You left your salaried job for more freedom, interesting work prospects and probably to be able to work in your PJ’s when you fancy it. But discussing money, value and negotiating finances is not the most fun part of self-employed life for most freelancers. After all, we’re British and we don’t like talking about money. But to ensure you are earning enough to cover all your costs and save for a rainy day too, you’ll have to bite the bullet and get to know your real worth. Here are some of the key considerations when it comes to setting your freelance day rate.
How much money do you want to make?
Seems obvious, right? There are some calculations to do first. Start with your previous salary before you went self-employed, you’ll probably think it wasn’t enough so add a little and research freelance day rates in your industry. These can vary even by location, with Londoners commanding more per day than those in the North of England, for example. Calculate your cost of living with a simple spreadsheet of all your outgoings, not forgetting those impulse online shopping purchases or nights out with friends. It all adds up and should be planned for. You’ll then have an annual figure in mind to work towards when calculating your day rate.
How much do you need for business expenses?
There may be very little expenses when you work from home, but consider bills such as website hosting, childcare costs should you need a few hours to concentrate alone, mileage and parking if you need to regularly see clients or prospects, plus tax bills. Not forgetting the first year of self-employment means you pay half of the next years tax ‘on account’ or up front. Start saving for a pension right from the beginning of self-employment, then the regular payments won’t feel like a hit later down the line. Overestimate if you need to think about these costs over a year, as you never know when client demands change to require you to travel, or you need to pay for some advertising to sell your services.
How much time do you have available?
You need to work out your billable hours. These are the hours in a day that you actually spend on work. Take in to account time each day for admin based tasks such as invoicing, emails, new business and social media promotion. If you need to pick the kids up from school, your day will probably end around 3pm. As well as hours, think about the holiday days you’d like to take across the year, or why not work a 4 day week and adjust your day rate to make that a viable option? Then there are sick days to consider, they will happen and you won’t get paid like a salaried job, so raising your day rate means you won’t feel the hit should you need a day or two in bed.
There are a number of online calculators like this one, that will help you do the maths once you’ve thought about the points above. Remember, it’s entirely valid to want to earn the same or more money as you did on someone else’s payroll, in less time as a freelancer. Don’t be afraid to set your goals towards both earning more, and being able to enjoy life.
If you enjoyed this post, why not read Why do so many freelancers not have a pension?