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Article by Jess Gately
Here we are at part 5, and we still haven’t even started writing yet! And sadly, there’s still lots to do before you do start writing. In this post we look at the finance side of things like quoting and pricing structures. For some of you keeping on top of these things will determine ‘if’ and ‘when’ you can leave your full-time employment for either part-time work of full-time freelancing. For others this may be how you keep on top of bills or save up for your next holiday.
Setting your prices
This is possibly the most commonly discussed topic in freelancing. What can you expect to be paid? And the truth is that it varies, which is not what any of us want to hear. We want set prices that we can work with, but unfortunately the writing world is full of people willing to do jobs at a minimal price. The difference here is quality, and that will be integral later in this post.
Before we go into setting your own prices we must first discuss the difference in how some freelance writing works. If you’re writing articles for a major print publication or an established online publication the likelihood is that they will have fixed rates that they pay writers. It’s uncommon for these rates to be negotiable and it’s up to you whether you think their rate is worth your time.
In these situations it’s best to look at your work as a product and ask yourself if the buyer is offering you enough:
How much did it cost you to write that article?
How many hours went into it?
Did you spend any money to get some of the information (parking fees, entrance fees, tour fees) or do you require specialised equipment to obtain the information?
Is what they’re offering you enough to cover all of that and make a profit?
But for many types of freelancing your clients are going to ask you to name a price. And often they’ll be approaching multiple writers about their prices and ‘shopping around’. Striking the fine line between being competitive and making enough money to survive is hard especially since many writers don’t make their prices public. So, how do you set your prices?
First, let’s talk about the different types of rates freelancers will often use. Different types of rates have different pros and cons. There are three main ways you can charge your clients:
- Per word rate
- Per hour rate
- Project rate
A per word rate means that the longer the article, the more you get paid, however, this comes with some caveats. If the project requires large amounts of research, but the article is short in length, you may be left out of time and out of pocket. Likewise, per word rates rarely allow for time spent in meetings with the client (by phone or in person) or for any changes that the client may want to make. If this is the case, you want to ensure that your per word rate is high enough to cover these eventualities.
Working on a per hour basis is a good way to ensure that you’re paid for your time regardless of the amount of writing or research required. It also ensures you’re covered for meetings and any rewrites or edits. However, some clients may feel iffy about not having an exact rate up front especially if they fear you’ll take longer than expected or deliberately add on more hours to make more money. If you are a quick writer this type of rate will also work against you as you may be producing work faster and therefore at a lower rate than other writers.
A project rate is a very popular option where you can estimate the amount of time it will take you to do any research, edits, meetings and writing and make an overall quote based on that. Clients are often happy because they get a full rate up front, but you as the writer don’t miss out on being paid for things that you might otherwise miss in a per-word rate. However, project rates can also stall freelance writers if the client has not provided all the information up front allowing for an accurate estimate, if they change direction halfway through the work being done (which is particularly possible on longer projects), or if they request extensive edits after you’ve produced your work.
“…the different types of rates are likely to depend on the type of project you’re working on and where your expertise is…”
As you can see, the different types of rates are likely to depend on the type of project you’re working on and where your expertise is. If you are writing an article or op-ed piece and you know it will take only minimal research, then a per-word rate may still work for you. Likewise, if the project boundaries aren’t clear up front or are liable to change, a per-hour rate is a viable option that ensures both you and the client can be happy. If there are clear boundaries and lots of research to be done a project rate is a very reasonable option for both parties.
Now that you know the different types of rates you might use it’s time to look at how you set them. As mentioned in the opening, there’s no shortage of writers who are willing to work for very little. Doing this does not give you any real options as a freelancer as often the clients are not long-term, and the type of work you’ll do won’t necessarily look good on your portfolio. It therefore not only undercuts everyone in the business but it also makes it harder for us, as writers, to have our worth and expertise recognised and paid.
If you’ve been reading this series from the start then you’ll remember that we advised you to choose a type of freelance that already matches your areas of expertise. Using your existing knowledge to your advantage means that you don’t have to charge next-to-nothing as you can sell yourself based on your knowledge and your writing skills. There are two things to consider when setting your rates.
