How I learnt to calculate my Freelance rate
Learning and figuring out what to charge for my services was one of the toughest choices I have had to make so far in my business career.
What you charge seems to one of those taboo topics that no one likes to discuss and let alone tell you what they do! So where are you meant to start then?
When starting on this journey I got some wonderful advice from my boss regarding what to charge my clients:
- You could pitch your rate depending on the type of work, duration, iterations expected etc and the type of client — so from mates rates, charity work to fully corporate company.
- You could charge either hourly or a set rate — so hourly would = time and materials.
- So for your lowest rate would want to charge — maybe figure out your hourly rate is from your current workplace.. add to that, power consumption, travel, materials, software, long-term wear on hardware…that should be your absolute low so for example, If you need a laptop…say every 2 years, what’s the daily cost of that? what’s your power bill… etc etc.
From all this advice I had a much clearer direction on how to charge clients. But I dove a bit deeper and went through the following process to crunch some real number, thanks to Creative Live Blog:
1 — Start with your target salary you would like to earn in a year
~ etc $75,000
2 — Calculate all your NEW expenses:
~ Office space — $4,200/YR (WeWork)
~ Web hosting — $360/YR (Squarespace)
~ Internet — $1,020/YR (Get the fastest internet you can)
~ Invoicing software — $360YR (FreshBooks)
~ Phone — $1,380/YR (iPhone)
~ Laptop — every 2 years — $600/YR (MacBook Air)
~ Promotion/Marketing — $1,200/YR (Ads, Business cards, flyers)
~Software — $348/YR (Adobe CC, Sketch, Trello Business, Stock photos)
~ Allowance for uncollected payments — $1,500/YR (2% of revenue)
~ Accountant fees/Tax prep — $1,000/YR (General help)
~ Healthcare — $4,800/YR
~ Self-Employed Tax —$5,700/YR
New expenses are a freelancer = $22,513
3 — Arrive at your new adjusted salary
Target salary $75,000 + New expenses $22,513
= Adjusted annual salary $97,513
4 — Billable hours
~ Working hours per year: 2,080
~ 4 weeks holiday = 160 hours
~ 2 weeks sick leave = 80 hours
~ Total hours off per year = 240
2,080 hours — 240 hours = 1,840
Now, this assumes that you’re going to be billing a client for all hours of work you do each week. However, as a freelancer, you’ll need to spend time each day signing new clients, making phone calls, answering emails, marketing and more.
Allow for 25% of your time to be spent on non-billable activities
~ 1,840 hours x 0.75 = 1380 billable hours per year
5 — Divide adjusted annual salary by billable hours per year.
97,513 adjusted annual salary / 1380 billable hours per year
= $70.66 rounded down to:
$70 per hour!
6 — Now, calculate your own hourly rate!
Here is an example of how you could use this guide to calculation your own rates:
$___ Adjusted annual salary / ___Billable hours per year
= $___ per hour
One important lesson I have learned over the past year is to know your worth. If you are fresh out of University remember, you ARE an expert in your industry. You may not have the most knowledge or the best skills but you have just spent years training in your field learning the latest of what the industry has to offer.
Let me know if this helped or if you have any questions!