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Although I offer the Freelancer's FAQ information free of charge, I'm finding that the costs of operating a web site are steadily increasing. If you find this information useful, a donation would be gladly appreciated.
Anne W.

Anne Wallingford, WordSmith

 

Freelancer's FAQ



Rate Setting


An Inside Look at Freelancing--How Do I Know What to Charge?

One of the most difficult issues a freelancer must resolve is "What Do I Charge?" A freelancer must set fees fairly and competitively to stay in operation. Unfortunately, those who use freelancers often do not realize that the same basic costs apply to freelancers as apply to any other business. The client sees only the "dollar per hour" rate. This is one reason why a freelanceer should get in the habit of quoting on a per-project basis, rather than on an hourly fee basis. But before you talk to a prospective client, you should have some idea of your rates firmly fixed in your mind--and stick to it.

There are times when you will certainly work for a lot less than $77/hr. If this is your sole means of livelihood and the rent is due, any job is better than none. But do you want to spend the rest of your life living as a starving artist? I doubt it. It is not easy to hold out for a higher fee when your stomach is growling because you haven't had the money to buy groceries this week. Only you can decide where and when to negotiate.

--The figures I've used below are comparable to an employee, in 1996, earning an annual salary of $45,000. If you keep these figures in the back of your mind, you will find yourself negotiating for what is a fair, living wage, and not feeling the least bit guilty about your negotiations.

The example below is created by comparing a consultant's rate to that of an employee earning $45,000 annually.

1. Determine daily labor rate

- Multiply the annual salary times 1.5 to account for life, health, dental, disability and retirement benefits. This reflects the real cost to a company of this employee.

Example: $45,000 x 1.5 = $67,500 annual labor rate

- Divide the annual labor rate by 180, the standard number of billable days in a year.

Days in a year: 365
Subtract: 104 weekend days
8 holidays
10 vacation days
5 sick days
24 administration days
34 marketing days
Billable days 180

Daily Labor rate example:

$67,500 / 180 = $375 daily labor rate

2. Expenses: Statistics show that overhead for a self-employed consultant average 44% of labor.

Typical expenses:

discount office supplies - paper, toner, pens, pencils, business cards
equipment - computers, copier, fax supplies
association dues, seminars
trade journals
advertising
postage and shipping
taxes and licenses
travel

Example: $375 x 44% = $165 expenses

3. Profit margin: As a business, the consultant is taking risks and providing service and/or product the same as any other business. Each consultant must determine a reasonable profit margin; this can range from 15% - 40%, with 20% being considered fair in most markets.

Example: $375 x 20% = $75 profit

4. To determine daily billing rate:

- Add daily labor rate + daily overhead rate + daily profit
- Divide by 8, the typical number of hours in a business work day


Example: $375 daily labor rate
165 expenses
75 profit
$615
$615 / 8 = $77 hour


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© 1999 Anne Wallingford

081007 042211 042511 Nov 21, 2013 1:38:05 PM