How to Create Estimates for New Freelance Projects
As a beginning freelancer, there’s usually one thing and one thing only on your mind: how to get your first client. You’ll likely find yourself obsessively searching around job boards, sending out cold emails, and reaching out to your network in an attempt to find them.
Eventually, the day will come when your interest is reciprocated — you’ll get a notification, rush to check your inbox, and open an email from your lead that says they like your portfolio and want to work with you.
Chances are that you’ll be over the moon...until you read the last line: “How much will it cost?”
For many new freelancers (and sometimes even experienced ones) this question can turn the excitement of a new prospective client into an episode of anxiety. After all, if you set your pricing too high, you’ll lose out on a client, but if you set it too low, you’ll be leaving a lot of money on the table.
Luckily, pricing your services and creating estimates is a skill that comes with time and experience, so that anxiety will fade eventually. Here, we’re going to give you some tips on how you can create accurate estimates for your new projects and clients.
What Is an Estimate?
An estimate is a way of telling a potential client how much they can expect to spend on the project they want to hire you for. You can essentially think of it as the price tag for your freelance service.
For example, if someone wants to hire a contractor for a roof replacement, they’re not just going to call someone up, hire them, and then simply hope they can afford the bill. Instead, they’ll likely call up a few different businesses, get price quotes from each of them, and then choose the contractor that provides the best balance between price and quality.
In short, an estimate serves four purposes:
- It tells the client how much they can expect to spend on the project
- It clearly states what specific services will be provided.
- It explains the deadlines and schedule according to which the work will be completed.
- It helps the client compare competitors to make a decision
Although practically all estimates will tick these boxes, they’ll all do them in different ways depending on what industry the freelancer is working in and how they choose to price their services.
Overall, a typical freelance estimate will look pretty similar to the invoice you send once the work is completed, perhaps with just a few pricing changes to reflect the value of the actual work completed. If you are accurate with your estimates, the only difference between the two should be the word “estimate” and “invoice” at the top of the document you send.
Quote vs. Estimate
It’s important to note that although the terms “quote” and “estimate” are often used interchangeably, they actually have slightly different meanings.
As the name implies, an estimate is just that: an estimate or approximation of the expected cost of work. It’s not a concrete figure, and it reflects the fact that the actual cost of the work may come to somewhat more or less.
For example, if a video editor quotes 5 hours of color correction work at an hourly rate of $60/hour for a total cost of $300, it’s fair for them to end up charging $360 because the work took them an hour longer than expected.
On the other hand, if that same editor quoted 5 hours of work for a total of $300, they need to honor that price no matter how long they actually end up spending on the work. Of course, there’s always some room for negotiation if the editor drastically underestimated the scope of work, but they should be ready to commit to that amount.
Parts of an Estimate
Let’s take a closer look at the individual parts of a typical estimate.
The header is the most straightforward part of the estimate. Here, all you’ll need to include is the estimate number (mainly for internal reference), your information, and your client’s information.
List of Costs and Description of Services
The most important part of your estimate is the itemized list that states what services you will be providing and how much you will charge for them. In many estimates, this is itemized, like in the following example, which demonstrates what the itemization might look like for a graphic designer who charges per hour:
If you don’t charge based on an hourly rate, you can charge based on your unit rate, such as per project, per minute of transcribed audio, per word, etc. In these cases, the amount of time you’ll spend on the project is irrelevant, and your itemization would look something like the following mock-up of a freelance writer’s estimate:
Some freelancers will need to charge for the cost of materials in addition to their labor. In that case, simply divide them into separate line items:
Terms and Conditions
This section states any relevant conditions the client should be aware of, such as payment terms. In some cases, it may include a date by which the work will be delivered. For example:
Terms and Conditions:
- Expected Delivery: 12/15/2021
- Client is entitled to two substantive revisions. All further revisions will be billed at $500 per web page.
- $100 deposit must be received before initiation of the work. Balance due within two weeks of project completion.