- How much are other people charging
As mentioned above, many writers don’t include their rates publicly, but that doesn’t mean there’s no way to find out. Many private online freelance writers groups are happy to discuss rates and there are plenty of blogs from professional freelancers who will share their knowledge. For example, the lovely Lindy Alexander, who will be checking in every so often in this series, runs The Freelancer’s Year, and she talks openly about how she sets rates and gives exact numbers on them as well.
Remember when you do your research to compare the right type of freelancing. There’s no point in setting your rates based on copyrighting if you are a technical writer because the type of work is vastly different.
You also need to make sure you’re comparing rates within the same market: first of all, there’s the dollar value (e.g. USD vs AUD), but there’s also the difference in what different markets expect. What companies in Australia are willing to pay may be quite different from countries like the U.S or China. Likewise, what a not-for-profit can afford will be different to a university which will be different to a major corporation. While very high prices scare clients off, very low prices may undermine your expertise and your suitability for the job.
“What companies in Australia are willing to pay may be quite different from countries in America or China. Likewise, what a not-for-profit can afford will be different to a university which will be different to a major corporation. While very high prices scare clients off, very low prices may undermine your expertise and your suitability for the job.”
The MEAA has recommended rates for freelancers (although many find them to be a little unrealistic) while Rachel’s List offers a free toolkit including yearly pay rates or you can pay to subscribe for live rates and links to freelance work.
Do your research and be thorough. While you can change your rates down the track, you don’t want to be stuck with ongoing clients who give you lots of work but whom you are still only charging a minimal rate when you have since raised your prices.
- How much do you need to make to survive?
This is the point where being organised with your finances comes in handy.
How much is your rent, your bills, your car loan, your petrol costs, your grocery costs?
On average, how much do you spend each week on miscellaneous items?
How often do you go out for dinner and how much do you spend?
How often to you go out to shows, gigs, performances or the cinema?
How much do you need to spend to set up and keep your company running, e.g. programs, subscriptions, website costs?
What are you saving up for?
How much do you need to put away for tax and superannuation?
How much do you need to put away for a rainy-day fund?
Remember: as a freelancer there is no such thing as sick pay, carers leave or holiday pay. There is no one putting money away for when you retire, your tax isn’t automatically being deducted from your earnings, and work is not a constant! You will often go for periods where you don’t have any clients or work. So, these are all things you need to consider when setting your rate.
While someone doing a similar job but in a contracted role may be earning $25 an hour, if you want to allow for all those extras, you may decide to charge $50 an hour. Of course, again, this all depends on the type of work you’re doing and what will meet your needs.
We wish it were possible just to give you a handy list of rates and say ‘here, use these’, but the reality is that no one can set your rates for you and rates change frequently. Be involved in your freelancing community. Join online groups and attend social functions and talk to your fellow freelancers.
Quoting and Invoicing
Now that you’ve got your rates, you’ll be asked to quote people and invoice them for the work that you do. Sometimes a quote is just a price in an email but sometimes they may need an official quote (for example, if it’s a business and your project needs to be signed off or if you’ll be working for someone who has obtained a grant to undertake their project). Generally speaking, a quote and an invoice look very similar and the only real difference is that one will have the word QUOTE on it and the other will have the word INVOICE. You may also use different numbering systems to sort out your quotes and invoices.
There are plenty of templates in Microsoft Word that you can adapt to your liking. A quick Google shows a diverse range of quotes and invoices that work for various services and products. A couple of examples are below.
If you’re using basic invoicing and Microsoft Excel you will probably be able to track your finances pretty well, at least in the beginning. However, as your business grows, you may want to invest in a bookkeeping software that handles your invoices and quotes for you. Quickbooks and Xero are two popular options that link straight in with your bank accounts, have online customised invoices, and offer flexible payment options to your clients. Programs like these are full accounting systems, tracking your income and expenses, storing receipts for tax time, and offering insights and reports as well as tracking GST (for those of you that need it).
A basic Quickbooks package starts from $15 per month, and Xero’s pricing starts from $25 per month. Both of these programs offer free 30-day trials so if you start to find that tracking your business finance is getting difficult then maybe this is a good option for you.
How are you feeling? Is it all a bit overwhelming? Don’t worry. Starting a business is no easy feat, but you’re doing it and that’s exciting and soon enough we’ll get to the fun stuff. But for now, it’s time for you to do some research on what you’ll charge and how you’ll charge it. In the next instalment, we’ll be talking about Tax and Superannuation before we dive on in to things like pitching, creative briefs and admin.