This
is the second article that I am writing about setting freelance
rates. The reason I am writing another article is because of numerous
questions that weren't answered in the previous article. I will
first summarize what the last article was about and then I will
go on to new details.
Determining
how much to charge for your services is often one of the biggest
challenges for a new freelancer. If you charge too much you won't
get hired and if you charge too little you'll starve. Take the time
to read this article and you will figure out what you need to charge
to thrive. If
you are a new freelancer, you have probably searched the Internet
trying to look for average rates of professionals in your field.
Don't even bother. I will let you in on a secret : now that the
Internet is here, there aren't any "average" rates because demographics
are too widespread. The United States has banned competitors from
discussing rates amongst each other based on Antitrust laws. This
is why you are having such a hard time finding rate surveys, there
aren't any. Instead I will show you how to figure out what your
rates should be by using a formula. Start
by figuring out what you want your annual salary to be. To determine
your salary, you might want to pay yourself what you earned as an
employee or take a look at salary.com
to find out what an average salary for your profession is. For
this formula, you will need to figure out what your overhead is.
Overhead is an expense that cannot be found billable to a client,
it is just a cost incurred by running your business. Please fill
out the following form. If you aren't sure what your overhead is,
then look back on last year's credit card bills and checking account
statements. MONTHLY
OVERHEAD: NONPRODUCTIVE
TIME There
are duties that must be completed for each client that are not productive
towards completion of the project. Figure out the actual work hours
are spent on the following duties. You will need this total later,
so keep the number handy. PROFIT Now
you will need to figure out how much of a profit you wish to make.
Profit is the amount that you make over expenses. I recommend 20%
in order to make an acceptable profit margin. Profit is necessary
for a successful business so make sure to count profit into your
formula. VARIABLES There
are always variables that you will need to take into consideration
when figuring out what you will charge. You must take into consideration
the following: 1.
What does your competition charge? 2.
What is your niche? 3.
How many years experience do you have under your belt? 4.
What skills do you have? 5.
What clients do you want to attract? 6.
Are you working online or local? FORMULA
1 Follow
these steps to figure out what your hourly rate should be. 1.
Subtract nonproductive time from Annual Hours to get Billable Hours. 2.
Add Salary and Overhead Together
3. Multiply Total By Profit Margin (10% - 20%)
4. Add Total (1) and Total (2) Together
5. Divide Total (3) by Billable Hours (the amount from #1) For
example, if the following is true:
1. Salary = $30,000
2. Annual Hours = 2,080
3.
NonProductive Time = 500 hours
4. Profit Margin = 20%
5. Overhead = $15,000 Then
this is how you figure out the hourly rate:
1. 2,080 - 500 = 1,580 2.
$30,000 + $15,000 = $45,000
3. $45,000 X 20% = $9,000
4. $45,000 + $9,000 = $54,000
5. $54,000 / 1,580 = $34 / hour FORMULA
2 This
formula is the easiest of them all. However, I don't recommend this
formula unless you are a very established professional. This isn't
the way to start out your freelance business, only very skilled
freelancers can get away with this. Ask
yourself the following questions: 1.
How much money do you want to make on this project? 2.
How many hours do you want to work? Now
all you need to is Divide these two numbers. Its that simple, you
now have your hourly rate. FORMULA
3 Use
the following formula if you are interested on how to set the rates
for your entire business.
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by Rachel Goldstein
http://www.Allfreelancework.com - 1000s of freelance jobs, articles, and resources. |
