How much should you design freelancers charge? Discussion Board member TZD recently posed the famously tricky question, and got some great answers from our resident pros.

Some background info: TZD has been working full-time at a "decently sized manufacturing facility (100 plus CNCs) as a Product Engineer," with "about 4-5 years working experience in related fields." A client recently came in and asked for design work outside the scope of his company. With his boss' permission he took the job on, and now he's looking to do more—but he needs to get the money straight.

The Question:

I'm now branching out [into freelance work] and am wondering how you guys are handling pricing. Up to this point I have been tracking my hours and billing at an hourly rate. I am not sure this is the best solution, and I am unsure of the rate. I have also been working with no contract.

So how do you guys handle your pricing? What kind of hourly rate is reasonable for [what] type of work?

Here are the answers, edited for clarity:

Figuring Out the Basics

1. Start With a SOW

I typically create something called an SOW (Statement Of Work). A document like this outlines key milestones, deliverables, and costs associated with those milestones and deliverables and the timing of payments.

--Michael DiTullo, California, Chief Design Officer

2. Flat Rate vs. Hourly

I prefer working with hourly contracts where you simply track all hours worked through a piece of software that includes screenshots and written memos, so the client always has an overview of the progress.

--Ralph Zoontjens, Netherlands, Product Designer

I find it easier to quote as flat fees. How I do that is I estimate how many hours it will take me, multiply that by my hourly rate and generate a price. You will never get the estimation right, and general rule of thumb is that you will under estimate it so round up and include anytime for communications (phone calls, reviews, meetings).

--Michael DiTullo, California, Chief Design Officer

3. How to Calculate Your Hourly Rate

To calculate an hourly fee, figure out how much you want to make per year. Be sure to factor in healthcare costs, rent, savings, things like that. The average work year is 2,000 hours, but as a freelancer you might spend half of that time chasing work, so divide your annual desired earnings by 1000 and you should have a pretty good idea of an hourly rate.

--Michael DiTullo, California, Chief Design Officer

What Other Factors Determine Rates?

4. The Market

Price is determined by what the market will bear. Yes, I am a broken record but it is true.

--Iab (location/occupation unknown)

5. Experience

Experience [also matters], I'd gladly pay [DiTullo] $175/hour, but not even near that for someone just out of college. But experience is not absolute as pricing is a dark art [see "Client Size," below].

--Iab (location/occupation unknown)

Depends on your level of experience. In San Francisco, a good freelance rate for a recent grad is around $50-60/hr. If you're a more mid-level designer you can probably tack another 50% on top of that.

--John Mauriello (location/occupation unknown)

If you are a design engineer with any competent level of tooling design experience, there's no reason you shouldn't be charging $100+/hr. The product engineers I've worked with have ranged in price from about $85 on the low end for an experienced CAD jockey with solid part design knowledge, to $250 on the high end for someone with extensive experience in mechanical design and part analysis.

--Bcpid (location/occupation unknown)

6. Client Size

I try to determine what I can get from a client and go for the max and readjust if they balk. For example, a Fortune 500 will likely pay more than a startup, but not in every case. So the "exact same" project between two different clients would be priced differently.

--Iab (location/occupation unknown)

My estimate would be around $40-50/hr for you. But you will have to determine for yourself based on the kind of projects you are looking to do and what clients would be willing to pay given your experience and specialization level.

--Ralph Zoontjens, Netherlands, Product Designer

7. Services Provided

Then of course price will depend on the services provided. For example, concept development will have a higher hourly rate over CAD work.

--Iab (location/occupation unknown)

8. Repeat Clients

You also need to consider the precedent you have made with existing clients. They will not like you raising the price. It is so much easier to lower a price than to raise it.

--Iab (location/occupation unknown)

9. What To Do if They Don't Like Your Prices

If they do balk at your price, don't just lower your price to get the job, be sure to adjust your SOW to reflect your reduction of work. If you don't, they will know to always ask for a price reduction.

--Iab (location/occupation unknown)

10. Don't Forget These Things

Don't forget to factor in taxes! For freelancers, remember about 30% is not your money.

--Sketchstone (location/occupation unknown)

Keep in mind, tax rates are higher [for a freelancer], you have to pay your own insurance, you can't bill for time spent on the phone with the client or meetings, you have to pay thousands of dollars for your own software, generating leads, etc. Ultimately, it comes down to what the market will bear (as someone else said), but I would highly recommend starting much higher than you think you should.

--John Mauriello (location/occupation unknown)

11. How to Avoid Getting Screwed on Revisions

For fixed-term contracts I factor in 10% extra work due to iterations needed to be done. You can consider the amount of iterations/revisions you offer to prevent putting in too many hours. I charge non-creative activities such as research and communication at 70% of my hourly rate. You can work with an upfront fee to ensure professional conduct and establish some trust with a client. I also advise you to include a Terms & Conditions document stating your rates, cases where your rate or project fee may be changed, the scope of the project and its deliverables, file handling and legal disclaimers.

--Ralph Zoontjens, Netherlands, Product Designer

12. Overall

A good rule of thumb that I once heard is about double what you'd normally be paid as a full-time employee. So if you want $60,000 a year at a standard entry level ID job (which averages to around $30/hr if you work 50 weeks per year), you should charge around $60/hr as a freelancer if you want a similar pay by the end of the year. The reason for this is that only about half your hours will be billable each week.

--John Mauriello (location/occupation unknown)

TZD and all of you reading this, we hope that helped! 

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