What I’m listening to: Get On Your Boots by U2
Here it comes.
A snow day for my region. The state of emergency for my town was put out early yesterday when the sun was blazing and the skies were a gorgeous blue. Not today. The latest forecast: 18 to 24 inches. That minimum number kept creeping up all weekend, starting somewhere around 6 inches, then 10, then 12.
Rather ironic that the song above came up on my iPod yesterday. The boots (although not sexy) are waiting by the back door right next to the shovel.
Before the storm, I ran errands. Unlike most people who head to the grocery store for things they can buy within a few hours of the snow actually stopping (call me cynical), I went to Barnes & Noble. Hey, I prepare my way, you prepare yours. Besides, nearly every one of us has enough food in the kitchen right now to make it a month. So I skipped the cheese counter and milk aisles and went to the Poetry section of the book store.
I also had time to meet my friend for lunch, During lunch, she mentioned that she’d hired a consultant to help her with both her website and her branding. It’s something my friend’s wanted to do for a while, and now that she’s nearly finished with her book, she’s looking for her platform. It’s an exciting time for her.
Except she was a little concerned. She’d told her consultant money wasn’t an issue. So she was surprised when she got back the bid for five hours of onsite consulting, the branding, and her website page design.
Would you be shocked to learn the price was under $1,000?
Then you’re going to faint when you hear it was under $500.
Right there. That feeling you have — what the hell is she possibly going to end up with for less than $500? — that’s the feeling she and I had. And it’s the reason she’s concerned. What kind of quality can anyone deliver at a price much closer to $300 than the $3,000 one would begin to expect?
If you’re asking yourself this about my friend’s contractor’s rates, you should be asking the same question about your own.
[bctt tweet=”What does your hourly rate say about you to potential clients?” username=”LoriWidmer”]
So let’s assume you want to be taken seriously by your clients. Time to start charging like you mean it.
Did I just hear gasps? Did I hear a few of you say “But I’ll lose my current clients!”? If so, let’s use this example:
Bill is your long-time client. You love working with Bill, even though he pays you around $100 per month. The work isn’t tough, but it does take time. Four hours of your time, which you’ve determined is worth $25 an hour.
But you know working with six more Bills wouldn’t net you a total of $700 a month. If that seems like a decent amount, multiply it by 12. That’s what you’ll make this year from seven Bill-type clients. Ew.
Ah, but you’re not done. You have to deduct from that total. You have to pay your own wage taxes (15% of 93% of your annual income), health insurance (if there’s anything affordable to be had anymore), retirement savings, oh, and you have to pay for your bills out of that. How much do your bills add up to every month?
Wow. So you pay out more than you make with all these Bill-like clients? When framed in that way, it’s not so tough to turn down those other Bills and maybe gently let go of Bill.
Let’s see how you can do better:
Figure your minimum acceptable rate.
What do you need right now to
- Pay bills
- Keep your business running (supplies, computers, printers, courses, books, memberships…)
- Pay taxes
- Have some decent spending money
Only you know that number because only you have those bills and those needs. So spend some quality time finding out the least amount of money you want to make. That means adding all of the above, finding your minimum annual income, and divide by the number of weeks you’re going to work this year (don’t forget to give yourself time off), then the number of actual billable hours you think you’ll have (look at last year’s hours worked to get a ballpark).
Figure your ideal rate.
This one is so much easier. What do you want to earn annually? Take that number, divide by 12, then do the math to come up with how much that represents per hour. Or just say “I’m charging $100/hour.” Just make sure you work enough to meet that earnings goal.
Set targets.
There’s no sense in deciding your rate or your annual goals if you’re not going to do anything to reach them. So I suggest this: set monthly earnings goals. You can base measurement on how much you invoice each month or on how much in checks you receive. Your choice. I prefer the former, Paula Hendrickson prefers the latter. Both tell you how you’re doing in reaching that goal.
Writers, how did you get to your ideal rate? Do you calculate your minimum acceptable rate?
How did increasing your rate improve your business and your clientele?
Any advice for writers thinking about setting or increasing their rates?
3 responses to “The Importance of a Serious Freelance Rate”
I actually track income both ways, Lori. But I only really count what it once the check has arrived. (Luckily I’ve only had a couple of deadbeat clients over the years.)
When I turn a project in I note down the amount it will pay, and each week I add those up. Some weeks are glorious, others aren’t—usually because that week’s projects have later deadlines. It gives me a quick view of my overall productivity.
But my bottom line: Invoices don’t pay the bills. Income does. So I don’t count my income until it’s been deposited.
Thanks for the added explanation, Paula. Makes sense, too. It might actually keep you more focused on the earnings, though I know personally I’d drive myself nuts with it. I choose my method solely because I know how hyper-focused I can get on things like that. 😉
I like that you track both ways. Makes for a more complete picture.
I kind of have to since I have one client with a slow-as-molasses payment system. Luckily they run it like clockwork, so I know that by Monday I should have a nice check for work I turned in around mid-December. It published in January. The first week of February they initiate the payment process for everything from January, and their process takes six weeks. Six very long weeks, but at least the schedule is reliable.