Freelance Foundations: Help for freelancers.
4 things freelancers miss when calculating hourly rates
When I started freelancing, I based my rate on what I was earning in my last job and added 25% to that. It was the worst thing that I could have done. My practice would have been more stable and effective if I had first considered all the costs my practice would incur.
Are you charging what you should? If you've left out any of the things below when you calculated your rate, you are charging far less than you should.
Equipment replacement. This is one of the biggest items. Your gear should come out of your income before you pay yourself, which means it should be factored in to your rate. Having good gear allows you to work better, so it's critical to budget properly for its purchase.
Training. You're the only one paying for your professional development. If you don't factor it into your rate, then when the opportunities come up you won't have the money to do it. Long-term, this significantly reduces your lifetime earnings.
Conferences. These are events where training, sales, and social opportunities all collide. They are probably one of the most effective ways to grow your practice. But they don't come cheap, which means the cost of attendance need to be factored into your rates or it just won't happen.
Downtime. What about the time you don't work? Most freelancers have one or two days a week that they spend in non-billable work. What about if you want to take some time off? Nobody pays you for that but you. If you don't account for it, you won't get it.
Home office expenses. In Canada, these are tax- deductible expenses for self-employed and freelance people. While most freelancers will deduct these expenses, they don't factor them into their rate. You definitely should.
Many of these are fairly large items, but they're important to consider in your rate. Leaving them out starves your practice. It makes you do things in ways that take longer and aren't as effective. Your practice doesn't grow properly when it's malnourished, which means you're not working at your ideal level.
Time to recalculate? I'll write up an approach in an upcoming post.
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