Every freelancer needs to set his hourly rate, and also those traveling the world and working from remote places, need to calculate their hourly rate carefully.
Sometimes you have to budget wisely, to save up for that rainy day when no projects are coming your way and hotel bills need to be paid or you need a visa extension.
Although as a nomad you can adjust your daily living costs much easier to you income, living as minimalistic as you find bearable, you do have expenses and you have your professional pride.
In this world where some low-salary countries are willing to work for pennies it might be hard to be honest with yourself about your hourly rate.
I remember my days of unsavoury searching the internet looking at other people offering services like mine. What do they charge?
Ending up with that overwhelming feeling that:
- I never would be able to pay my bills if I would work for such little money
- I realised I was a lot more worth but how to overcome the shame to ask a proper rate as a beginner without looking greedy
- and how to beat the flood of cheap Asian workers
I doubted even my decision to start as a freelancer.
You have to ask what you need to live (within reason) and you have to realize you are worth it.
I remember a conversation with a business coach (yes, even coaches have coaches) that told me point blank that if I didn’t start believing in myself and my skills and put a serious hourly rate to my services I might as well quit.
Because, so he told me, when you aim too low, your prospects will think nothing of you.
Let me share how I calculated my hourly rate
Basically it comes to: adding up what I need to get by on a monthly base. So I add up:
- living expenses (food, housing, lots of coffee, clothing budget)
- professional expenses (internet, website, more coffee, telephone costs, business permits, registration costs and taxes (if any))
That is the basics.This is what I need to to live.
I add to that:
- visa money
- travel money
All that should come from the profit.
And there you have the two margins in your hourly rate: basic income and profit.
Profit allows you to do extra things, basic income is just what it is: you need that!
Negotiations on pricing always happen in the profit margin, and never in the basic income
Keep in mind a few basic things:
You became a freelancer to have more free time. You became a nomad to travel. Free time and travel time also need to be paid for, although your client will never see that in his bill, it needs to be added to your profit margin.
So how many hours do you need to work, per month, to get a basic income (living expenses and professional expenses)?
You also need to search for projects and do other non-money making chores.
Add to the total amount of hours you need to work to get yourself a basic income, 20% time as an extra for acquisition, networking, administration and other professional duties to keep the business running.
For example: you need to work 20 hours, than add 4 hours extra. So you need to work 24 hours to keep the business afloat.
For me, living in a relatively cheap country: I only need to work 10 hours per week to pay the bills, working 20 hours a week allows me to travel freely.
When I move to another country I have to re-calculate my living expenses and maybe put in a few extra hours.
You need to find a balance between what you are willing to work for and what the client is willing to pay. The past part of that previous sentence is the hardest, for the client always wants to pay as little as possible. I even know people that hired a guy from eastern Europa or India in the first place: because it was cheap, to come back eventually and pay double on a project because it was done all wrong. That is how your client thinks. Keep that in mind.
If you have a certain specialism, you can demand far more per hour than when you are one of a dozen. Let’s be realistic about that. When the competitions is limited the price will rise.
And although your colleagues will ask for example 30 US$ an hour, that doesn’t mean you have to ask the same price. Look at their portfolios, specialism, reviews and compare it to your skills and keep in mind the basic maths, and set your price accordingly.
Be wise and value your time.
Specially when you are travelling, your time is valuable, you also want to wander off that beaten path outside the co working hub, or coffee shop.
That’s what has gotten you into this life at the first place. Keep that in mind.
Keep also in mind that your possible client is looking for a solution first, budget comes second. And you, while sharing project details and knowledge have the unique opportunity to convince him that you have that one right solution. Try to understand his reasoning and his needs for that will give you a clear picture of where you can fit in his problem solving frame and in his budget.
A few more thoughts on setting a rate:
- working for a low rate can be very tempting, but it is risky business since you do not know if you can find another job
each project should have a fair amount of profit for savings (just in case or spent on fun or pension)
- if your rates are too low you probably end up juggling several projects at the same time
- if your rates are too high you might scare new clients
- if your services allow it, you might want to consider working per 15 minutes, clients like the rate, they have the feeling they do not overpay
So, how did you set your rate? Did you learn anything new?
If you have any questions about your freelance business or the digital nomad live, feel free to contact me.
If you liked this article? Will you share it with others please?