Wednesday, 25 April 2012

What price freedom? How to price up work as a freelance consultant?

If you are good with words, I've noticed, sooner or later you need to get good with maths.The first of three posts looking at how to price up your freelance comms work.

But I need it, I really need it.

A recent survey in PRmoment, showed that most freelancers charge between £200 and £500 a day. So where might you fit in? The next few blogs  share my ideas on how you decide what to charge. Hopefully useful if you are considering becoming a freelance PR, starting out, or just sense your business model might be a bit broke. 

Part one – calculating a notional day rate, aka what you need to charge to survive. 
 

Step 1) What do you need to earn?
Did you really go freelance to become rich? Really? Most people I know have gone freelance to take back control of their lives, to be able to make their own decisions, to be there for their families and generally to feel like they are living a more balanced and healthier life. And in that sense we are all very successful, though none of us ‘rich’. So when you are working out what you need to earn, if you really want to be a freelancer, I doubt if it’s anything like what you used to earn. Do a monthly budget of what you can cope with, (you’ll be surprised freelance currency goes along way). 
This gives you your base line figure of what you need to clear after tax. For easy maths' sake lets say that’s a £1,500 a month so £18,000 a year. So how does that convert to a day rate? 

Step 2) How many days in the year do you have to earn it?
Answer: it’s not 365, though this is where you start.
Days in the year 365
Less main public holidays 5
Less weekends 104 (don’t actually schedule to work weekends)
Less holidays/family/emergency days 25
Less sick/jet lag/ hangover days 12 ( just being realistic)
Days available to work 220 ( standard industry figure) 

Now assume that 50% of that time you are not doing client work, either because there just isn't any, or because you are working but not being ‘paid’ for it, eg admin, networking, training, research, marketing, pitching, preparing materials etc. That leaves 110 days to cover your budget, plus tax plus expenses.

Step 3) Not all that money is yours you know.
Tax and expenses. 
So sticking with our notional sum of £18,000 a year,
Plus expenses say 15% £2,700 ( if you are working from home, can easily be more if you are not), 
Plus tax, say 25% £4,500. 
So in theory you need to earn around £25,200, to give you £18,000 and meet that £1,500 budget. 

Step 4) Calculating the notional day rate
So now just look at how much you need in total, and divide it by client days. In our model that’s
£25,200 /110 days = £229/day notional day rate. 

Next blog: how does that compare to what the market will bear? Favourably we hope. After that, take a look at when to discount your work so that you find that sweet spot that keeps your clients happy and your finances healthy. 

2 comments:

  1. Excellent article, broken down into understandable terms and simple maths. I charge by project (as I've just started and I'm looking for a full time position). So I'll go one step further and divide the end figure by hours I want to work in a day and boom; I've got my hourly rate :)

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  2. If only accountants spoke to their clients in such normal, logical terms!!

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