Are you new to charging for your services? When is it okay to charge more? How can some developers get away with charging $150/hour? Let me try my best to answer some of these questions. I’ve been freelancing since 2002, while I am not an expert on this, I do have quite a bit of experience on this matter. Here is how I determine what to charge a client.

1. Determining your hourly rate

Here is a good way to figure it out.

Find some job listings as a web developer on monster.com or careerbuilder.com. Something that you actually qualify for. Get a few listings together of jobs that you would be a fit for. Look at how much each position makes a year. Find a good average out of those numbers. Once you have that number try this formula:

Your Skill Set Salary / 52 weeks / 40 hours a week  = Starting Hourly
Since you do more than just development for a client (you handle the business side as well) then we add %25 on top.
Starting Hourly + (Starting hourly * 0.25) = Your suggested rate

Example: If your salary fit is 60,000 a year then the formula would look like this:
60,000 / 52 /40 =  $28.84
25% of 28.84 = $7.21
$28.84 + 7.21 = 36.05 – suggested hourly rate

Make sure that you are honest with this part so that you can remain competitive against other freelancers of the same skill level.

2. Taxes!

Yes the first thing I think about when I charge for service is how much does Uncle Sam get. Well if you don’t know, get ready for this: Nearly half (roughly 40%). They do this because freelancers can write off a lot of different things against how much they owe in taxes.

My strategy is to put half of whatever I make as a freelancer in a savings account. At the end of the year (or quarter depending on when you pay) you can use the money in your savings account combined with a list of write offs. Take these to your accountant and have them work their magic. If you have a lot of write offs you should end up keeping a chunk of what you have saved for taxes. That can be considered your personal freelance tax return and you can keep that money for yourself.

Now with the “half your money goes to taxes” mentality when you would have charged $30 per hour you now see that as making 15 an hour after taxes.

3. Don’t Guess, You May Lose Money

In the beginning of my freelance career I would often set a price for a website. For example in 2003 my rate was $600 a website. That included design. This is how those projects went down most of the time.

Project will span 2-3 weeks:
a. 2 hours of phone calls with client
b. 5 hours of design
c. 3 hours of back and forth emails about the design options
d. 8 hours of HTML / CSS development
e. 6 hours of changes

So that’s:
600 / 24(hours) / 2(taxes) = $12.50 per hour.
My goal was $30.00 an hour.

By guessing, I ended up working very hard and using a skill set that I went to school for. I would have earned the same as a clerk. ( no offense to any clerks out there )

4. How to Charge, the correct way.

Here is how I charge my clients.

First, I find out as much as I can about the project:

Features - List out all the features you will need to program/install through out the entire website.
Database - Find out of the client can supply any data-entry or spreadsheets full of data that the project might need.
Design -  How long am I going to spend designing? How many rounds of revisions will be allowed?
Programming - Try your best to estimate how long it would take to program each feature one at a time and list it out.
Responsibility - What is the client responsible for delivering to you. If they are late will it hold up the project. If they have a lot of content that they still have yet to create, it’s sometimes good to charge extra to keep the project alive. Set deadlines for the client to deliver content. If the client misses it’s deadline it should add days to your deadline.
Deadline - Is the client going to set a tight deadline? Is the deadline open ended?
Additional talent – Is the project to big for one person? Are you going to have to hire additional help? Get estimates from other developers prior to giving client a cost.
Misc Costs- Hosting costs, domain names, turnkey software.

So here is my formula after I figure all the above out.

Example: Let’s see what I should have charged for the website project in 2003:

By using this formula I found out that I should have charged $1075 instead of the $600 used in my last example.

5. Conclusion

There are many ways to figure this out, however my formulas have worked well for me. As long as you are honest with the hours you are working, you will remain competitive and fair. If anyone would like to share their ideas or opinions, post them in the comments section.

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