Good morning! Today I am pleased to welcome personal finance blogger Harry Campbell who will talk about side hustles and how to set your rates when you get started. Let me know if you would like to guest post on MMYW.
Harry started blogging about personal finance on his main site Your PF Pro a few years ago and enjoyed it so much that he started a second site dedicated to finding the perfect work-life balance at The Four Hour Work Day. When Harry is not blogging, he works full time as an aerospace engineer and enjoys surfing and playing beach volleyball.
Before you establish a side hustle, one of the hardest things is just getting started. It’s not easy to put yourself out there and start networking in a new field or even to make valuable connections within your niche. Once you do take a few steps in the right direction though, you’ll find that you can quickly build some momentum.
After that side hustle has been established, the next hardest part is figuring out how much to charge people. Setting your rates can be extremely tricky and there are a lot of factors to consider. Price yourself too high, and you fear getting turned down by people not willing to pay. Price yourself too low, and you’ll find yourself slaving away for too many people, for too little in return.
Research the Market
The best way to know where to set your rate at is to do some research. What do others in your line of work charge? What is the low rate, the average, and what is the most you’ve seen someone charge? You can find this information by reaching out to those who are already successfully doing it. Explain that you’re looking to expand your freelance work and you’d love if they had a moment to give you some advice or answer a few questions. Let them know that you aren’t looking for specifics, just a general place to start. Gathering this kind of information about how other people charge their clients will allow you to create a spectrum of prices and better evaluate where you should fall on that scale.
What’s Your Experience Like?
Factors that will determine your positioning include your experience, your reputation, and your availability. If you’re new to the game and lack a ton of experience, you may have to pick up a few low-paying gigs in order to gain that all-important experience. After that, you can start developing a portfolio of work and a list of references from happy clients. However, if you’ve been working your hustle for a little while now and are somewhat established within your niche, you’ll likely slide toward the higher end of the spectrum.
What Do You Want in Return?
Once you have a feel for where you’re starting on the pay scale, you also need to evaluate what you’re looking to get out of your side hustle. If you want a quick buck or some extra spending money, you may be able to pull in more short term type gigs with high turnover if you set a slightly lower-than-average rate. This may help you produce a steady stream of income, but it won’t be too much and you’re likely always going to be looking for your next job as many of these gigs could be one-offs.
Calculate How Much You Really Need
While a great way to get your hands on a bit of extra “fun” money, this strategy is not appropriate if you want to eventually step up your side hustle to a fully-fledged business. If this is your long-term goal, you need to focus on setting sustainable rates. You’ll want to calculate what you need to eventually transition to doing your side gigs full-time. You have to add in your overhead and expenses, and you’ll need to remember that taxes will have to come out of your gross profit. To determine your minimum acceptable rate, or MAR, enter your personal numbers into this formula:
(Personal Expenses + Business Expenses) / Hours You’ll Work = Your MAR per hour. And don’t forget to include about 20% onto that gross hourly rate to account for taxes! If you wound up with $20 per hour from this equation, for example, your actual MAR would be $24 per hour.
Depending on your goals, one strategy may (literally) pay off for you, while another freelancer may need to go a different way because they have different goals. Once you understand what kind of range you can place yourself in and what you’re looking to get out of your side hustle, you can get specific and determine exactly the rate you’ll charge. You can use the MAR calculation and stick to what it spits out for you, or you can charge lower if you want an immediately higher volume or work. You can also charge higher, if you have the skills, experience, and reputation that will help you justify your higher rates to your potential clients.