The chance to bid on a major project is a freelancer’s dream, but it can also be a nightmare. If the customer has not set a price. Thus, you will need to make your own estimate and it can be very difficult to determine the amount to charge.
If you get your estimate wrong, you can miss out on good projects and not find enough work. It can be just as bad if you end up working for too little and finishing a project at a price that can’t even cover your costs.
This freelancers guide will show you how to do it right. As a freelance writer and editor, I have compiled many estimates, made many mistakes, and learned many lessons.
I’ll walk you through the process from start to finish, starting with the scenario in which you were asked to bid on a project while you had no idea what to calculate. In the end, we’ll make an accurate estimate based on your own financial situation, taking into account market prices.
Our case study is a content writing project. However, you can use the same principles for design, photography, or any other freelance project.
I am assuming you will provide a fixed price estimate for the project since most customers prefer experienced freelancers. However, if you plan on charging by the hour, much of what I’ll discuss in this tutorial will still be relevant.
1. Get the details
The key to an accurate price estimate is an accurate time estimate. You need to have a clear idea of how long it will take to complete the job before you can commit to a price.
Unfortunately, the first job you get from a customer can often be frustratingly vague. In our hypothetical example, it says “Write a white paper on cakes for our website”.
Also, it is impossible for us to put together a quote until we have answered at least the following questions:
- How long will the whitepaper be?
- How soon do they need it ??
- Will they provide an overview of the content or do I create it from scratch?
- Should I draft the document and include diagrams and illustrations, or just provide the text?
- Will they give more context to what the paper is going to convey? For example, is it about the baking utensils or the impact on the environment or the investment potential or some other aspect?
- Will they provide resources to help me write, or will I do my own research ??
- Should I interview people and get original quotes and facts, or just use public sources?
It is so important to be clear. Your interactions with the customer at this point will also help you gauge how easy the process will be later on.
If the customer communicates clearly and has reasonable expectations, the work should be relatively smooth. However, if you feel there is a lack of clarity, the multiple iterations process can be painful and you need to take this into account in step 2.
2. Estimate the time commitment
Now that we have more details about the job, we can put together an estimate of the time we will be spending on it.
Everyone works in a different way and at a different pace. Therefore, you should base your estimates on your own experience. The estimates I give here are just to illustrate the process, not to tell you how long it will take you to write a white paper.
Even if this is your first time working as a freelancer, avoid underpricing your services. If you are not sure, remember that it is always better to overestimate than to underestimate!
With that in mind, let’s map out the different tasks and put some time estimates next to them:
|Customer negotiations||2 hours||Freelancers often forget to account for this time, but it’s part of the job so include it.|
|First research||6 hours||This depends a lot on how much you know about the subject and how much information the customer provides. So we had to ask these additional questions in Step 1.|
|Write||15 hours||This only applies to the first draft, which should make up the bulk of the work.|
|design||1 hour||In this case, the customer just asked us to create a simple Word template and told us not to worry about charts and illustrations. If the design work is more intense it could be a lot higher.|
|Rewrite||5 hours||This is where you add extra time if the client seems unclear or otherwise requires a lot of maintenance. Our client seems pretty reasonable, so the number isn’t very high.|
|Invoicing / Admin||1 hour||Some customers, especially large corporations, expect you to sign up for a lot of apps and systems that will make things more efficient for them but that will take up your time. Try to get an idea of it early on and make sure of it.|
One final note on the revision: While there is a lot to expect, avoid going back and forth (endlessly) with the client, you need to draw a line to avoid a “situation” where the project expands to something much more than you expected. Clarifying this is very important.
Some freelancers only commit to a fixed number of writes. However, I prefer telling a client that I will commit to revising them as often as necessary until they are completely satisfied with the job. However, if the scope of the project changes, I’ll have to charge an extra fee.
That approach worked well for me. I never had to do more than two or three revisions, and in some cases, customers would come back and ask me to rewrite it in a completely different way than what we originally agreed as agreed in advance.
3. Set your minimum price
This part can be a little involving, but you only have to do it once and you can apply it to future projects as well. The idea is to calculate all of your business costs and find the minimum you need to break even.
Calculate all of your costs
To be clear, we’re not talking about the cost of doing this work. We’re talking about the basic “salary” you need to make to keep the lights on. Some people focus on business expenses here, but I am an individual so I prefer my overall expenses to survival. That’s the priority, after all.
For example, let’s say my monthly expenses are $3000. This includes personal items like rent, utilities, transportation, groceries, and business expenses like equipment.
To break even, I need to make $3000 a month, right? No, don’t forget the taxes. Assuming I lose about 30% in taxes, I have to aim for $4300 a month, which leaves me around $3000. Also, 4,300 x $12 is an annual salary of $51,600.
Remember, that is not your goal – that is the bare minimum you need to survive. (And also remember that these numbers are just examples – the cost of living will of course vary depending on your circumstances and where you live.)
Calculate your billable hours
Now think about how many hours you can work in a week. But here we are only interested in billable hours, ie direct customer work for which you are paid.
Remember that if you are just starting out you will have to spend time marketing, looking for jobs, creating unsuccessful applications, etc. Even if you plan to work 40 hours a week, maybe only 20 of those will be right on Projects. You can’t calculate the time spent updating your website or networking on LinkedIn.
So let’s say 20 hours per week, times 50 weeks per year (you need at least two weeks of vacation!), So that you have 1,000 billable hours per year.
Now just divide the first number by the second. $51,600 divided by 1,000 is $51.60 an hour. This is the minimum hourly rate you should charge.
You will apply this number to every project from now on. For this particular case, we’ll multiply that $51.60 by the 30 hours we’re likely to spend on the white paper, for a minimum project estimate of $1,548. Our final amount will likely be higher, but it’s good to start with a baseline.
4. Take into account the non-financial benefits
This tutorial is all about pricing your work in order to make a profit. However, there are many reasons why you might want to lower your plan or even work for free.
Maybe it’s a nonprofit venture that’s worth it. For example, and you’re happy giving them some free cash. Or maybe it’s a prestigious customer who can give you good references.
Especially in the beginning, it can be worthwhile to begin low. That way, you’ll easily grow your portfolio, and get some evidence.
Often times it is good to have your name posted in different places. Sometimes I write guest posts to blogs. The pay is usually below my normal rate and sometimes non-existent, but it’s fast and sends traffic to my own website.
The same applies, of course, to other industries (photography, design, development, etc).
5. Research the competition
Unfortunately, this is often the first and only step freelancers take. When I first started I would often base my allegations on what I call the “standard plan” and then get depressed due to the small amount of money I made.
The price is not everything
Here’s the thing: there’s no standard price for the writing (or the design, or any other field). There are general guidelines, but prices vary widely depending on the client’s needs, resources, level of experience, type of job, and a variety of other factors.
Even for something as simple as writing a blog post, the “standard price” can range from $ 5 to $ 500, depending on where you look.
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