WORKING OUT YOUR RATE
Your clients ask you for your pricing, and you’re not completely sure how much to charge. A quick Google tells you that some freelancers charge an hourly rate which varies on experience. How do they even work this out? Here’s some simple steps that can help.
That’s right, this is one of those things where you have to use your brain. Most business planners would tell you to work out your business expenses, but I would like to propose something different. Work out ALL your expenses. Why? You enjoy this work and you want to be able to do it full time. When you’re full time, you have to earn enough to pay yourself your living expenses so it’s important you can afford it too. Make sure you include everything in your calculation. This means even your loan repayments or gifts that you buy for others during Christmas. They don’t have to be exact, just a close estimate so you can include them in your expenses.
However, if you’re meticulous like me, you can setup an Expenses Template using Google Sheets.
I’m not talking about the time you start and finish here. I’m referring to the hours you can use to spend on BILLABLE work. You’re wondering, “Aren’t all working hours billable?”. Not exactly. When you work with clients, they aren’t going to pay for you to work on your company budget, marketing, or project management. You still have to put time for those somewhere because they help make your workflow more efficient, but none of your clients will ever expect to pay for that time, so work out your billable hours.
Once you’ve worked out all your expenses in step 1, and your billable hours in step 2, it’s now time to find an hourly rate. Divide your expenses by your billable hours, and you will get a starting point for your rate.
Total expenses = $1,000 / week
Billable hours = 20 hours / week
1,000 / 20 = 50
You could start at a price of $50 per hour
Of course, there are two main aspects you would have to consider:
If you’re just at the start, then my guess is that you have another full-time job or you’re still a student. You can afford to drop your rate to entice new clients. If you’re attempting this during your adult-life then it might be more difficult to just plunge into it full-time (It is achievable though with a little extra work).
Personally, I would advise against dropping your rate as it can set a tone with your customers that you are a push-over. You can instead offer a first time customer discount to attract new prospects.
Once you have considered which one you fit in, then you can make some adjustments. Business coaches will often advise to add 40% on top as a target so you can try this as well.