Why do Freelancers Charge so Much?

“Oh, ok… That’s quite a bit more than I was expecting. Thanks for the information I’ll have to think about it and let you know”

If you’re a freelancer, —particularly one who knows your worth— you’ve probably heard a variation of this phrase more times than you can remember. Sticker shock is real and it doesn’t just happen in luxurious department stores.

Everybody has an idea in their head about how much things should cost. For many things, this idea comes from past experience. For example, we have a pretty good idea what to expect a gallon of milk to cost because we’ve purchased thousands of gallons of it in our lives. But most of us haven’t purchased a new website, or commissioned a new logo, or hired a content writer. Most people have no idea what these things cost, yet somehow they still manage to have expectations. And as any freelancer who’s been in the business longer than a day will tell you, these expectations are often ridiculous. But it’s not their fault. As I said, they’ve likely never paid for a website, or logo and they’ve no idea what all goes into such a task. Hopefully this article will help potential clients come to more realistic expectations.

There’s also a misconception that freelancers aren’t as good as an agency. There are people who believe you should only hire a freelancer if you can’t afford an agency. I’m not 100% sure where this idea came from but I have my suspicions. I think a big part of it is the fact that literally anybody can call themselves a freelancer. When you apply for a job with an agency, however, there is at least some amount of vetting that takes place. So there are quite a few freelancers out there who have no business trying to develop websites or design logos. Typically these folks don’t last very long.

That being said, freelancers can be —and quite often are— just as good if not better than the folks working for a agencies. In fact, many successful freelancers once worked for one of those agencies and realized they could do much better for themselves on their own. Freelancers also tend to care more about their projects, because the quality of their work reflects back on them directly, whereas with an agency the quality of an employee’s work reflects back on the brand, not the individuals who did the work.

So why do freelancers charge so much? Here’s a list of reasons why:

1. Health benefits

As a freelancer you don’t get half of your health insurance benefits paid for by an employer. You have to pay for that all by yourself. And the plans for individuals tend to be more expensive than the plans an agency can get.

The average monthly cost of health insurance for a single person is almost $400, with a deductible of over $4000. That’s an average of $8800 per year that a freelancer could have to pay. And if they have a family, it’s $1000 per month with a deductible of of $8000. Source.

2. Overhead

As a freelancer you are a business owner, and owning a business comes with expenses.

An individual freelancer may have less overhead than an agency, but they do have significant expenses.

Photographers have to buy their own cameras and lighting, which is all very expensive. Photographers, graphic designers, and web designers need computers, various software like Adobe’s creative suite (which is not cheap), invoicing software, project management softwares etc. Also, if a freelancer wants to work in an office, that’s a fairly large monthly expense. From coworking memberships that start around $100/mo to private office space which can be several hundreds of dollars per month.

As a freelance web developer, my expenses last year (2019) totaled over $5000, and Photographers/videographers have it much worse than I do. I own a coworking space, and recently purchased some basic photography/videography equipment for the space and it is a significant expense.

3. Vacation/Sick Time

When you work for an agency you often have at least some amount of vacation and/or paid sick time. This is not so when you’re a freelancer. If you take 2 weeks off from work, that’s 2 weeks you’re not getting paid. The average salary for a web developer is about $50,000, which means 2 weeks of work is just under $2000. You also don’t get paid for taking a day or two off to recover from an illness or injury.

4. Paid Work vs Non-paid Work

Employees typically get hired to do one thing. You might be an engineer working for an avionics company. Your job is to design power supplies, that’s it. You don’t have to find clients, you don’t have to make sales calls, you don’t have to manage projects. You’re told to design a power supply, and that’s what you do. Every second you spend working, you’re getting paid for. If you work 40 hours in a week, that’s 40 hours of engineering work that you’re getting paid for. (I realize many engineers are on salary, but the basic principal is the same. You’re expected to do a certain amount of work and you get paid a certain amount).

Freelancers don’t have this luxury. Freelancers don’t have a marketing department, or a sales department, or a billing department. They have to do it all. So when a freelancer tells you they charge $100/hour and you think that’s outrageous because you don’t even make half that as an engineer, remember that much of the work they do is unpaid. They don’t get paid for sales meetings. When they sit down with a potential client to talk about their needs and how they may be of service, they’re not getting paid for that. They don’t get paid for the time spent sending invoices and chasing down money. They don’t get paid for the hours and hours spent networking. They charge $100/hour because they’re not doing 40 hours of paid work each week. So much of their time is spent doing unpaid work so it’s not fair to compare their hourly rate to that of an employee.

5. Marketing Costs Money

This is technically part of number 2 but I felt it was worth giving it’s own section. Freelancers need to market themselves just like an agency does. Paid ads on Facebook and Google aren’t cheap especially when you’re trying to compete with the seemingly endless supply of marketing dollars some of the larger agencies have. Not to mention non-digital marketing like business cards, pamphlets, swag etc. Being part of a local chamber of commerce usually costs money as well. If you found your freelancer using an app like Upwork or Freelance.com the freelancer has to pay for those services.

Conclusion

I hope this helps you to understand why freelancers charge what they do. In reality, a freelancer should probably be a little less expensive than an agency, mostly due to the difference in overhead. But they shouldn’t be that much less expensive. They are providing the same service, with presumably the same amount of skill and experience (if you did a good job vetting your potential freelancers).

Notice I didn’t talk much about a freelancer’s skill/experience. The reason for that is that skill and experience affect a freelancers price the same way it can affect an agency’s price, so I didn’t feel like it was necessary. Obviously the more skill/experience a freelancer has, the more they will cost. It’s up to you as the client to vet your potential freelancer or agency, and make sure they have the necessary skills and experience to deliver what you need. And whether you hire a freelancer or an agency, you need to be ready to pay for those skills.

Let me know in the comments what you thought of these 5 points. Did you agree/disagree with them? Are there more points you would have added that you think I missed? Let me know!