How to set fees for freelance work 09:08 on Thursday
…and live comfortably.
For some reason I’ve been asked this quite a lot lately, so here is my personal formula for earning enough money while living happily and free of worries. Financial worries, at least.
The first rule is: When calculating money scenarios, optimism is a bad idea. Keep this in mind when you tinker with the numbers. And now on with the formula.
How much money do you need each year? A good estimate of how much you spend will come from your tax records. How much you actually need to live happily might be more or less than what you currently spend. I’ll throw some numbers in as an example, so let’s say you need 30.000 (in your currency of choice).
How much are you willing to work? How many days off do you want each year? How many days a year would be realistic for you to have a freelance project under work? There are very roughly 240 working days each year (20 days per month). Let’s say you are willing to work 8 months a year, which equals 160 working days. Some of these will be bank holidays and surprisingly many you’ll be spending on administrative tasks. For those we’ll take out one fourth, resulting in 120 working days. This could still be optimistic depending on your client base, so feel free to reduce this amount even further.
Dividing your yearly income need with the working days, you can see that you need to charge at least 250 for a day. If you want an hourly rate, divide this with the number of hours you’re willing to work each day. If you also wish to keep your sanity, don’t calculate for more than 6 billable hours a day. It sounds small, but trust me on this one. With 6 hours, the hourly rate would be about 42.
If the resulting number sounds smallish, congratulate yourself! This means you will be able to work less to maintain your standard of living.
This naturally applies only to time-based pricing, so if you’re lucky enough to have a product-based or other more profitable pricing in place, I’ll salute you and leave you to your own devices.