One of the most difficult pieces of my freelance work is determining how much to charge small business clients. I try my best to explain to clients what they pay for when they hire a freelancer and how they benefit, but it’s a challenging process. And sometimes I struggle to do it well.
Some small businesses have a good understanding of what they pay for when they hire a freelancer. But I often find myself in situations where I have to educate potential clients about the different pieces involved in a freelance project, in addition to the costs involved in managing a freelance business.
If you are a small business owner wondering what you pay for when you hire a freelancer, here is your answer.
Skills
Freelance workers offer creative, technical, marketing, and other skills that many businesses don’t have in-house. These skills may not be required at the business every day. But when you need a project completed, it could be critical to the business. This is where the freelance worker fits. They offer something the business needs without requiring the business to hire them on a permanent basis. This benefit gives the freelance worker’s skills a value that the business should respect and pay for.
Experience
The amount of experience offered by freelance workers ranges from zero to dozens of years. And just like a worker in a standard workplace, the more experience a freelance worker has, the more strength their argument exercises when they ask for a higher rate. They’ve worked with more clients on more projects and learned more about how business works. They are, theoretically, better at their job. And the better they are at their job the more likely they are to give you a solid return on your investment. In this case the investment is paying them to do a job.
Dependability
A freelance worker will not lose much more than their client when they don’t complete a project. There may be some negative feedback that can be spread to other clients, but it probably won’t kill their business. This is why dependability is a part of the freelance package that should be respected by a business. When a business finds a reliable freelance worker, they should pay them solid rates. And a freelance worker who has a reputation for being dependable should ask for solid rates without being questioned.
Flexibility
A benefit that the business receives for hiring a freelance worker is a level of flexibility they often cannot find in their own workers. Many freelance workers do not work normal hours. Their hours fluctuate as needed and accommodate clients. This accommodation is hard to find in the standard 8-5 employee. This employee will go home and not check their email until the next morning. The freelance worker likely has their email connected to their phone. When a project needs an emergency change, many freelance workers have their computer nearby and are ready to do it.
A fresh or unique perspective
Freelance workers are paid for their ideas as well. You will only get a certain amount of ideas from your own workers. And sometimes a business’s creativity starts to feel like it exists in a vacuum—it is difficult to bring in new ideas or perspectives. This is why hiring a new mind with different influences and views can shake things up in positive ways and move a project forward.
Time
A freelance worker uses their time to work on your project, and their time—just like yours—has a value. They have likely decided a certain dollar value to attribute to their time, and try to hit that target value with their estimates and projections.
Outsourcing
Paying a solid third party to do some or all of the freelance work is a common practice. Outsourcing work is how many marketing agencies complete large projects with minimal staff. And a freelancer can do it the same way. This can benefit the business, because they don’t have to find multiple freelancers to complete a large project. They will just work through one.
But the freelancer has to make sure they are still earning a profit when outsourcing. This means they have to be sure they are charging higher rates than the workers to whom they are outsourcing.
Small business marketing
The freelancer’s business has to market itself just like any other business. This may be through social media, online ads, Google, business cards, hats and shirts, or simply face-to-face conversations. No matter what it is, it is products and unpaid time that have to be covered through paid work. This is where the client comes in. The cost of your work covers this business marketing.
Healthcare
Full-time freelancers or freelancers who don’t work a second job aren’t offered health insurance. It should go without saying that this is a high cost for businesses, and freelance workers are running a business.
Retirement
A portion of a small business income can (and should) be moved into an SEP retirement account. This is money that won’t make it into the freelance worker’s bank account for daily living. It isn’t technically a cost, since this is money the worker will eventually receive. But it does have to be factored in as a cost since the money can’t be used now.
Hardware/software
Computers, Adobe subscriptions, Dropbox subscriptions, Google Drive subscriptions, cameras, lenses, headsets, computer bags, notebooks, vehicles, mileage, office space, desks, product repairs—the list is endless. These are all costs a business needs to cover through its paid work.
Management
The time spent managing a business—whether this is creating business projections or reviewing finances—will add up. And all of it is unpaid.
Taxes
The U.S. is not gentle on small businesses when it comes to taxes. It is recommended a small business hold about 20% of its gross income for taxes. This is a lot when you think about all the other expenses taking money out of a business’s income.
Fees
They may be small, but there are a lot of them and they add up. Credit card fees are especially notorious, and require the freelancer to raise rates to cover credit card costs.
Business income/markups
The final piece of what you pay for when you hire a freelancer is the business income. The freelancer’s business needs to earn money in addition to the freelancer. The business needs to be making a profit so that it can use the money to grow and become a larger business.
If you are in need of a freelancer, reach out at freelance@brennanhallock.com or 402.318.3924.
