Should I Charge an Hourly Rate for My Freelancing Services?

Calculating Hourly and Day rate

Below are a couple of ways to calculate your hourly/day rate, if this is how you want to charge for your services:

  • Taking your annual salary and adding a 1/3 to it, then divide it by how many days you believe you will be working. E.g. £40,000 add 1/3 is £53,333 divide by 235 (5 days  x 47 weeks) is £227 per day
  • Estimate 30 billable hours a week at 47 weeks in a work year – this is 1410 hours a year. Divide the annual salary plus any annual expenses, by these 1410 hours for an hourly rate. E.g £40,000 is annual salary, £5,000 is annual expenses. Divide this £45,000 by 1410 hours is £32 per hour or £240 per day.

This may help you to calculate your rates, but I’m not sure using a full time salary is such a good idea, although it is does help give a ball park figure.

The problem with these two methods are the figures rely on the fact that you will have a consistent flow of work.  If you are a web designer with a lot of connections this may be the norm which is great, but in my experience this isn’t the case. I have been freelancing within digital marketing since 2011 and find my clients come and go and the work fluctuates. If you followed this method and don’t get that consistent workflow you could be earning much less than if you were full time.

When you are full time employed, you get paid regardless of work load or holidays and sickness. When self-employed this safety net doesn’t exist so when calculating your rates, some thought should be given to this.

I know a freelance structural engineer that spends a huge proportion of his time working on quotes for potential clients. He finds this more stressful than anything else he has to do in his business. He invests so much time in the quotes so that his client will not only get clarity on the project but can see the quality and value of his work. This time spent is currently classed as non-billable, however he has to take this time into account within his rates.

Project Based Rates

When I am calculating my rates and hours I treat each client differently. I work out my rates based on their requirements, their budgets, if it is a recurring task, my current work load and my future work load.

I even, dare I say it, look at the client to see if they are someone I would want to work with. This isn’t as superficial as it seems, honestly! I ask myself, do they seem like we would work well together or do they seem hard work to communicate with and would they accept that I’m not always working normal office hours.

I’ll give you an example of someone I actually turned down work from. A few months ago I was contacted for permanent work 2 days a week, but they wanted me in the office for both days. That wasn’t my preferred choice but it was very local and the draw of a recurring paycheck enticed me to find out more. I thought that maybe I could negotiate a day from home once I started and showed my true value. But then the client tried to negotiate my day rate to something quite low. I understand it is good business to barter so I took part in these negotiations but I must admit I was a little insulted. In the end I turned down the work.

This was a difficult decision and I still wonder if i had made a mistake, but then i have to remember why I freelance in the first place. I need the freedom to work flexible hours. This job would have required child care and just wouldn’t have worked for us as a family.

Find out the Clients Budge

Not all potential clients want to reveal their budget. I understand this, however especially for PPC work I need to know their budget. The budget is usually directly linked to the amount of time spent in the account and the volume of keywords and adverts I will have to manage. For example, if their budget is £500 per month it is fairly small so this reflects the time required to manage it. In this case my rate for the project would be lower.

What if the work is project based, like designing a new website or SEO work. The client doesn’t have to reveal their budget. So how can you find out their budget?

You could ask: Do you have a budget set aside for the project that is over £XXXX? This gives the client an indication of expected budget so you don’t waste too much time on the project.

Another example of setting expectations: We wanted a new bathroom and went into a showroom that sold and installed new bathrooms. The assistant asked if she could help and then stated that their bathrooms normally cost between £6,000 and £7,000. This statement is designed to cut down any time wasters for them.

But what if you can’t afford to turn down work.

Yes, if you can’t afford to turn down work, you would work on an hourly or daily rate. This would build up your reputation and portfolio to allow you to charge project based rates at a later date.

But initially, you have to charge your clients in a way you are comfortable with. In the end, it’s a case of trial and error. If your rates are too low the quality expected of you may be to. Charging by the project seems a much better way to go in the long term. You may need to build confidence, reputation and experience before you can do this though.

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