Many have hailed 2013 as the era of the freelancer, and they seem to have a point. ONS Labour Market Statistics [links to PDF] show that between April and September 2013, 15,000 people registered as self-employed, bringing the total of self-employed people in the UK up to 4.2 million. The increase in self-employed people isn’t a bad thing, as there is plenty of demand to go around. In fact, a survey by freelance website Elance.com found that UK freelancers actually saw their earnings grow by 62% over the last three months.
Going freelance is no longer the voyage into the unknown that it once was, now that more people are making more money than ever doing it. Still, there are certain things about the freelancing life that only you, the freelancer, can decide for yourself. What will you do? How will you get your name out there? How much will you earn?
We can’t tell you what you should do for a living, and there’s so much out there already about marketing yourself that it hardly bears repeating. We can, however, show you how to figure out how much you should earn.
With this combination of tools and techniques, you can easily decide your rates as a freelancer.
Calculate how much you spend each year.
Ask yourself how much you need to earn in order to survive. Tools like Barclays’ Budget Calculator can help you see how much you spend each month. Multiply that by 12, and you get the amount of money you spend in a year. Divide the annual amount by 52, and you know how much you spend weekly. Divide that number by five, and you’ve got a rough estimate of your daily spending.
When you know how much you spend, you can see how much you need to earn to survive.
Figure out how much time you have.
Freelancing gives you the flexibility to set your own work hours, and that means you can work as much or as little as you want. To determine how many hours you want to work, you don’t have to use a tool. You just need to think about whether you want to have a full-time or part-time job. If you have 40 hours a week to spend on freelancing, it’s a full-time job. If you have less than that, it is part time.
Next, think about how many days a week, month and year you are going to work. Consider sick days, holidays and personal days. This website shows how many bank holidays there are in the UK, for example. And don’t forget to factor in weekends as well. So how much time off do you want to take? In employment, workers are entitled to 5.6 weeks of paid holiday per year, so take the number of days you want to work in a year, and multiply that by 5.6. That will tell you how many holidays employees working your schedule would be entitled to take, which is a good guideline.
Once you know how many days you will be working, figure out how many hours you’ll work over that time. Calculate how many total hours you would have to work over each day, week, month and year.
Determine your billable hours.
In every company, employees have tasks that contribute directly to the bottom line (called billable hours) and those that don’t (called non-billable hours). Billable hours are those spent working on a client’s project. Non-billable hours are pretty much everything else. They can include project management (where you organize yourself and figure out what needs to be done first in a day), emailing and, in the case of freelancers, self promotion.
Tasks that are non-billable are all necessary, and you won’t be successful if you don’t do them, but you should plan for them. Your hourly rates will have to cover the hours you can’t actually bill directly to clients.
Generally speaking, most productivity experts suggest aiming to make about 60-70% of your time and work billable. If you’re working 40 hours a week, between 24 and 28 of your hours worked will actually earn you money.
Figure out your billable hours for each day. Multiply that by the number of days you work in a week, in a month and in a year to determine you daily, weekly, monthly and annual billable hours. If you want an easier way to calculate this, TrinityP3.com has an Annual Billable Hours Calculator on this page (it’s the third calculator down).
Put it all together to figure out your rates.
Your rates need to be determined by how much money you need to make. Take your annual spending, and divide it by your annual total hours. Do the same with your daily, weekly and monthly spending and total hours figures. They should all be roughly the same. This is minimum amount you need to earn each day, week, month and year.
Now take those figures for the minimum amount you need to earn each day, week, month and year, and divide them by your daily, weekly, monthly and annual billable hours. That should give you an idea of how much you need to charge each billable hour to cover all your costs.
Freelance rate calculators you can use online
If your head is spinning at the thought of all of these calculations, don’t worry. There are many tools out there to help you calculate how much you should charge per hour. The Freelance Hourly Rate Calculator from AllIndieWriters.com is very user friendly, if you want to get a rough estimate of your costs and necessary hourly rates without getting bogged down in lots of numbers.
If you want a calculator that gets a little more in-depth with costs and fees, the Freelancer Rate Calculator from AddedBytes.com is a good choice. For those who want the most accurate, detailed rates, they don’t come much more detailed than the Freelance Rates Calculator by MicroBusinessHub.co.uk.
Whichever calculator you choose to use, simply pop in the information they ask for, and the calculators will estimate how much you need to charge per hour.
Your rates should be a combination of factors, the most important of which is your on financial security. Yes, market forces will have some impact, but you should never put yourself in a situation where you are working all hours of the day and night but still can’t make ends meet. You should be able to live comfortably and charge reasonable rates. And now you know how to figure those rates out.