Hey there, freelancer! It’s time to unlock the secrets of setting rates that truly reflect your awesome skills and unique offerings.

Oftentimes, freelancers struggle to successfully value their skills––setting low rates to draw in clients or out of fear that they may lose one is all too common.

At Xolo, we believe in empowering freelancers to take control of their financial journey, and that starts with mastering the art of pricing your services. Give yourself the credit, and let clients from the world over know what you bring to the table.

Let's dive in!

🇳🇱 Some tax information in this article is tailored to freelancers based in the Netherlands but remains useful for any global freelancer!

Understand your value as a skilled and flexible freelancer

You’re: A talented professional with a unique set of skills and expertise. When setting your freelance rates, it's crucial to recognize that value.

Freelancers are chosen over full-time, contracted employees for many reasons, but flexibility and specialized skill-sets ring true for thousands of employers. When you’re setting prices and rates, consider the following:

What specialized skills am I bringing?

Do you possess expertise in a niche area? Whether it's coding in an obscure programming language, creating stunning digital illustrations, or providing legal advice for a specific industry, your specialized skills deserve a premium price tag. Embrace the rarity of these abilities and position yourself as an expert. We’ll get into this more when discussing UVP.

What experience have I accumulated?

Think about the years of expertise you've developed over. Veteran freelancers often command higher rates due to their proven track record and extensive knowledge. Share your success stories and let clients know they are investing in a seasoned professional.

What is my UVP (Unique Value Proposition)?

This is what sets you apart from the competition. Maybe it's your creative problem-solving approach, exceptional communication skills, or the ability to deliver projects ahead of schedule. Identify these unique qualities and communicate them effectively to justify your rates. Not every freelancer is equal, show them the sum of your parts.

How to calculate your rates as a freelancer

Now, let's get into the nitty-gritty of setting your freelance rates. It’s wise to begin calculations by first determining two major factors:

1. The Income You Need
Determine the minimum amount you need each month to live and cover your bills. Your hourly rate must cover your business expenses while ensuring you retain at least this amount. It’s important to note that simply desiring an affluent lifestyle above your skills and means doesn’t equate to a client’s desire to accept the cost.

2. Competitor Rates
Research your competitors' rates. If your rate is significantly higher or lower, be prepared to explain this to your clients. Consider your UVP and how it sets you apart from these other freelancers. Justify your cost.

With the basis of your potential income in mind, begin expanding on your service offerings and overall worth. A few things that you’ll want to take into account include:

• Business expenses
  Factor in fixed and variable costs, as well as startup expenses. Major costs may include office rent (if applicable), administration, marketing, transport and insurance. For freelancers working from home, some of these expenses may be lower.
• Desired income additions
  Let’s say you aim to take home €1,750 net per month (or €21,000 annually). Add 8% for vacation allowance (€1,680 annually), bringing your total net income requirement to €22,680. This amount needs to be calculated after taxes.
• 🇳🇱 Taxes and contributions
  Sole proprietors in the Netherlands pay income tax. Depending on your situation, you might qualify for deductions like: Zelfstandigenaftrek (Entrepreneur’s Deduction): A fixed deduction for self-employed individuals. Startersaftrek (Starter’s Deduction): An additional deduction for new entrepreneurs in their first few years. MKB-winstvrijstelling (SME Profit Exemption): Allows you to reduce your taxable profit by 14% after applying the above deductions.

These deductions can significantly lower your taxable income. However, it’s still wise to reserve about 30% of your earnings for taxes. Additionally, allocate 5.32% of your income for mandatory healthcare contributions.

You’re in a strong position now to determine your annual income goal, and you’ve got the relevant tools and foundation to accurately assess your needs as a freelancer. It’s time to set your rates.

We recommend setting up different pricing packages for:

• Hourly rates: Often used for smaller projects

• Project rates: Billable for entire projects, ensuring a clear scope of work is outlined first

• Weekly or monthly rates: For continued work with clients

• Retainer costs: What a client pays to keep you available

Additional tips for determining and setting your freelancer rates

• Use variable rates: Charge higher rates for last minute rush jobs and offer discounts for long-term commitments.
• Adjust for market trends: Use tools like the CBS Consumer Price Index (CPI) to ensure your rates reflect current market conditions.
• Review regularly: Evaluate your rate yearly or after significant market changes, such as rising energy costs.
• Negotiate effectively: Be confident in discussing your rates during the sales process to ensure mutual satisfaction.

Negotiating and communicating rates

You should be exuding confidence and professionalism when you discuss your rates. If you know your skills and who you are, try to reflect this in your sales pitch. 

To help you with this, prepare detailed quotes ahead of time and break down your rates for clients so they have a clear understanding of your prices. Transparency builds trust.

You must resist the temptation to undercut your rates. Focus on the value you deliver and remember that clients seeking the lowest price might not appreciate the quality you offer.