If you’re a freelancer struggling to calculate your rates, or a company looking to hire a freelancer but unsure of how much to charge, worry not! The answer to calculating your rates is not as difficult as it seems. Follow the steps below to see how you can easily come up with a fair price for the services you are offering:
Target annual income
The first step to calculating your freelancer rates is figuring out how much you want to earn over the span of the year. A good benchmark to do so is by looking at websites like Glassdoor. Let’s say you are a video editor, for example.
Glassdoor estimates your annual income to be around $36,000 per year. This, of course, differs according to how much experience and skills you have under your belt.
If you feel like you are worth higher, then feel free to hike up your estimated salary. But keep in mind not to overvalue yourself and aim too high for what you’re offering either.
Annual expenses & overhead
The next step is to calculate your yearly expenses and overhead costs. This includes all the software, equipment, tools, hosting costs, internet and utility bills, rental, travel expenses, and everything else you need to spend to run your business.
An example would be as below:
Travel expenses: $1,500/year
+ salary of $36,000 = $44,653
Once you have your adjusted annual salary, it’s time to calculate your billable hours. In other words, it’s how many hours you would realistically be working throughout the year.
The standard number of hours would be 40 hours a week x 52 weeks a year, which equates to 2080 hours annually. However, realistically you wouldn’t be working that many hours, after taking into account days off and the days in which you don’t have any work lined up.
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Let’s come up with a more accurate number of billable hours:
Public holidays: 11 (88 hours)
Vacation days: 21 (168 hours)
Sick days: 7 (56 hours)
Total number of unworked hours: 312 hours
2080 hours – 312 hours = 1768 hours
Then, you’ll also need to take into account the hours in which you will be spending on non-client related tasks, like marketing your business, admin work, making calls and sending emails, connecting with new clients, etc. Let’s assume it will take up 20% of your time.
1768 hours x 80% = 1414 hours
The final step is to divide your annual salary with your billable hours.
$44,653 / 1414 hours = $32 per hour
And there you have it, a simple way to calculate how much you should be getting paid for your work. But don’t solely depend on these numbers though, as you should be conducting your own research by getting in touch with industry insiders and experts to see if your rates are on point. Now get out there and start freelancing!
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