Supporting yourself as a creative freelancer is a dream shared by millions. However, the cold hard reality of making it actually work often comes as a nasty surprise. Regardless of what creative field you’re in, one of the biggest hurdles faced by many budding freelancers is trying to figure out how much to actually charge per hour in order to keep afloat.
It’s a deceptively tricky number to get right. While you may be able to sniff out some average rates in your space, there are rarely absolute figures available to rely on. Particularly when it comes to the creative industries, price is simply what somebody is prepared to pay. Also, you need to hit a number that works for you, not just try and match market rates.
So, rather than plucking a figure out of the air and hoping for the best – or low-balling your way through the first few months and later regretting it – how do you work out what you really need to charge per hour to support yourself? Let’s break it down!
- Start with a desired yearly total
Rather than casting about for hourly figures at the outset, start with a nice round number you’d ideally like to pocket each year. This is an educated guess at this stage, so don’t agonise too much over it. Pick something that feels right.
Your initial figure here will naturally depend on a number of factors. Maybe you’re based in an affordable location and are prepared to aim low. Maybe you’re trying to juggle family and mortgages, and have a crystal clear idea of what you need to hit to keep the show on the road each month. Maybe you’re trying to match a previous full-time salary. Everyone will have different requirements.
Get a number in your head that sounds reasonable and write it down. Let’s keep things simple and say your goal is $50,000 per year.
- Estimate your yearly expenses
Now for the bad news – money will be going out as well as coming in. As a freelancer, you’re going to be liable for a range of expenses and outgoings that you may have previously been blissfully unaware of if you’re used to dealing with the comfort and security of a full-time job.
You’ll potentially have to shell out for equipment, travel, insurance, office space, and a host of other things over the course of the average year. And, of course, you’ll need to keep the taxman happy while you’re at it. Tot up your projected expenses and tax obligations as best you can and write them down. For our purposes here, let’s say it comes to around $25,000.
Bearing in mind that you want to be taking $50,000 home, your new annual revenue target is $75,000.
- Estimate your billable hours and pick an hourly rate
OK, by this stage you have a realistic overall target and it’s time to start thinking about hours. Assuming an eight-hour workday and a five day week, there are a whopping 2080 hours available per year – you won’t be billing all of them, though.
Start by removing time for holidays. We’ll assume you’re going to be going flat-out all year and taking a miserly eight days off. Now you’re down to 2016 available hours.
Even assuming you were to be fully booked all year, you wouldn’t be actually charging out every one of those hours. You’ll also need to factor in time for finding clients, general admin, marketing, and a host of other bits and bobs. Rather than get bogged down in minutiae, let’s just assume that will take up 30% of your time altogether.
A quick bit of arithmetic shows we’re down to 1411 billable hours. So, in a best case scenario, you need to make $75,000 in 1411 hours. Long story short – you need to be charging $53 per hour to make it work.
This is by no means a final figure, but it at least gives you a realistic set of assumptions to work from, and a theoretically sensible base rate to consider.
Bear in mind that you may not always be booked and you may, for example, end up having very different hourly rates for different types of work. Also, as your business grows, you’ll naturally face additional costs for things like additional staff and marketing. Be prepared for that hourly rate to go up rather than down!
Our three simple steps are by no means a magic bullet when it comes to working out hourly pricing, but they will start you off on the right foot. Use them to plant a stake in the ground, be prepared to adjust as you go on, and make sure never to sell yourself short!