Aside from selling stuff, another great and easy way to earn extra income is to offer your services for a fee.

But how do you determine your rates as a freelancer?

How do you calculate the fair cost of your service to your customers?

You certainly don’t want to overcharge, but you also don’t want to sell yourself short.

Below are some quick and simple tips.

**Start with your salary.**

If you’re a teacher that earns P20,000 per month, how much would you ask for tutorial services? Assuming you work 5 days a week, 8 hours a day, then your minimum rate as a tutor should be P125 per hour.

Factor in your incidental costs for doing the service and you have your price. If it takes one hour to go to and fro your tutee’s house, and your meal and fare allowance is P200, then your rate becomes P450 for a 1-hour tutorial session, plus P125 for every additional hour in the same session.

Round it up nicely if you’d like some breathing room for negotiations, and give your client P500 for the first hour, plus P150 for every succeeding hour.

**Earn from material costs.**

Let’s say someone asks you to landscape their garden. You determined you’ll spend P5,000 in materials and P1,000 on incidentals; and the project will take 20 hours to finish – 5 hours planning and buying materials plus three days working 5 hours each.

First, add 30% to the material cost – so that’s P5,000 x 1.3 or P6,500. Then as a teacher, 20 hours of work costs P125 x 20 or P2,500.

Finally add your incidentals and you have P6,500 + P2,500 + P1,000 or P10,000.

As an option, you may add 10% to the figure just in case the client haggles, and you end up with P11,000 as your price quote for the garden landscaping project.

**But landscaping is NOT your line of work, so why base it on the teaching salary?**

Because that’s the simplest way to determine how much a person’s time costs. If you want to be more “accurate”, then you can base it on the current industry standards.

*Related Post:* How Much Should You Charge For Your Product or Service

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**Consider the industry standards.**

Let’s say you have a friend who works as a professional garden landscape artist and you learned that he, as well as most of his colleagues, earn around P30,000 per month – which is roughly P188 per hour.

You now have the option to use P188 instead of P125, for your hourly rate.

But you’re not really a landscaper by profession, so if you charge the same rates, then the client might as well hire a professional instead, right?

Indeed! So as an alternative, you can simply charge 80% of the current professional rates. That’s P188 x 0.80 or roughly P150 per hour. If you follow the same process above, then your final price quote would be around P11,500.

**Don’t forget your monthly living expenses**

If you plan to become a full-time freelancer, then your rates should be able to cover your monthly expenses. If your cost of living is P35,000 per month, and you plan to work 5 days a week, 8 hours a day as a freelancer, then your rate should be around P218 per hour.

Because you plan to freelance full-time, you can now actually consider yourself as a “professional”, which eventually gives you the option to use standard industry rates.

In our example, since P218 per hour is above the “assumed” industry standard of P188 per hour for garden landscape artists; then you might want to find ways to lower your monthly expenses and create other sources of income so you can be competitive and charge the P188 per hour standard rate for professionals.

Of course, it is still your option to charge higher, specially if you can deliver unique value to your clients that other professionals don’t or cannot offer.

**The ultimate rule**

Pricing your service should not be a complicated process, specially if you’re just testing the waters of freelancing. If you want a quick way to calculate your fees, then simply ask yourself…

**What’s the lowest income I’m willing to receive to do this job?**

Once you are able to give a specific answer to this question, then you’re already halfway done. Simply add your material cost and incidentals to get your final price.

Of course this rule is more emotional than logical… a “ready, fire, aim strategy” which can help you move forward if you get stuck in the calculations.

And always keep in mind that, in the world of freelancing, the more projects you take and finish, the more competitive your rates would eventually become.

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Photo credits: ukgardenphotos

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Tags: business pricing strategy, Freelancing, price, pricing strategies

As a freelance consultant in online marketing, pricing for my services is one of the difficult to calculate because there are different factors involved like the client budget, competition, target goals, etc. I even feel I am still underpaid 🙁

very nice advise… might as well calculate no how much should i charge …

Good points! I would add that one has to definitely consider as well what stage of building their freelance career they are in so they would know how to effectively set prices. Competition prices also have to be considered.

That clears my head. I was wondering how much is my rate on oDesk, now I have an idea. I am just starting freelancing, so I wont charge that much.

Thanks for the idea