How to Estimate the Cost of a Freelance Project
Deciding what to charge is one of the most important parts of any freelancing project. Charge too much and you’ll risk scaring your potential client away. Charge too little and you’ll set yourself up for disappointment and struggle to run a profitable business.
Unless you offer productized services such as a fixed-price photography package, each of your projects will be unique. That means you’ll need to estimate the cost and timeline of every freelance project before sending a proposal and contract to the client.
This process can take a lot of time and be quite intimidating, especially for new freelancers. To make matters worse, many clients fail to respond once they receive your quote resulting in hours of wasted time and effort.
For the first few years of your freelancing career, it’s valuable to know your effective hourly rate and track how long it takes you to complete your projects. This information will help you refine your rate and create more accurate project estimates, even if you don’t charge hourly.
Eventually, you’ll be charging enough money that the exact hours aren’t important and you can use daily or weekly rates (combined with your experience) to create accurate estimates.
You can also charge for value using value-based pricing, but we’ll consider that out of scope for the sake of this article. In fact, estimating the cost and timeline of a project has little to do with the way you present the project to the client.
Getting the right inputs
Before you can accurately estimate the cost or timeline of a project, you need to have a clear understanding of the work involved to meet the client’s project objectives. That requires having conversations with the client until you develop such an understanding.
A great way to start the conversation is with a discovery meeting where you can introduce yourself to the key project stakeholders and begin to learn about their needs. This is your opportunity to ask questions to solicit as much detail as possible about their business goals and project goals.
But you can’t just ask any questions. You need to ask specific questions designed to get you the most helpful information possible.
There are two main types of questions you should ask:
- General questions about their business goals and the project context. This will help you understand the underlying problems and goals that are motivating this project. Freelance projects can often drift into subjectivity, so having this context will ground each discussion in objectivity.
- Specific questions about the scope of work. This will help you get the detailed information you need to accurately estimate the cost and timeline.
These are some of the best questions to ask new clients during a discovery meeting:
- What prompted you to start this project? Why now? Why not six months ago or six months from now?
- What business goals are you trying to achieve? What does success look like on this project? Failure?
- What are your timeline expectations for this project? Is it important, urgent, or both? How much flexibility do we have here?
- What specific features or functionality do you need? How do those align with your business goals? What is essential vs. nice-to-have?
- What are your budget expectations for this project? Is there a cost you’re not willing to exceed? Are you gathering other quotes?
- Are there any constraints or limitations I should be aware of? Anything else I should know before starting this project?
When you ask these questions, ask them with confidence. Practice saying them out loud before the meeting if needed. Craft your questions carefully and adjust them so you’re comfortable with them.
Ensure you’re the one “driving” the meeting so you get the chance to ask your questions. It helps to send the client a brief agenda ahead of time so you can set appropriate expectations on how the meeting will go and what you hope to get out of it.
Taking the lead may feel unnatural to more introverted freelancers, but you shouldn’t expect the client to share all the details you need. You need to be aware of what information you need and be prepared to ask the right questions.
You may need to schedule multiple discovery meetings or follow up with more questions via email until you’re confident in your ability to create an accurate cost and timeline estimate.
Creating the Estimate
If you don’t have much experience estimating freelance projects, this process might feel like guesswork at first — and that’s ok. Even after you’ve gathered all the details about the client’s needs, you still might not know how to estimate the project.
Again, that’s ok. No estimate is perfect, just do the best you can with the information you have. Whether you’re planning to charge hourly, daily, weekly, fixed-price, or value-based, it’s a good idea for most freelancers to create an hourly estimate as a starting point.
To determine the total project cost, simply multiply the total number of hours by your hourly rate:
Example: 50 hours x $100 per hour = $5,000 total project cost.
Step 1: Estimate Hours
First, you’ll need to write down how many total hours you think it will take to complete the project. I like to do this in a Google Spreadsheet.
It’s easiest to do this by breaking the project down into “chunks” of work. For a web design project, this might be estimating how long it will take to design each page, then adding the total hours together. Then, you’ll want to include hours for meetings, emails, and revisions to your work.
You should charge for every hour you spend doing work for this client, including research, analysis, design, development, emails, and phone calls.
If you plan on presenting multiple options to your client, you need to reflect that in your estimate as well. This process can take up to a few hours depending on the size of the project.
Creating an accurate estimate also requires brutal honesty. Really imagine yourself doing the work. What can you really get done in an hour without any distractions? Use this honesty to your advantage. You can always adjust your estimate later!
Step 2: Set Your Rate
Next, you’ll need to decide on an hourly rate. If this is your first project, this might feel arbitrary, but there are some factors you should consider:
- Industry Experience: if you’ve got a lot of industry experience, but not a lot of freelancing experience, you can still charge more for that experience.
- Geographic Location: If you live in a big city, you can charge more than if you lived in a rural area. In fact, clients will expect you to charge a higher rate.
- Market Rates: The market needs to support your rate. If every other virtual assistant is charging $75/hr, it might be difficult for you to charge $150/hr.
- Value to Client: If your client is trying to generate $250k of sales next year, you should probably charge more than $1,000 for the project.
- Your Financial Needs: You need to earn enough to make a living. Calculate your desired annual net income annually and work backward from there.
Also, consider how much you’d like to earn for the work and how confident you are charging that rate. You also need to consider what client expectations are in your industry. Just because you think you’re worth $150/hour doesn’t mean clients will be willing to pay that rate.
Search for common rates in your industry online and let that influence your decision if you aren’t sure. Just be sure to look at many sources and take an average!
