A quick search on Google reveals mind-boggling statistics about freelancers and the freelancer industry. In 2020, there were over 1.5 billion self-employed workers in the world. The United States alone has over 56 million freelancers contributing over $1.4 billion to the U.S. economy.

The demand for freelance freelancers and consultants in fields like information security and cybersecurity, privacy, compliance, and risk management is growing at a fast clip, thanks to a huge workforce shortage of over 3.4 million people globally.

So if you specialize in these areas and want to make a go of it as a freelancer, it may be a great career decision. But before stepping into the freelance life, you need to decide your freelance rate. This resource will show you how.

Why It’s Difficult to Set Rates as a Freelancer or Consultant

It’s not easy to set a freelance rate for your services and expertise. A freelance rate that is too low or too high can both be disadvantageous. If you price yourself too high, you may lose potential clients and projects to freelancers who offer lower rates.

But if your freelance hourly rate is too low, you may miss out on a lot of potential income. Lowballing yourself can also send out the wrong signal – that you don’t know your own value. And if you don’t know how much your skills are worth, why should potential clients?

It’s important to set the right rates for your freelance services, otherwise your earnings may not match your expectations. You may also lose earnings to other freelancers. Remember that your freelancer rates signal how much value you place on yourself, which will then enable clients to value you.

Best Practices to Optimize Your Pricing Strategy

Setting the right freelance hourly rate can help you earn a decent earning from your freelance business. These tips can help you set the right pricing strategy for your services.

Do your research

Research freelance rates in your country and area of expertise. For example, in 2020, the average salary for a full-time Information Security Director in the U.S. is $141,813. It can even be as high as $180,020. But for companies, the cost of hiring a freelance IS Director is usually much lower because they don’t have to worry about the costs related to 401K matching, social security tax, health insurance, paid time-off, etc. Doing your research about these differences will allow you to understand what companies are willing to pay for a freelance IS Director and accordingly set the prices for your services.

Look beyond the base pay

Whether you calculate your freelance rates on an hourly or project-based basis, consider this number your base income. Then add all the extra expenses you may incur to this amount. Also factor in vacation days or sick days when you won’t have an income and  account for other extras such as retirement savings or investments when calculating your freelance rates.

Think about billable time

When calculating your rates, think about the number of hours you will spend doing billable work. Billable work is any work you will be doing for a client’s project and will charge them for. Non-billable work includes any tasks that help you run your freelance business or learn new skills, such as:

• Marketing
• Sales calls
• Invoicing
• Business events
• Training

See the next section to see how to factor in billable hours into your rates calculations.

Consider these factors

Consider your skillset and experience when determining your rates for a new project or client. If you are a cybersecurity compliance consultant with 20 years’ experience, your rates should not be the same as other freelancers with only 2 years’ experience. Again, do your research on freelance platforms before finalizing your rates.

Also take into account:

• Your education and certifications
• Project complexity and duration
• Your geographic location
• Client’s geographic location

How to Calculate Your Hourly Rate

Let’s take a look at the step-by-step process to calculate the minimum hourly rate for your freelance business.

Step 1: Set your baseline rate

Suppose your desired “salary” is $50,000 and you want to work for 48 weeks and 45 hours per week.

Here’s how to calculate your baseline hourly rate:

Number of hours worked: 45 hours/week × 48 weeks/year = 2,160 hours

Hourly rate = $50,000 ÷ 2,160 hours = about $23/hour

A  freelance rate calculator can help you determine a reasonable baseline rate for your location and applicable tax rates.

Step 2: Calculate your expenses

Determine your total expected business expenses. These expenses could include:

• Health insurance
• Disability insurance
• Taxes
• Travel expenses
• Office space, office supplies, utilities
• Phone calls
• Internet fees

Also take into account software costs and advertising/marketing costs to calculate freelance rates. You should also take into account the absence of those costs. For example, if you’re using a platform like TalPoint, you won’t have marketing or advertising costs, so you may want to price at a different/lower rate than if you were directly marketing and advertising your services. 

Step 3: Calculate the total cost (TC) of doing business

Add your desired freelance profit margin to your business expenses.

Suppose you expect expenses of $10,000/year and your desired profit margin is 10%.

TC = $10,000 x 1.1 = $11,000

If your desired annual salary was $50,000, increase it to at least $61,000.

Step 4: Calculate your billable hours

You plan to work 2,160 hours in the year, of which billable hours will be 60% and non-billable hours will be 40%.

Billable hours @ 60% = 1,296 hours

Non-billable hours @40% = 864 hours

Step 5: Calculate your new hourly pricing

Re-calculate your hourly rate considering only billable hours:

Original hourly rate = $23/hour

New hourly rate = New target salary / billable hours = $61,000/1,296 = $47 hours

Do you see how your hourly rate has more than doubled? If you had not done this hourly rate calculation, you would have set a lower rate and lost out on a lot of potential income. That’s why it’s important to determine your hourly rates by following this process.

Pro Tip: Freelancing means that you’re running your own business and may be eligible for certain deductions. Make sure you speak to your accountant about how to work these deductions to your benefit in order to maximize your earnings.

Where to Find Work as a Compliance, Risk, Privacy, or Cybersecurity Freelancer/Consultant

There are many platforms where you can find freelance projects and clients in your area of expertise. Some well-known platforms are Talent.com, Fiverr.com, Upwork.com, and LinkedIn.com.

However, most of these platforms are geared to make employers/clients happy, and their features and pricing reflect this preference. Another downside is that they are open to the entire job market, increasing the competition and making it harder to find well-paying gigs suited to your skills or experience.

TalPoint is different. Unlike these general-purpose talent marketplaces, it is designed for specialist consultants and freelancers in cyber and information security, risk, privacy and compliance. We connect our experts with businesses We also connect companies with vetted cybersecurity, risk, and privacy professionals.

Our goal is to help firms get their most important projects completed by the most skilled TalPoint Experts. These experts bring deep expertise in their specialized area and offer the flexibility and agility that other options, such as going through a general marketplace or even working with a Big 4-type consultancy,  cannot match. They are also less expensive than in-house experts and there’s no bait and switch unlike traditional consulting firms. Schedule a call if you are a business looking for affordable but expert cybersecurity, risk, compliance, or privacy professionals.

And if you are a freelancer who is ready to take your freelancing career to the next level, join the TalPoint community today!