Freelancers ROI: How to calculate the ROI of your freelance projects

If you’ve recently chosen to dive into the wonderful world of freelancing (or plan to soon), then you don’t need to be told how rewarding it can be to go into business for yourself. 

Once you’ve become a freelancer, you’re the boss and call the shots. 

You’ve got a golden opportunity to pursue work you’re genuinely excited about, and you have every right to be excited about that.

But it’s also important to remember you’re a business owner now, and you need to understand the importance of ROI (return on investment) if you’re serious about succeeding. 

Here’s a closer look at how to calculate freelancers ROI and put yourself on the fast track to a healthy bottom line.

What is ROI?

Every business will have at least some overhead to consider — money and resources the business owner must invest in providing services or selling products. 

Many freelancers — especially those that provide creative services over the internet — tend to have a relatively low amount of overhead compared to other business owners, but it’s there all the same.

ROI (short for “return on investment”) refers to the end value of an investment versus its initial cost. 

Let’s say, for example, that you create original artwork as a freelance artist. If it costs you $100 in art supplies and resources to complete a commission for a client that pays $500, then you’ve made a profit of $400.

Since the initial cost of your art project only equals 25 percent of your end profit, you can tentatively say your ROI was 75 percent. 

However, many freelancers will make additional adjustments to account for the time they spent, any opportunity cost attached to their choice to take the project in the first place, etc.

Why Does ROI Matter?

All business owners, including freelancers, need to know how profitable their efforts really are, and ROI is a key performance indicator for determining that. 

If you don’t know the ROI attached to the various projects you do, then you have no real way of knowing how successful your business is, especially over time.

A clear, comprehensive understanding of the profitability of a particular service or product helps you make solid business decisions moving forward.

For example, a new freelancer may decide to offer both copywriting and graphic design as initial services. However, suppose their copywriting projects eventually yield a much higher ROI than their graphic design projects. 

In that case, they know they can potentially make their business more profitable by dropping graphic design as a service and focusing on copywriting full-time.

How to Calculate ROI as a Freelancer

The standard equation for calculating ROI as a percentage looks like this:

ROI = [(Return – Investment) / Investment] x 100 %

You can do the math yourself if you like, of course, but you can also simply use an online ROI calculator instead to make things easy on yourself.

To calculate a freelancers ROI that’s as accurate as possible, make sure you’re considering all relevant factors when determining the true cost of your projects. 

What that really means will differ drastically from one freelancer to another, but some key considerations might include:

• Supplies and other necessary goods that need to be replenished once they’re used (like paper, fabric, or printer ink).
• Hardware like computers, tablets, or flash drives.
• Software like word processors, design programs, etc.
• Labor expenses associated with any help you may have needed.
• Taxes and license costs associated with running your business.

And again, many freelancers may also wish to consider opportunity costs when assessing their ROI. 

Naturally, there are only 24 hours in a day. Spending six hours on one project means that’s six hours you don’t have to spend on something different, so choose your opportunities wisely.

6 Tips for Increasing Your Freelancers ROI

Now that you understand a bit about why knowing your ROI is important, as well as how to calculate it, it’s time to look at some strategies for maximizing it over time. 

Here are some tips to get started with.

1. Make sure you’re charging enough

Many new freelancers struggle with the idea of asking for enough money in exchange for their services, so you’re in excellent company if you do, too. 

However, it’s critical to your business’s success to ensure you’re charging enough.

Here are some key questions to ask yourself when setting or retooling your rates.

• What is your experience when it comes to the type of service you offer?
• How in-demand are skill sets like yours?
• How long have you worked in your field (or a related one)?
• What are other freelancers in your field charging for similar services?
• Is your current income adequately covering your living expenses and your business costs?

Make sure you reassess and raise your rates regularly, as well. Inflation is a very real thing, and the average cost of living is constantly on the rise. Your rates should always reflect that.

2. Embrace time-saving solutions

As a freelancer, you likely don’t need to be told that your time is valuable. 

It’s also limited, as you only have so much of it to devote to your professional projects each day. 

The more time, energy, and labor you can save, the more you have left to reinvest in your business.

There are so many helpful resources and tools out there these days that take the guesswork out of running your business. 

Automate email outreach, sales processes, and similar tasks that don’t need hands-on attention. Optimize any systems you use for invoicing, calculating prices, and onboarding new clients, as well.

3. Quit charging by the hour

Although there are always exceptions to every rule, the vast majority of creative freelancers shouldn’t be charging by the hour. 

If you are, then you all but have a guarantee that you’re not seeing a good ROI.

Remember, there are only 24 hours in a day. You can only realistically spend so many of those working, so you’re already working with limited resources when you set your rates by the hour. 

A by-the-hour rate model also means you make less as you become faster, better, and more efficient at what you do when the opposite should be true.

Stop charging by the hour. Start charging according to the level of value you’re offering your clients. 

You can start with a basic flat rate you charge all clients and customize that rate according to the scope of each project.

4. Get better at saying “no”

Never forget what you now know about opportunity cost. 

Remember, saying “yes” to one set of projects means you’ll eventually have to say “no” to another.

The door will close on those missed opportunities, and there’s a good chance it might not open again, so keep that in mind when deciding whether or not to take on a new client or commit to a specific project.

When you’re brand new to freelancing, you might well have the capacity to agree to every opportunity that comes along in the interests of filling your schedule and gaining experience. 

But sooner or later, you’ll be busy enough that you need to pick and choose more often.

At that point, you need to know how to say no and mean it. Be selective with how you spend your time, and save it for clients you gel with and projects that are profitable enough to help you grow your ROI.

5. Commit to investing part of your income

Even the most successful freelancers don’t usually have a regular income they can rely on without fail month after month. 

That makes solid financial planning even more crucial for freelancers than it would be for most people.

Tax responsibilities and ongoing overhead expenses already mean freelancers need to save and invest a good chunk of their income toward the future, regardless of their actual living expenses at any given time.

Make sure you’re doing this, but you should also save extra when business is extra-good, so you have something to fall back on during the lean times. 

Choose high-interest savings options that ensure you’re making even more money as you save for the future.

Investing is another good way to put your money to work for you and maximize your freelancers ROI.

Stay on top of the market so you can invest wisely. Aim for a minimum of 10 percent of your earnings, and continue to invest more consistently so your money continues to grow.

6. Keep leveling up your skills

The more skilled you become as a freelancer, the more you can charge for your services. 

Never stop learning, growing, and looking to level up regarding what you can do. 

Take advantage of both free and paid resources that can teach you more than you already know or help you develop new skills.

You should also consider creating courses and other educational materials as a way to profit even further from your skills. 

There are countless other would-be freelancers out there who would love to be able to do what you do, and they’ll pay you good money to teach it to them.

Offering your own educational courses and instructional materials helps you establish yourself as a go-to authority in your industry or niche, as well — something every serious freelancer should be looking to do.

Wrap Up

Maxing out your freelancers ROI is all about making your limited time as productive as possible, but there’s only so much you’ll be able to do on your own.

Check out our handy write-up on some of the best tools for freelancers out there today for some great options to add to your repertoire. 

You’ll learn all about how you can use options like Canva, Hemingway, PayPal, and others to make a massive success of your growing business!