How Much Are You Worth?

Learn what determines the amount you should charge for your freelance services.

How much are you worth?

This is an important question when you are working as a freelancer or independent contractor. If you ask too little, you compete against people brand new to your field. If you ask too much, you might find yourself without any clients.

Let’s start figuring out how much you are worth by looking at two areas that help determine your value: education and experience.

A Good Education is Tough To Beat

Ask yourself these questions: “Why did I or why should I spend the time and money to get a college degree? How will I benefit by immersing myself in a college environment? What is the payoff for my work?”

The answer is usually—but not always—a bigger, fatter paycheck. Education teaches you the skills and provides you with the knowledge you need to do your job effectively. People with bachelor’s degrees earn more than someone with a high school diploma or GED (general education degree/certificate). Those few with a master’s earn even more. The top earners from an educational perspective are the rarified few with doctorates.

According to this site, male workers who finished high school without a diploma had a median income of $28,023. Adding the diploma boosted their income to $39,478.  Earning a bachelor’s degree meant a median income of $62,444 while those with a master’s got $79,342. Women high school graduates had a median income of $29,150 while those with a bachelor’s made $46,832. Women with a master’s degree earned $61,068.

An education is one key ingredient in making money. Experience is another.

Getting an education provides graduates with facts and figures. “How do I calculate this? How should I write that?” You learn the answers to these questions in a classroom or online setting.

Ah, but is education alone enough? The consensus answer is a resounding “NO!” You need experience as well.

Experience Is A ‘Real World’ Teacher

Education may teach you one method of performing a task, but it doesn’t teach you about all the ways to do it. Experience in the real world of dealing with multiple tasks, multiple deadlines and pressure from several sources at once gives you a “real world education.”

Employers—at least those in the United Kingdom—place practical work experience high on their list of qualifications.

Textbooks and classrooms are all fine and good when it comes to performing any task in the “textbook” manner. Then the “real world” gets in the way. Mistakes are made, some of them devastating in their severity.

A newspaper reporter writing about a criminal case can get in a ton of trouble by leaving out one word: “not.” There is a huge difference between writing that a person is guilty and writing they are not guilty. The key difference here is the presence or absence of a single word.

Performing tasks under less than ideal conditions—“hellish” may be an exaggeration but it’s closer to the truth—tends to result in mistakes, foul-ups and, “What the Hell did you do?” rants from your boss.

Experience teaches us how to recognize mistakes before they happen and as thy are taking place. Experience lets us know how to stop mistakes in their tracks and keep the damage to a minimum.

For example, a computer neophyte may respond to an email from a friend saying, “check out this great website.” The novice visits the site and downloads a computer virus that knocks down your machine and everything connected to it.

 Someone with a limited amount of experience would install an anti-virus program first. The protective software would either warn you about what you are going to do or limit the damage to a single machine.

People with extensive experience wouldn’t even open the message, knowing it is likely infected because they have seen similar messages in the past.

Experience, though, takes time. It takes a lot of time, as in years, to gain the wisdom that only making mistakes and learning from them can teach.

So how well does your experience translate to the requirements of a particular employer? This recent blog post from Ask A Manager may help you sort it out.

Being ‘Good’ Requires Education AND Experience

People who are not new to an occupation have the education to understand the “how” to perform a task. They also have the experience to know “when” to apply the book learning … and when to use other methods they learned outside the classroom.

Good, effective employees can look at any given situation and assess it based on their knowledge and experience. This combination teaches them which method is effective and efficient for a given situation, and which methods are likely a waste of time and resources.

Applying Supply, Demand to Your Fees

So the question remains: How much should you charge for a given task or project?

Your education and your experience are only part of the equation. Supply and demand also play a big role.

Research the amount other people are charging for the services you offer in your general geographic area. What is the typical billing rate? Is it by the hour, by the job or by the product?

Now compare that rate to the number of people offering services similar to your own in that same area. If your typical rate is drastically higher than the average, you may not get many clients. If your rate is dramatically lower, you may get people with whom you have problems collecting.

Experience often teaches us that the people who pay the least complain the most because they want what you are offering for as close to nothing as they can get.

These days you also must compare local rates with those in foreign countries such as India. Someone used to paying $5 for a single blog post for an outsourcing foreign supplier may balk at your fee of $15-$25 for what they consider the same product.

It’s your job to explain to them why your fee is higher.

Explain Why You Are Worth More

So let’s make the assumption that the going rate for your services is $50 an hour. An outsourcer is offering a similar product—you know it’s inferior and can prove it—at half your rate. Your rate is reasonable when the top people in your field charge $200 an hour. Where should you adjust your rate if you should adjust it all?

