These days, it seems like everyone and their dog has a side hustle. The cost of living has risen, wages haven’t kept pace, and it just feels impossible to get ahead — or even make ends meet — without a little something extra. From pet sitting to pottery painting, anything can be monetized if you can find the right market, and with the internet, there’s no shortage of people to reach.
But just because everyone’s doing it and it’s easier than ever doesn’t mean it’s not difficult. It’d be crazy to say that freelancing isn’t hard work. For most of us without a business degree or upper management experience, the ins and outs of setting fees, meeting deadlines, reaching new markets, and cultivating relationships is uncharted territory.
The hardest piece of the puzzle is often setting your price. As a side hustler, determining the value of your product or service requires thorough analysis of several factors. While there’s not right or wrong way to set your price, we’ve pulled together a few things to keep in mind to make sure you’re getting paid what you deserve (and when you deserve it).
Determining Your Rate
The first thing you need to do is calculate how much you need to cover your expenses. In some cases, like dog walking, you’ll have little to no expenses. If your gig requires travel, though, or admin duties, you may need to calculate the cost of gas, office supplies, utilities, or computing power. These expenses occur even during non-billable hours; if you’re doing outreach or advertising, you’re not being paid to work, but you’re still using resources.
Next, you have to decide your salary. What should you get paid for doing what you do? There are a few ways to go about this. If you’re taking your day job and turning it into freelance for some extra hours, you can use the rate you’re paid at work. You can also take what you’d like to make annually and divide it by the number of billable hours you anticipate working — remember that you won’t always be paid for putting energy into your side hustle, as in the case of finding new clients.
Keep in mind that you’ll also have to pay taxes out of your income — you may want to add a percentage on top to cover that cost. If you’re going full time freelance, you’ll also need to consider benefits. At work, you likely have a health insurance option as well as a retirement plan, and the option to take some vacation time. Those things shouldn’t go away just because you’re paying yourself now.
Building Room to Grow
Once you have your operating costs, salary, and benefits information, it’s time to consider profit. Approximately 43 percent of freelancers expect their income to increase in upcoming years, and rather than underpricing your services in a growing market, use the extra income as a margin for growth. Setting aside income for profit allows you to have money to grow your business, potentially going from side hustle to full-time freelance, or from freelance to established small business. It’s standard to consider 10 to 20 percent for profit, and you can adjust based on business goals. It’s also worth considering your expertise level at this point; if you’re a beginner, you won’t be charging as much as someone who has years of experience, trade mastery, or additional relevant certifications.
So, to recap, you’ve got your operating expenses, salary, and taxes and benefits expenses to consider. It may be easier to think of things on an annual scale and then divide it out over your billable hours. Then, add your profit margin, and you’ve got your hourly rate.
At this point, you can look around and see what other industry players in your region are charging and adjust (but only slightly) if need be. You want to do this step last and avoid setting your price based on what someone else is charging — maybe they have fewer expenses, less experience, or just haven’t done their due diligence! Be confident in the rate you land on, and try to stick to it. If you absolutely must start with a lower fee, make sure that you are getting paid and your expenses are covered. Profit can come with time.
Anytime you’re discussing a freelance rate or how much you should be paid for a side hustle, it’s worth taking a minute for relationships management. While the gig economy is certainly flourishing, some people still seek out freelance work because they believe it will be cheaper than working with a larger business.
Establishing your value as a service provider is essential to getting paid well and on time, as well as developing a potentially recurring relationship with your customers. When you take on a job or contract, be sure that expectations are clear from the get-go. Job requirements, timelines, and hourly rates or project quotes should all be obtained in writing. Both parties need to understand under what circumstances changes can be made to the order or how the pricing may shift based on time, materials, and other unpredictable factors.
Invoices are essential to making expectations understood, especially when it comes to payment. While you should never have to justify your rate to a client, make sure that your invoice includes a pricing breakdown — if there’s an extra materials charge or you charge different rates for different parts of the project, break each item out into a line. Your invoice should also include a payment due date and the types of payment you accept. If you charge part of your rate upfront (which is wise if you need to purchase materials), note any payments already made.
Hopefully, you’ll never have to pursue payment form a difficult client, but that’s wishful thinking. Have a plan for when clients don’t want to pay; don’t back down just because confrontation is uncomfortable. Your time and skills have value, and you should be confident in treating them as such.
Whether your side gig is a casual weekend job that takes advantage of skills you already have or an attempt to become a full blown freelancer, knowing your worth is paramount. If you’re not charging proportionately for your time, you’re just going to end up spinning your wheels into exhaustion and frustration. While a quick buck here and there is nice, make sure you’re fully prepared before jumping into a serious side gig. In the meantime, keep hustling, and let us know what your best tactics are for setting prices, building relationships, and getting paid.
Article written by Alyssa Razmus.