I'm still building things, but not as a freelancer. One of my previous clients made me an offer that I couldn't turn down.

Some people use a comma instead of the period for numbers. So he charges "$65.00" per hour. Threw me too!

Because the structure of the projects I was typically working on did not allow me to make any realistic guess on the value (in cash) of what I was doing.

Take this as an example: I was working as the only designer (but still as independent contractor) at a startup (now one of the biggest players in that industry) which serves about 2 billion mobile ads per month. When they asked me to help them out on the design front, that company was a 6 persons team with good (but not enormous) funding. I was hired to design and build the front-end of a platform for advertisers/publishers to manage their ads and all that analyzing/metrics/payment stuff that comes with that. Roughly 100 people would ever see this interface, and the business would probably still run as well as it does today if they would just have used Bootstrap. Good design was a nice to have, but nothing a customer would really care about. Still, they wanted to have a good looking and usable platform because the staff of that company would spend a lot of time on that platform (managing campaigns for their advertisers).

What should I charge now, if I would charge by value? $2 million because I design & build the hearth of a product that now makes $100m+ a year (hint: they would have hired someone else)? $100.000 because this is the "estimated" value of time saved due to a better UX? These numbers are totally made up... which leads me to:

Flat project pricing

I was working on that project for a time frame of 2 years, sometimes working a full month exclusively on that project, sometimes just spending 5 hours/month fixing minor bugs.

It would be impossible to come up with a flat rate (yes, even if you would split this in smaller projects). The purpose if the whole platform changed over time, we shifted from one technology to the other, we made 2 major redesigns.

Flat pricing is great if you design a simple website for a local bakery. You know what could probably go wrong, you can minimize risk and maximize profit. It's useless for highly dynamic products that evolve all the time.

Thanks Mitch! I use Node on the backend and Backbone on the frontend. Also Impulse for the page transitions. Node only loads the shell, then Backbone first loads the homepage (during the brief loading animation). Once that's ready, it's displayed. Then, Backbone preloads the other pages on the site so that they are available right away when you click on one of the navigation icons.

Hey thanks bud, no worries.

Mostly just a combination of trial and error over the years.

That said, mainly, when I ditched hourly pricing ages ago, I thought of one thing - I thought of myself as the customer and the fears on the other side.

No matter how hard you try, no matter how prompt you are, no matter what software you use - I believe hourly pricing eventually leads to suspicion of abuse in most freelance/ studio scenarios.

Most of the time, the customer can't see you working and burning those hours and eventually, the freelancer might use odd rationales for tacking on hours, etc..

For that reason, I believe value pricing is more strategic, you earn more in the long run and forces you and the customer to be more focused in the very beginning.

Also, think of another thing with hour pricing.

If you are pitching someone high level, let's say at a research lab, guess what - when you say even $250/ hour - what do they do?

They compare their wages to yours. It creates tension.

If you come in with value pricing, I believe it gives your offering more of a "company feel" and negates the unknown, and those types of comparisons of what your prospects make and you make.

Finally, not totally bashing hourly - just saying it might flawed, but - when you hourly price - you are essentially comparing yourself to an employee versus a specialist.

Nothing wrong with that - but it probably drives your perceived value down.

In order to properly value price, you need to focus on one thing in the early stages.

Deep scoping.

The more you deeply scope, the more clarity and the more alignment with the customer in the very beginning, the less the project is going to go beyond your original cost estimates.

I don't leave anything to chance.

I dig deep into the financials of the business, business model and of course the essence and deliverables of the product itself.

It costs time.

Back in the day, you used to be able to charge for that stuff. Not so much these days.

In terms of actually calculating cost.

Yes, there is definitely a time component that is core to cost estimating. However, that is not the only variable.

There's mental overhead, complexity, expected outcome, and others depending on the project.

For some projects, such as a current one I am working on, directing leading the UX/ UI for a new retail bank backed by a venture firm.

That is for the online banking system, mobile applications, marketing site, and assistance with interactive design for the physical locations.

For that contract, I break things down into smaller pieces with a cost estimate assigned to each piece and a total value of the contract.

Customer pays a 20% deposit on the total value of the contract, followed by a 50% deposit on the first piece/ batch of deliverables.

You need some deposit/ money tension to keep the project moving.

To arrive at the cost of those deliverables, I have them broken down into enough manageable pieces - not too small, not too big - to maintain client expectations, deliver on time and get paid.

Finally, on this point - since we are talking about banking.

