Ask any freelancer what their rates look like and you’ll most likely get hit with one of three options: hourly rates, per project rates or a mix of the two. But how do freelancers decide on these rates? How do experienced freelancers set up a rate for his/her freelance services, whether it’s traditional skillsets like graphic design or writing, or non-traditional gigs like yoga instruction or creative business management?

Well friends, that’s a great question, and one that all of us freelancers, new or experienced, ask ourselves on the daily.

It can be challenging to show value through your rates, while earning a reliable and well-deserved income, without pushing away potential clients and for maintaining a lineup of preferred projects. That’s a lot to consider when piecing together your freelance rates, but all are important considerations to keep in mind.

Stick With What You Know

From my experience, going with what you know is the best way to go. When you first start freelancing it can be a scary world and in order to take one unknown out of the equation, it can be comforting to do what you know when it comes to setting up rates.

Related: Business Planning 101: The Freelance Edition

For me, that was charging by the hour. I had just come out of the marketing and public relations agency world and was all too familiar with tracking every quarter hour of my day to bill to appropriate clients and projects. So that’s what I did. And it worked for me and for my clients at the time.

But what about if you don’t have any experience in “sticking with what you know?”

Ask Around and Do Your Due Diligence

Start asking around the freelance community about what they charge and how they came up with their rates. Lucky for us here in Sacramento, we have a really supportive and friendly community of freelancers who are, in my opinion, more than happy to talk about freelancing and help each other out. After all, we are all in this together!

You can also find other local businesses, similar in industry, and get an idea of what their rates or prices look like. Don’t be afraid to ask questions.

Use the Freelance Rate Formula

If you’re still not sure how to set up your rates, or at least where to start, the Freelance Rate Formula is a really helpful and resourceful tool widely used among freelancers, and offered by Freelancers Union as a guideline.

Freelancers Union recommends using this formula for setting your basic hourly rate, which you can tell clients as an hourly rate or use as a baseline when figuring out your project, package or day rates:

(Annual Salary + Annual Expenses + Annual Profit) ÷ Annual Billable Work Hours = Basic Hourly Rate

For more information on how to set this up and what each part of the equation looks like, visit the Freelancers Union “How to Get Paid What You’re Worth” and “Everything You Need to Know About Freelance Rates” blog posts for, wait for it, everything you need to know about freelance rates.

Adjust As Needed and Be Flexible

If something isn’t working for you, then change it up! Hourly may seem like a good idea at first but once you realize that clients can get sticker shock, you may prefer a per project rate. (Sometimes, it’s just not worth the battle of saying you charge $X per hour when you could instead say you charge $X per project.)

For example, if I charge an hourly consulting rate of $100 per hour for a 2.5-hour project, that may seem out of control to some (note that I said “some”) clients. Yet, if I charge $250 for a half-hour introduction phone call and a two-hour consulting session, the client might accept it as a normal cost. Yet in the end, it’s the same rate for me as the freelancer at $100/hour.

Remember, this is your business and you can do as you wish, but my recommendation is to start simple. Go with what makes sense to you and your business structure, and then adjust as needed. It can be nerve-wracking to send out an estimate to a client when you really want the business and are hoping they won’t balk at the rate. But don’t undervalue yourself or your business.

When it comes to freelance rates, my motto is this: If you’re not a little bit nervous when sending out an estimate to a potential client, then it’s too low.

Follow Cherise’s journey every month as she navigates the freelance life.