Calculating the Estimate
Now comes the hard part: deciding how much you should charge for your work. Here are five steps you can follow to make competitive estimates.
1. Evaluate Yourself
The first step requires being honest with yourself and evaluating how you stack up against the competition at this point in your career. To do so, you’ll need to balance several factors, like your level of talent, how many years of experience you have, and what makes you stand out from other freelancers in your field.
Unlike full-time employee compensation, a freelancer’s income usually isn’t directly linked to their education and experience, even though those can play a part in some situations. That means that instead of deriving your “salary expectations” from how long you’ve been in the business, you should go straight to the product itself and figure out how much it’s worth.
To do so, you can compare your portfolio to other freelancers’ in your field. After all, your portfolio is the sum of your experience, talent, and education anyway.
2. Decide How You Want to Charge
Even though billing by the hour is perhaps the most common way to charge, there are lots of other options available to you, some of which may work out better financially. Other popular options include charging per project or for a unit of work that’s specific to your field (per word, per minute of edited video, per website page, etc.).
To understand why you might choose one over the other, let’s look at an example. In terms of an hourly rate, a beginning freelance writer might find that potential clients are willing to pay at most $40 an hour. However, that same freelancer might also find that clients are also willing to hire them at a rate of $0.10/word.
Now, imagine there’s a freelance writer who typically writes about 1,000 words per hour and is hired to write a 1,000-word article. At the freelancer’s current cadence, it makes more sense to charge per word, since they’ll be making $60 more for the same amount of work. On the flip side, if they work more slowly and expect a 1,000-word article to take at least three hours, then they should charge per hour, since they’ll make at least $20 more.
Keep in mind that neither of these fee structures is inherently better or worse, they’re just different. Getting your work done faster doesn’t mean that the work is lower quality, nor does doing it slower mean that it’s higher quality. People simply work at different paces, and you need to set your rates to reflect your personal working style.
3. Research the Market
Luckily, freelancers don’t have to deal with the struggles that come from pricing a new type of product that the world has never seen before — you’re not Henry Ford trying to price the world’s first mainstream automobile, you’re a freelancer trying to meet a demand that’s already established. That means that there should already be a market for the type of work you do and that there’s already a well-established standard market rate.
To find out what a fair market rate is for your work, you’ll need to do some research. Most of the time, you can find out pretty quickly via Google, but it also helps to join a community where you can ask other freelancers in your industry what they charge.
The market rate will typically cover quite a wide range, so you’ll need to refer back to the first step to figure out how to place yourself within it — if you think your portfolio is middle of the pack, price yourself accordingly. If you think it’s top of the line, set a rate that reflects that.
4. Figure Out How Long It Will Take You
If you charge by the project or unit, you’re done: you should already have your price estimate ready to go based on the market rate and the specifications that your client provided you. However, if you charge by the hour, you’ll need to tell your client how long you expect the work to take you and, consequently, how much they’ll be obligated to pay you.
Out of all the steps, this is typically the hardest one to nail down as it’s fairly personal. The only way you can really get an estimate for how long a task will take you is through experience completing similar projects.
If you’re a veteran freelancer, then this should be no problem: just look at your past invoices and use those to make your estimate.
However, if you’re a new freelancer, you likely won’t have much to go off. In this case, your best bet is to research how long it typically takes other freelancers to do similar tasks and use that as your guide. After you complete more projects, you can refine your estimates to reflect your individual cadence.
5. Write and Send the Estimate
At this point, you’re pretty much done. Now, all that’s left to do is to do the math, put it all on paper, and send the estimate to your client.
To help with this step, you can use digital tools, like Blinksale, which provide easy-to-use, professional freelance estimate templates.
Key Takeaways: How to Create Estimates for New Freelance Projects
Writing estimates is an essential part of freelancing. Although estimates may seem intimidating at first, over time, you’ll naturally get a better sense of how much to charge for your projects, and making estimates will become easier.