’s small — without adjusting the expectations, and possibly the compensation, of the project. This article deals with scope creep from a project management perspective but is a valuable process freelancers can follow as well.
But if you’re just going along to get along, you will find yourself in a place that is less profitable, less enjoyable, and clients who push the project’s scope often don’t appreciate the extra (and free) work you provided.
They’ll respect you more if you maintain your boundaries. You’ll be glad you did.
Wrapping up
Estimating a project isn’t rocket science, but you do need to know what you want to make, a vision for what you want your life to look like, and have a decent idea of how long it takes for you to complete projects.
If you’d like some example proposals, or guidance on how to present a proposal to a prospect, let me know in the comments.