Knowing your worth is one of the most important, but also one of the trickiest parts of freelancing. It is crucial to understand when you are charging too much, when too little, and when just the right amount, so that you can get the most out of your career as a freelance developer. In this blog post, we will help you to understand how the hourly price is formed and share our best tips for setting your rate right.
We at Thriv have years of experience in price negotiations with freelance developers and client companies. This experience has given us a great deal of first hand knowledge about different factors affecting price levels of freelancers and what to consider when setting your own hourly rate. In the following list, we have gathered the seven most important points that usually define how much you can charge for your work in a project.
Factors affecting hourly prices of freelance developers
1. Role description Role description is probably the most significant factor impacting the hourly rate. The hourly rate increases in line with the responsibility level of a role. Lead developers and architects can usually charge 20-30% better prices compared to team members without any lead responsibilities. No matter what your role description is, it is crucial to fully understand the client's needs and be a valuable team member, not just a developer.
2. Experience and seniority level We always find out what kind of experience and seniority level our client companies are looking for, which sets the boundaries for price negotiations. Here, it is important to understand the difference between having experience and being a senior developer. If a talent has been working as a professional developer for over ten years, but still lacks experience in the particular role, it is hard to justify a hefty price tag.
3. Contract length There is a general rule that applies almost every time: the longer the project is, the lower the hourly rate will be as long contracts reduce the risk levels in the longer term. This is also one of the reasons why public sector projects usually have lower prices compared to private sector projects. In the public sector, contract periods tend to be several years long.
4. Urgency Sometimes clients want things to happen “yesterday”, which gives talents an advantage in price negotiations. Urgency to start as soon as possible narrows down the options of the client and helps talents to negotiate higher prices.
5. Competition In most cases, clients look for talent candidates from several vendors, which means we usually face some competition in the talent proposal phase. The more there is competition, the harder it is to get a high hourly rate accepted by the client. Hence, especially in these situations, it is important to highlight your unique qualities in the best light to make you stand out from other candidates. We always communicate the competitiveness of the case to every talent candidate and discuss our recommended price level for each case.
6. Full-time VS part-time Most of our projects enable full-time work for our freelance developers, but also part-time projects exist. In general, talents are able to request a higher price in part-time projects because it also means that they most likely need to find another project in order to keep themselves busy five days a week. Increased sales costs justify the higher hourly rate in part-time projects.
7. Demand and supply Software consulting business has its seasonalities. So far every year has been different when we have been running our company. Thus, the demand and supply are never in equilibrium. From Fall 2020 to Spring 2022, we witnessed an exceptionally hot market where the demand was higher than supply almost all the time. However, the uncertainty in global financial markets and the crisis in Europe have clearly cooled the market down making the supply in certain talent profiles higher compared to the demand. This means that the prices of software consulting services have started to decrease compared to the prices in early 2022, when the demand was record high.
TOP 5 tips for setting your hourly rate right
Setting your hourly rate too high might prevent you from getting the projects you want or at least largely narrows down the offered opportunities. On the other hand, you will end up losing considerable amounts of money by setting your price too low. Hence, setting your hourly rate right is essential.
At Thriv, we value transparency in everything we do, also in pricing. We always define rates in cooperation with the talent candidates on a case by case basis. This way we want to make sure that everybody wins and gets treated fairly. Below you will find our best tips for finding just the right price tag for your services!
1. Contact Thriv to discuss different project opportunities. We will tell the hourly price range you could realistically get based on your skills and preferences.
2. Talk to other freelancers with similar backgrounds and skills. This is a great way to get an idea of what other freelance tech talents get in the market.
3. Ask about the competition, when applying to a project. If there is no competition, requesting a bit higher price probably won’t hurt. However, most of the cases face competition so if you really want to get the project, be prepared to lower your price to a competitive level.
4. Go the extra mile. Describe how your skills and previous experience match the project requirements to justify the price you are asking. This sales pitch could be for example attached to your CV.
5. Understand the seasonalities in the industry. In general, the beginning of the year and end of the summer are seasons when there is clearly more supply compared to other times of the calendar year. During these busy seasons, demand is also higher but the competition can be hard which is why prices tend to be lower.
Whether you were thinking of pricing or other things related to entrepreneurship, we at Thriv are here to help you. Just reach out to us and let’s talk!
Wanting to land that dream project? Check out our previous post Creating a CV that sells.