This can vary greatly, but as a broad generalization, here’s how clients perceive hourly rates across industries and geographies in the United States:
- $25/hr or less is quite low and often perceived as “cheap”.
- $25-$50/hr is below average. This is an ideal range for most new freelancers.
- $50-$75/hr is average. This is a good range once you’ve got more experience.
- $75-$100/hr is above average, but still considered reasonable.
- $100 – $150+ per hour is considered premium.
It’s unusual for most freelancers to charge above $150 per hour. At that point, they’re likely using fixed rates. value-based pricing, or they run their own business. An example might be a lawyer who has their own law firm or a CPA who has their own accounting firm.
Pro Tip: You should feel free to adjust these numbers after seeing the final total to something you feel comfortable and confident presenting to the client.
Lastly, feel free to adjust your rate over time. You’re likely just figuring things out and you may need to adjust your rate up and down until you find a rate that works well for you. That is not unethical, it’s just a natural part of becoming a freelancer!
Step 2a: Determine the Timeline
I could write an entire article about this topic, but for now, I’ll keep it simple. To determine an approximate timeline for the project, you need to consider:
- How many hours a day can you dedicate to the project?
- How many days do you plan to work on the project each week?
- How responsive is the client?
- How will you handle revisions?
- Do you or the client have time off coming up?
The key takeaway here is to understand that the total number of hours does not always translate accurately to the total calendar time you’ll spend on the project. That’s because you can’t charge for the downtime between email or phone correspondences.
For this reason, the timeline should always be considered an estimate regardless of your billing strategy. That’s why I always like to reinforce this by providing the client with a range in weeks.
For example, if the project is going to take 80 hours and you can dedicate 20 hours per week to the project, you might think the project will take 4 weeks. But more than likely, it will take closer to 5 or 6 weeks when factoring in weekends, communication delays, and revisions.
In this case, I’d tell the client the project will take 4-6 weeks, rather than setting the expectation that the project will be done in exactly 4 weeks. This will also take the pressure off you to deliver the final outcome on a specific date when you aren’t in control of all the variables.
Step 3: Refining Your Estimate
Now that you have a rate and a total number of hours, you can calculate the total cost of the project. Again, the formula is:
Formula: Hours x Rate = Project Cost
But too often, freelancers overthink the total cost. You might think it’s too high or too low. I’ve never charged that much before. What if the client rejects my proposal?
I encourage you to give yourself more permission to make decisions, mistakes, and adjustments as you learn and grow. Accept that not everything will be perfect and that it will take time to find your rhythm. In this case, that means giving yourself more permission to adjust your estimate after you’ve done your calculation.
Let’s say you live in New York and choose a rate of $50 per hour x 72 hours, that’s a total cost of $3,600. If that seems too high, feel free to adjust it down to $3,000. If that seems too low, feel free to adjust it up to $4,200.
Perhaps one of the most underrated questions in the freelance world is: “what amount of money will make you happy to do your best work for this client?”
What amount of money will make you happy to do your best work for this client?
Yes, your estimate should be accurate, honorable, and ethical, but you also need to feel happy and confident with the final price. This doesn’t always mean you’ll feel comfortable, but you should feel confident about its accuracy and be able to justify it to the client if needed.
I remember the first time I charged $5,000 for a website. I was definitely NOT comfortable, but I knew the cost was justified, so I was confident.
Over the years, I’ve found that the more I charge, the more confident I become. You’ll get a huge confidence boost each time a client says “yes” to working with you!
Presenting Your Estimate to the Client
When you’ve finished your estimate, you’ll need to present the cost and timeline to the client in a proposal. It’s extremely important to understand that you don’t need to share your exact estimate with the client. The breakdown you created for yourself can be different from what you send to the client.
Sometimes your proposal will include line items and sometimes it won’t. Sometimes you’ll estimate the number of hours, but present a fixed-price or value-based price to the client.
When you’re presenting the cost of the project to the client, you don’t necessarily want to refer to it as an estimate anymore. This will feel too informal to the client. They need to be confident that the cost you’re presenting is accurate, even if you’re charging hourly.
⚠️ The most common and detrimental miscommunication between freelancers and clients happens at this stage.
If you create an estimate based on hours and present the client with a total cost, the client will interpret the total cost as a fixed price. That’s a problem because it likely wasn’t your intent to charge a fixed rate or commit to that exact cost, even if things take longer than expected.
The advantage of hourly rates is that the price isn’t final and can change if the work takes more time (or less time) than expected. If you work faster, you make less money. If you work slower, you make more money. That’s the theory, but not how things typically happen in practice.
Unless you can charge more if things take longer, then this isn’t an advantage at all.
If you think hourly rates are starting to sound strange, you’re right.
? Freelancers don’t want to work faster to make less money and clients don’t want to pay more for you to do the job slower.
This is the main reason most experienced freelancers will tell you not to charge hourly rates. Fixed pricing eliminates this strange incentive and sets clearer expectations with the client.
Wrapping It Up
Estimating the cost and timeline of a freelance project can feel confusing and intimidating at first, but with practice, it will get easier and feel more natural.
Remember, gather as much detailed information upfront as possible and do your best to estimate the total time or effort it will take you to do the work. Then, set a reasonable rate based on your experience, geographic location, and the value the project will provide to the client.
Finally, calculate the total cost + timeline and present the project to the client in the form of a proposal.
Give yourself permission to make adjustments over time. You’ll gain valuable insights every time you create an estimate and whenever a client accepts or rejects your proposal. These efforts are never a complete waste of time!