I was asked to join a Facebook Live Chat hosted by Asto, on the topic of ‘knowing your worth as a freelancer’. Worth a broad church here, but we were specifically talking about the financial value of your services as a self-employed individual.
As money is one of the big stressors for many freelancers (85% worry about irregular income, 60% have felt stressed from working below their day rate and 70% worry about justifying their price), it’s a topic which is close to our hearts at Leapers.
You can find the livestream here, but I wanted to cover the ten key points that I took away from the conversation.
1. It does cause stress - so don’t do it alone
It’s such a commonly asked question, yet one that many don’t feel they’re able to talk about. Money can be a taboo subject, but don’t feel you have to figure it out yourself.
Firstly, there are some brilliant guides online which can help you figure out your ’number’ – we’d suggest the WorkNotes Freelance Pricing Guide, which is a practical and invaluable resource for anyone who is self-employed, not just new starters.
Secondly, talk to others. If you’re part of a community, ask around, find out what others are charging so you can make sure you’re not undercutting yourself, and so you don’t undercut others. The more transparency around day rates, the better, as it helps us all charge a fair rate that doesn’t get pushed down.
2. You’re running a business - so make sure you charge for your work
Don’t do free work. You’re a business, you’re experienced, and they’re asking you to work. So you should charge for it. Of course, there are always exceptions: if you want to work pro-bono for charities, non-profits, social interest projects and where you simply want to help out, but even in these cases, work out the value of the project, and then give them a discount of 100% on the invoice, as it helps you understand the cost of work for similar future projects.
3. Day Rates, Project Fees, Retainers
Don’t assume that day rates are the only way of charging. Look at different models, rates are a common way of comparing one person against another, but it doesn’t factor in experience, speed, quality of work. You might be taking on some additional risk if the project runs over, but you’re also making a better profit if you do it efficiently. That said, many clients will refuse to work with anything but day rates, so be prepared for the conversation.
"Think about how you’re charging for the value of your work, not the time spent"
4. Figure out your baselines
Set yourself a minimum rate, which you won’t go below. It helps you be steadfast in negotiation, and be willing to walk away from a discussion if it falls below this baseline. It is all too easy to find yourself working hard but losing money – which only leads to anxiety and frustration – which in turn means the quality of work drops.
5. Have conversations up-front
It can be hard, but get conversations about rates and money out of the way up-front, so there’s no surprises after discussion of what you’ll be doing it and how. If you feel confident to – simply ask what the budget is, as it could vary what you’re able to do, and what the most effective route is to helping the client – and it saves everyone time on the back and forth haggling.
6. Value your experience, not just your time
Time is no longer an effective measure of work – something could take 30 minutes to do, but because you’ve got 30 years of experience, some projects have high value, such as the creation of an idea which then goes on to generate large commercial revenues. Think about how you’re charging for the value of your work, not the time spent.
7. Don’t stick rigidly to rates
It’s hugely useful to have a day rate, and an approach to pricing, so you can walk into a conversation with confidence, but the reality of the situation means you’re likely to be negotiating, or want to change your approach based upon the work. Use your rates as a guide, and be open to being flexible (but remember your baselines).
Send invoices on the go
Create and customise invoices while you’re on the move. Send them from your mobile and get paid sooner.
8. You’re entitled to be paid on time
Even if you’ve set an agreed rate, that’s not the end of the conversation – unfortunately, many small businesses and the self-employed have regular issues with payments on time. Research from IPSE says that freelancers spend an average of 20 days a year chasing late payments, with 43% per cent doing work they were not paid for at some point in their career. This isn’t okay, you’re legally entitled to be paid for your work on time and can charge late payment fees. The UK Small Business Commissioner’s office has guides for how to deal with late and unpaid invoices.
9. Think about the future
Don’t just think about the next project and the day rate you’ll get from that – start to think about the future of your career and how to invest in that. What learning and development do you need to undertake in order to give yourself a promotion and increase your day rate? What work do you need to take on to show you’re capable of further challenges? What is your back-up plan for if you can’t work due to sickness; if you can’t work to start a family; when you want to take time off for holidays; or finally when you want to retire. 70% of the self-employed are not paying into a pension. Find a financial advisor and seek help to build a plan for your financial future.
10. What is the true cost of a project?
Finally – don’t just think about the cost of the project to the client – consider the cost of the project to you, as an individual. This goes way beyond time, materials and expenses. Will you enjoy the work? Will you find it meaningful and motivating? Will it add to your portfolio so you can find the next project? Will the relationships you build here be useful? Or is the relationship toxic, and will find you working all hours and unable to fulfil your other needs as an individual? Whilst not everyone is in the position to be able to say ’no’ to a project, take a moment to consider the cost of the project holistically. Yes, a high day-rate might seem attractive, but if it means you’re unhappy or unable to work, it’s a false economy.
Money and Mental Health
Money and Mental Health for many are absolutely intertwined – anxiety around irregular income, the ability to pay the bills and long-term planning can be full of stress; and for others the amount you charge can feel directly connected to your own self-worth. I started Leapers, to support the mental health of the self-employed and to provide a community where this conversation can be had. Don’t ignore it – engage with others around you on the topic, and seek support and guidance, rather than letting it turn into something keeping you awake at night.
Helping sole traders
Asto can help you manage your business admin when you’re on the move. Send invoices, record your expenses and get paid sooner
Asto does not provide advice. You should not take anything in this content as any form of investment, tax, financial, legal or other advice. We have provided this content for your information only. You should not rely on it. Asto is not responsible for the accuracy or completeness of this information. You should seek independent advice as necessary.