How to set your rate for your side hustle

A side hustle is a great way to explore a passion, build new skills and make extra cash. For better or worse, we live in a time when technology and the cost of living make it easy (and appealing!) to start one. In June, CNBC reported that 44% of Americans work a side hustle to make ends meet. That number for millennials and Gen Z workers is even higher.

Whether you’re walking dogs, designing websites or making sponsored posts on Instagram, it’s tricky to know how much you’re worth when you’re starting out. You have to split the difference between goals, dreams and realities — and make sure you’re not setting yourself up for burnout. Luckily, there are a few guidelines that can keep you on track.

Related: How a teenage ‘Side Hustle King’ brings in $120k a year

Set your goals

There are two important questions you should ask yourself to get started, according to M'Chelle Ryan, director of the Upwork Academy, a learning resource for freelancers. First, how much do you want to make? Second, how much do you need to make?

These numbers are probably different. You’re going to want to know them both. Maybe you want to be making $80,000 per year, but your lifestyle and regional cost of living would allow you to get by on $60,000. Once you have those annual figures, work backward to calculate the hours and rate you’d need to earn that amount.

To help figure out your “need to” number, it’s helpful to play around with the many online rate calculators that allow you to plug in your rent, health care, grocery and other expenses to come up with an estimated minimum required monthly income. Don’t forget to include your monthly and annual business costs, like a computer, hardware and software needs and taxes.

But the “want to” number is important, too.

“The cool thing about entrepreneurship is, as long as you're very aware of the value behind what you offer, the sky is the limit,” says Maddie Peschong, a freelance business coach. Sitting down and figuring out what the ideal salary is for you is crucial. That might not be something you can make your first couple of years, but that’s what you’re working toward.”

Do your research

Once you have some goal numbers in mind, it’s time to figure out what’s actually happening in the market. Talking to people in your field will help you figure out whether your “want” number is realistic and, if not, what is.

“The biggest mistake young freelancers make is not to do any market research,” says Holly Steffy, senior director of customer success at the freelance marketplace Fiverr. “Understanding what the going rate for their service is — on sites like Fiverr, other freelancers elsewhere and even larger agencies will help make a decision on the right rate to set.”

Related: So you want to be a freelancer. Here’s what to know.

Ryan says it’s important to determine what other freelancers charge for similar services and how much you would earn as a full-time employee doing similar work.

You can find some answers online. You can find the average salary for, say, an entry-level graphic designer or software developer at sites like Glassdoor, Statista or Payscale.com. (It’s $39,568 by the way). For freelancer rates, you can check out websites like Fiverr and Upwork, where you can see what people are charging for services from data analysis to photography.

But nothing beats talking to real people. It’s a great idea to join listservs, forums, Slack chats or Reddit channels about your industry. Here, you can read peers’ conversations about rates and earnings, and ask your own questions. It’s worth spending the time to get coffee or Zoom with peers in your industry, especially those with a similar skill set and experience level, and have them walk you through what they charge and how they came to those numbers.

"As you continue to develop your career, you will meet near or at your “level” who can then share their rates with you," says Gorick Ng, Harvard career adviser, UC Berkeley faculty member, and author of The Unspoken Rules to Starting Your Career Off Right. "This is where it’s helpful to compare—to know if you are being paid 'at market' for someone at your level of experience and credibility."

Identify your value — and don’t shoot too low

Obviously, not every freelancer in an industry will charge the same.

"Every profession has its own earnings ladder," Ng explains. "Take photographers. Amateur photographers might charge nothing, but professional photographers in, say, Hollywood might charge tens or even hundreds of thousands of dollars for a single photo."

He continues, "Everyone starts somewhere. Don’t be too greedy, too soon. Build a portfolio. Build a collection of testimonials and case studies. Build a list of happy clients who will refer new business to you. Then, slowly raise your rates. You’ll get there! The most important step is to just start."

“Your value is a reflection of your experience, skill level and past work portfolio,” adds Ryan. “When you have more experience, you can charge more for your time. Additionally, the rarity and complexity of your skill set will play a role in your pricing strategy.”

However, the instinct for many young people is to set their rates low. This isn’t always a mistake, says Peschong, echoing Ng. But your rate is as much about confidence as it is about skill. “It can be scary to ask for what you want, money-wise. Starting with a lower price and then building up your confidence to charge more is a great way to go about doing things.”

Related: Meet the TikToker who’s flipping furniture to pay off her $80K student loan debt

One mistake thing to avoid pricing your services so low that you discredit yourself. Instead, try to establish a rate aligned with what the market is charging.

Steffy also cautions against taking on work for no charge in order to gain exposure or establish yourself in the marketplace. She explains, ”Don’t undersell yourself by doing ‘free’ work in exchange for exposure, reviews or promotion. You’re working and deserve to be paid.”

Trial and error

Don’t stress too much about setting your rates. It’s okay to test things out and make mistakes. Freelancing is a long game, and your rate is something that will fluctuate throughout your career.

“For young people, it’s important to have patience and keep trying when first starting out,” Ryan says. “A side hustle often takes some trial and error. When you’re just getting into freelancing remember to learn, implement your lessons and keep experimenting.”

Ng emphasizes that, starting out, you should focus on making connections and the quality of your work, more than the money. "

Every business is ultimately in the business of building trust," he says. "So, if you are just starting out, don’t focus so much on the rate; instead, play the long game and focus on building a portfolio and a collection of testimonials."

Bottom line: don't worry too much. If you're getting started, you’re already heading in the right direction.

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