Working for yourself gives you lots of great perks, but a guaranteed, regular paycheck generally isn’t one of them.
Katie Perry is an independent marketing strategist and editor at AND CO, an app that helps self-employed professionals manage invoicing, contracts and payments. We recently discussed some of her best negotiation strategies for freelancers.
Alexandra Dickinson: What do freelancers need to know before setting their rate?
Katie Perry: There are a lot of resources out there that can help set your rates. Comparably, for example, is an excellent tool that aggregates salary averages by market, title and industry. Estimate what the title of the work you would be doing would be called at a full-time equivalent and browse the range provided.
Once you have an estimated full-time equivalent, many experts suggest multiplying by 1.25X to 1.4X to account for the additional costs of being a freelancer, such as freelance taxes, health care costs, office supplies, workspaces, subscriptions, travel, etc. Divide that figure by the number of hours you plan to work a year—for example, if you work 49 weeks out of 52, that’s around 2,000 hours.
Dickinson: What information should a freelancer have before entering a negotiation?
Perry: Before entering the negotiation, you should have this target hourly rate in mind, but be prepared to be flexible. Start the conversation slightly higher than the number you want, so when you meet your client halfway, you’re really getting the number you wanted all along.
You should also know your walk away point before starting the conversation. You should always know exactly how much you would be willing to compromise before the deal is, as they say, dead.
Finally, you might also consider non-monetary asks that would sweeten the deal for you if a client cannot meet your target dollar amount. These might come in the form of a results-based bonus structure or paid travel to conferences. In these instances, think of ways to get value that might not be cash in your bank account, but will still help benefit you and your business.
Dickinson: What are some of the biggest negotiation mistakes freelancers make?
Perry: An easy miss many novice freelancers make is to start working without a signed Statement of Work (SOW) and contract. This is an especially easy mistake to make if you’re working with past colleagues or friends or friends.
Having a signed contract is important for a few reasons:
It clearly articulates the ins and outs of the engagement in black and white. A good contract will go into detail so there are no gray areas. When it comes time to cut the check, little will be up for debate.
It forces both parties to be thoughtful about the terms of the scope and how success will be measured. Setting expectations is one of the most important things you can do as an independent worker.
Most importantly, it protects freelancers from miscommunication down the line that can cost them either in lost revenue or legal fees.
Dickinson: Should a freelancer ever give away free work?
Perry: The short answer is no, but not everything is so black and white.
Some level of “spec’ or pre-work will come before most engagements. It’s important to show value and a gameplan for driving results, otherwise, why would someone sign you on as a resource? It’s up to you to determine how much time you are willing to “risk” for the opportunity at a piece of billable work. Back when I first started out, I remember slaving over a comprehensive marketing plan and deck for several hours, only to have the project disintegrate. It wasn’t because the prospect was shady or unethical—the work simply went away. I learned from that and found ways to showcase thought and capability in different formats that took up less of my time, but still proved I was capable of the project.
As a freelancer, new business is a non-billable activity that is 100% crucial to the success of your company. It’s not avoidable in most industries, so it’s up to you to determine if your client and the opportunity are trustworthy and legit before taking on spec work before a contract is signed.
There are also instances when unpaid work absolutely make sense—as long as you’re getting non-monetary value. This might including speaking on a panel or contributing a byline to a popular outlet that could gain you significant exposure; both investments can pay off in the form of new business down the line, and so they are something to consider if you are ever given the opportunity.
This post originally appeared in Women@Forbes, where Alexandra Dickinson is a contributor. She writes about how to use a negotiation mindset to achieve your goals.