Explain why you earn what you charge.

Here’s an example of how much businesses should pay bloggers and how variables, such as experience and knowledge, affect the pay scale.

The best answer is explain to the client what you bring to the table. Explain your unique skills, experience and education. Show each client that you provide a service while similar on the surface—such as blogging—has greater value to them.

Your blog posts, for example, may include search engine optimization techniques the off-shore versions lack. Your blog posts may also be written by a native English speaker, one who understands the complex rules of English grammar, how to apply them and when to ignore them.

What you need to do is not only tell a client how you are better than anyone else, but show them examples of your work. Ideally have testimonials and compliments from people who appreciate your efforts on their behalf.

Show It, Don’t Say It

Anyone can say anything they want, but can they back it up? If you are showcasing your experience and knowledge, show work samples to potential clients. Give them concrete, “in your face” proof that you know your business and that you are worth every penny you are charging them.

If your previous work samples don’t sway a particular client, offer to create a small sample just for them. If they like it, they can hire you. If they don’t like it, they are free to hire someone else. Be careful, though, to protect yourself and restrict their use of any samples. You don’t want to “give” them something only to find it used against you later on.

Some of these same comments can be found on this About.com web log entry, “6 Steps to Get a Professional Blogging Job.”

Offer An Introductory Rate

Some people offer a low introductory rate. Be careful with that approach because they are some people who will insist on paying you that low rate even after you have shown your merits.

Have stated limits on your introductory rate. Make sure your client understands this rate is for a short time only and is not permanent. Set a time limit or a number of products where you will accept a sub-standard fee. When that limit is reached, the client then has the option of either paying your standard fee or getting someone else.

If you make the mistake of offering the low fee without a stated end, some unethical clients may expect you to work indefinitely for that substandard rate. That low rate then becomes your standard rate, if you let it go long enough.

Keep Records

Keep track of what you do, when you submit it, who you submit it to and what their response is. Having these records will pay off for you in the short and long term.

In the short term, you know what you just finished and ideally, what your next project it. Keeping a record of your progress and providing it to your client also reinforces that you are a person of your word: you deliver on your promises.

In the long term, keeping these records will help you add clients. You can show them proof of your skills by submitting samples done for other people and firms.

Having copies of emails also works in your favor if a dispute occurs. For example, an email where a client agrees to your stated rate supports you if the client decides to pay you less, then claim they never agreed to your original rate.

Know When To Move On

Let’s be honest: some clients are more of a pain than they are worth. They want everything for nothing and complain constantly. These people interpret the adage, “the sticky wheel gets the grease,” to mean: the more they complain, the less they have to pay.

You have a responsibility to yourself and your fellow professionals. Cut these creeps off. Let your fellow pros know if and when you find a client that behaves this way.

You may want to ignore a limited amount of griping from the client when you are first starting out.  Use constructive criticism as motivation to do a better job. If a client asks,  “can you emphasize this?” or, “please write only about us. We don’t advertise our competitors,” do it.

However, there is no reason to accept unprofessional behavior from a client. If you are providing the service your contract states at the rate you and the client have agreed upon, then the client is responsible for upholding their end.

A good contract spells out your rights and responsibilities.

Contracts Keep Your Friends Your Friends

“Contracts keep your friends your friends and keep everyone else from screwing with you.” Written contracts signed by all parties are important in business. Many people do not lift a finger nor perform a minute of work without one.

Avoid a case of, “he said, he/she said” by stating everything up front and in writing. If a client isn’t willing to abide by the terms of the contract—such as rate or when payment is due—they are not worth keeping. Contracts not written by lawyers may have little value in court, but they mean far more than a verbal agreement.

Contracts require both parties to perform a set task or series of tasks. They also spell out the amount, type and frequency of compensation you expect once you have performed those tasks.

This blog entry explains “How to Write a Simple Employment Contract.”

You can consider copying this sample employee agreement then modifying it for your own needs.

Here is an attorney’s Introduction to Contract Law, which is well worth reading.

Nolo Press sells a wide range of legal products designed for the average person. Its book Contracts covers terminology, how to decipher a contract someone hands or sends you and how to change them.

The Bottom Line

Getting paid by someone to perform a task entails rights and responsibilities on both sides of the negotiating table. You need to know how much to charge, when to bend a little bit and when to stop bending. Know your rights as an independent contractor, but realize your clients have rights as well.

Don’t work without a contract if possible. If that is not possible, be sure you have detailed records showing what you told them you would do and what you delivered.

The time you spent getting educated is worth money, as is the time you spent learning to perfect your craft in the real world. Set a realistic compensation level then don’t vary it unless you are willing to degrade yourself.