You have to bill/ evaluate cost also in relationship to the mental overhead of the vertical.

Some verticals just have more mental overhead. That's the way it is

My multiples go up when I'm designing say a UX/ UI for evaluating DNA. Something I have done.

It's just more mentally intense - and some work like biomedical and banking, consume more of your thoughts than say - designing a photoapp.

You should account for and bill for those instances. So, even if technically you are "working" the same number of hours.

The mental strain should be accounted for.

Ohh and one more thing.

Another thing you can do.

Say, you have a lot of bandwidth, no other projects and you land a new project.

You can offer a "focus fee" - that says you will basically work heads down, focused on their project - and not take any other projects on until their project is complete.

I usually charge double for that - for the total cost of the proposal and have had customers go for it in the past.

Enough - that if I get the opportunity, I offer it, but pretty busy these days.

Hope that helps.

Sure. My rule of thumb is not unlike how retailers arrive at their standard prices for goods: it's 4x the cost of production. Example:

Let's say you make and sell a leather belt. Your costs -- materials, labor, taxes, whatever -- is $5. So you price it at $20. That a) allows you to sell it to wholesalers for $10, who can then mark it up to whatever they want and b) allows you to discount it ("25% off today only!") so you can control inventory if you need to move units.

You're not always going to sell enough product so having a 4x multiplier helps you create a cushion for the margin you need. This rule of thumb is for professional services, too, like dentists: my friend (who is a dentist) told me her wholesale cost to do a crown is $30, so she charges $120. Pretty standard stuff.

So I looked at my "cost of production": what do I need to make to run my business at break even? This is all the costs associated with running your business: equipment, Basecamp, internet, office space, taxes, labor, etc. Break it all down to an hourly rate (monthly cost / 160), and add it up! For labor -- think of your "salary" as a line item cost for the business -- what it costs the business to produce the service. As far as that rate goes, apply the same formula, but for you personally:

Start with your fixed costs: housing, food, internet, student loans, whatever. So if your rent is $800 / month, you need $5 / billable hour to cover that. Add it all up till you get your labor line item, then add that to the other numbers above to get The Number: what you need for the business to operate at break even. Then multiply it by 4. That's your hourly rate.

I had calculated I need $35 / hour to break even, so I charge $125 (rounding a little down). Of course, there's some fudge here -- obviously the labor line item (what you pay yourself) is variable but it helps to be conservative. And while $125 hourly may sound like an excessive amount -- other industries are happy with 25% or even 15% margin -- on top of goods sold (grocery stores are like 2%, it's cut-throat), it ends up not too crazy.

Consider that realistically you're going to lose money on half of your projects, so that 4x multiplier evens out to a 2x multiplier -- meaning you're taking home $35 / hour in profit on top of the cost of running your business, less taxes, so closer to $22 / hour (in the US). Which doesn't sound like that much now, does it? $22 / hour full-time ~= $45,000 per annum. But that's "free" money; since the other $35 / hour of the cost of running your business included all your personal expenses as the labor line item. So in this scenario, $45k would be net profit / discretionary annual income.

Of course, maybe you're really good, and every project you take on is profitable. In that case, if you never lost money on a project, you could charge 2x your Number and undercut everybody. But that's rare for professionals. As you get better at your work, you can charge more for the same time or charge less for less time and increase the volume of work / revenue. Either way nets you more money.

In the end, the benefit to this approach is that it's not magic: your fixed costs are your fixed costs, and you have to cover them. That includes the "labor" line item that represents what you pay yourself. You can make that number whatever you want, raising and lowering based on market conditions and what you perceive your value is -- and what you'd like to get paid. By being sensible about that -- tweaking it in the 35-50% margin range, you'll make a good living.

Hope that helps!

7 years of experience, self taught

No college experience but have been designing since for the past 10 years. I am 31 now. Work keeps coming in and no-one has balked at my rates. I only got into UX/UI design in the past 4 years. It pays way better and I was able to build my portfolio up incredibly fast after landing an entry level job at an agency (was making 48k/year). Now I have made 52k just in the first quarter working for myself. Connections, connections, connections. I know people that ask for 150/hr but only make 40k-50k a year because they can't land jobs. Because of my communications skills with my clients I charge anywhere from 55 (agencies) to 75/hr (individuals) and end up making over 100/hr because we do a flat fee project based on hours and I work my tail off. I only work about 35 hours/week but my hours are scattered (only downside to working for yourself).