How to Set Rates for Your Side Hustle

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.

 


Thank you for reading! Please let me know your thoughts in the comments below. Never miss another post and subscribe via RSS feed or email. Or come and say hi on Facebook and Twitter.

About Pauline

A 30 something French girl looking for ways to make more money. I blog about real estate, side hustles, improving your career, investing and making money online.

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Comments

  1. It’s interesting to see how much different people charge as fiverr dilutes everyone’s earnings. I still don’t know what to charge even when people want to do a fake guest post for advertisement on my blog.
    charles@gettingarichlife recently posted…Six Rules On How To Become A MillionaireMy Profile

    • Yea there are some good gigs on fiverr but most of the people I know that have used fiverr for larger scale projects were not happy with the results. Shoot me an e-mail if you need help advertising/setting rates for your blog – that’s my specialty :)
      harry @ 4HWD recently posted…How Much is Your Time Worth?My Profile

  2. I think there’s nothing wrong with under-charging at the beginning. I charged far below the market rate for my first spreadsheet consulting client, and I don’t regret it one bit. While market rate is a good indicator, I think that experience should be the biggest factor in pricing.
    DC @ Young Adult Money recently posted…Why Outsourcing Will Increase and What it Means for AmericansMy Profile

    • Yea no matter how great you think you are, if other people don’t know it then you won’t be able to charge your rates. Once you’ve established yourself though, then you have a lot more flexibility/freedom. That’s how I approached my freelancing business. I started off charging reasonable amounts and as I got more and more high paying gigs I got rid of the lower ones one at a time.
      harry @ 4HWD recently posted…How Much is Your Time Worth?My Profile

  3. Great info here, Harry. I often don’t take jobs that pay too little, and only take jobs that I feel are worth my time and effort. This might be dangerous as a beginning side hustle person, but it’s worked so far. I realize if I were a bit more flexible on the pay, I might be making more money, but to me, my time is just as valuable as my money, so I weigh that into consideration when taking or not taking a job.
    Laurie @thefrugalfarmer recently posted…Debt Payoff Recap January 2014My Profile

    • Nice Laurie, you might enjoy my latest article on how much your time is worth(linked below). Luckily, everything I do online is supplementary to my day job income so I’m able to be very picky with what freelancing gigs I’ll take on. Would love to talk to you more about your freelancing/what type of projects you’re interested in. I’m always looking for more writers :)
      harry @ 4HWD recently posted…How Much is Your Time Worth?My Profile

  4. You might also be able to feel out the situation, instead of announcing your rate on the front end. For example, you could talk about what the person is needing done and say something like “I feel my time is worth X, but let’s talk about your budget and expectations”. That sets the bar and then you can work with them from there. They may want to pay less, or they may be fine with your standard rate!
    FI Pilgrim recently posted…What Good Is Early Retirement At Age 45 When I’ve Got Kids At Age 30?!My Profile

  5. That’s a great formula. As I’m starting to look at doing things like a few sponsored posts or accepting advertisements, I’ve found that my initial ideas on how much people would pay are WAY too low. Even with my little blog. I sort of think it doesn’t even hurt to pitch a kind of high number with a note saying you’re open to discussing the price or even alternative forms of compensation instead.
    Mel @ brokeGIRLrich recently posted…Educate the Next Generation and Earn Money: Substitute TeachingMy Profile

  6. Woah! I’m really loving the template/theme of this site.
    It’s simple, yet effective. A lot of times it’s challenging to get
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    travel agency recently posted…travel agencyMy Profile

  7. I started by working for a very low price. I needed to build up a client base and experience, as well as prove myself, before I felt comfortable charging more. Now I’m charging a lot more than I was at the beginning and making some nice side money.
    Daisy @ Prairie Eco Thrifter recently posted…How to Pick the Right CSA for Your NeedsMy Profile

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