Did you know around 36% of freelancers make $75,000 or more in a year? And 12% earn more than $100k a year. Successful freelancers charge at least double the hourly rate they'd be happy with for a full-time job, and in some sectors, up to four or five times more than their minimum acceptable rate.

And it's by setting these high prices that the best freelancers have the time and budget to consolidate their expertise in a particular field, and do work that brings value to the people who ask (and pay) for it.

Often depicted as the ultimate freedom - no boss, flexible hours, work when you want, with who you want, become famous for your work, make money - many people dream of becoming freelancers. But one of the trickiest, scariest things in freelancing is setting your own rates, especially when starting out.

So here are the two major pitfalls many freelancers face when setting their rates, how to avoid them, and how to properly value your work using the Value-Based Pricing method.

Or, in other words, overestimating your income.

Let's say you charge your clients an average of £150 per day of work, and you work four days per week for them. That's about £2400 of monthly income.

Or, if you're working on ad-hoc projects, like a photoshoot, let's imagine you charge a brand on average £400 for one shoot and do five shoots per month, plus get an estimated £1000 from buyout fees. That's about £3000 per month.

That's pretty good, right?

But you might find that your rate is too low to cover your expenses.

Before setting your rates, always estimate how much money you'll have to take from your monthly income to cover:

These can add up quickly. Before setting your rates, you need to think like an accountant when you manage your finances as a freelancer.

So let's estimate your total expenses:

Can't save 10%? It's a good indication your rate might be too low.

You have different options here:

Make the calculations work for you until you find the right balance.

A tip: Don't suddenly double your rate for a client you've been working with for a while. Instead, always explain any raise in costs, or offer an extra service that can justify the price increase.

This is something inexperienced freelancers often face at the beginning of their careers. For example, you might be shy and not like the idea of having to sell yourself. Or you're afraid of looking pretentious, upsetting potential clients, hurting your reputation...But these fears can slow down your career progression and motivation. And make you accept underpaid assignments.

Fortunately, there are solutions to get out of this trap.

Often, this fear comes from a lack of specialisation and expertise. And specialising can help you negotiate your freelance prices upwards.

Specialising can help you develop your strengths and build the necessary trust that will allow you to justify higher freelance rates.

And you can specialise in multiple fields. In fact, 61% of freelancers specialise in two to three skills. Evaluate where your strengths lie, prioritise your efforts, and map your way to the areas where you can build your expertise. 

Are you a model with a passion for copywriting? You could launch a blog and create a paid newsletter with platforms like Substack. You'll earn commissions for each new subscriber. This can then open doors to new clients, giving you another source of income. Your newsletter's performance and success can help you negotiate (and justify) higher rates for the services you offer to brands.

Multifaceted creative freelancers sometimes struggle with specialisation. The key here is to learn as much as you can. Read, get mentoring, and meet people that can help you grow. The more knowledge you have, the more confident you'll feel, and the easier you'll find the fields where you can become a specialist. An expert in multiple domains is often more valuable than someone specialising in only one area.

Forget hourly or daily rates. Here, the rate you set depends on the benefits you'll provide to your client. Think of it as a "project rate".

Always ask yourself this question: Why would the client be willing to pay me?

Usually, the answer falls into one of two categories:

You need to consider how you can solve the client's problems through your work.

As a freelancer, you have to look at it from the following point of view: try to provide the best possible help rather than the best possible price.

Your customer doesn't want to buy "a service" or "a project". They want to find solutions to a problem they've identified.

Once you understand that, it makes all the difference.

So, during each of your talks with your client, try to understand what problems they're trying to solve, what value you can bring them, and what benefits they'll get from your service.

That's where the Value-Based Pricing method comes it. It has four simple steps:

The goal is to fully understand the client's project and needs.

Why do they need a freelancer? What problem do they want to solve? What would be the cost to them if this problem remained unsolved?

Don't be afraid to ask questions to get clarity.

After your first meeting, ask yourself:

How does the customer make money? What tangible impact will my work have on their business? What will they gain from me?

Keep in mind that the service is not the end result! It's only a means to an end that will enable the client to achieve a goal and generate more income in the long term, thanks to your work.

The aim is to demonstrate that your service will actively and concretely contribute to the client's final objective.

Once you've understood their goals and how you can help achieve them, it's time to prepare offers or "packages". Try to avoid presenting a single price to your client. We recommend you prepare three different offers, each providing a different level of service (low-touch to high-touch):

Pack 1: basic offer

Pack 2: advanced offer

Pack 3: ultimate offer

The customer then doesn't have to choose whether they want to accept your price or not, but rather which offer they should select. This gives an entirely different perspective on the value of your work. And can often encourage the client to choose the higher-priced offer because they'll feel they'll get more for their money.

Once your client has agreed on an offer, you can send them your commercial proposal. Never announce a gross price without explanations! The proposal should summarise what you've discussed with your client. It should list the actions and strategic elements you'll undertake in your project, with specific timelines.

Show that you've understood their problem and will provide a clear solution that will bring the customer closer to their goals.

With this approach, you position yourself as a consultant who understands your clients and builds trust.

And during the entire time you work with them, give them as much information as possible about the progress of your missions. Always consider providing your client with that bit of extra or special touch that will make the difference compared to another freelancer or an internal employee.

If your client has enjoyed working with you and your assignment is a success, you'll be much more likely to continue working with them in the future. And getting repeat customers is the key to building a solid foundation for your freelance business.

Now that you know what the Value-Based Pricing method is, you've got to set your project rate. Let's do a little exercise:

We're at the start of a recession. Your bank account is tight. Businesses are cutting costs. You need to get work, fast.

What's the lowest rate you can accept? 

Write this rate down (remember to consider your expenses as mentioned above).

Now, multiply this rate by two. 

You've got your project rate. 

This exercise can help you reflect on the lowest value you think you can accept and what you should actually take for your work. But remember to consider your current level of expertise when setting these rates. Try to be sensible and objective, and don't hesitate to ask your peers to help you value your work. Show them a job you've done, and ask them, if you were this business, solving this problem, how much would you pay for it?

Another way to set the proper rates is to look for rates of freelancers of similar experience. 

How much are they charging? 

Now, look at freelancers with slightly more experience than you. How can your reach their level of expertise?

Aim high. Get inspired by people who are more advanced than you in your field. 

This will help you understand the incremental increases you can make to your rate each time you gain experience and expertise.

Freelance life can be exhilarating. It can take time to get to a comfortable point where you make enough money and work with repeat customers. But it's possible. Once you know which fields to specialise in, how to reach out to potential clients, and which rates to set for your work, you'll be on the safe path to success. Hang in there. You've got this.