Be your own boss, set your own schedule and decide how much you will be paid. For the most part, it looks like a fantasy. But for freelancers, entrepreneurs and contractors, this fantasy can become a reality. However, like all dreams come true, the reality is a bit more complicated.
One of the biggest challenges for the entertainment industry is determining the amount of fees charged for your services. Some clients offer jobs at a fixed rate, but many ask for your rates. If you have not yet set your rates, this may cause a panic in the calculation of the numbers and an untimely response.
The setting of tariffs is a delicate but necessary task. However, when rates are correct, the appropriate rates allow you to stay fairly compensated without running away from customers.
So, how can you set a fair hourly rate? And is it the only way to bill and get paid for your work? Here is everything you need to know.
Three ways to calculate your hourly rate
In most conventional jobs, you are paid for the number of hours worked. Your hourly rate takes this concept and translates it into the independent world.
However, this process is not without complications. In a traditional job, you usually work eight hours a day and are paid for each job, no matter how long you work. But as a freelancer, you only need to bill the hours spent on a specific project.
Since you do more focused work during these hours, your freelance hourly rate may be higher than you would get at a regular job. However, you want to make sure that it is not too high for your customer pool.
There are several ways to calculate what you should charge at the time. here is how each one works.
Work behind your goal
One way to calculate your hourly rate is to set a target salary and then go backward to determine the salary you must earn each hour.
To set your target salary, calculate all your monthly expenses. How much do you need to cover your bills and living expenses each month? How much more do you need for work-related expenses, health insurance and other expenses that are no longer covered by an employer?
Do not forget that you must also pay taxes on everything you earn, which can account for up to one-third of what you earn. After totaling all your expenses, add an additional 30% to cover your taxes.
Divide the total by the ideal number of hours you want to work each month. You will probably have less than eight billable hours a day because you do not charge customers for your downtime. The result is the minimum hourly rate you must charge to pay your bills.
Of course, your salary should also include money for leisure expenses, travel, holidays, etc., so your ideal hourly rate is higher than this bare minimum. This infographic Break down everything you need to include in your calculations.
Use a calculator
You can use an online rate calculator to automate some of these calculations. We like this detailed hourly rate calculator for all industries.
Of course, you should not be satisfied with the number that the calculator spits. But if you are not inclined to mathematics, or if you are afraid to forget to include something in your calculations, it may help.
Discover the standard of the industry
It is always good to do a calculation like the one above because it can help you set a budget and set your rates. However, it is also useful to know the standard hourly rates in your area.
Rates always vary. For example, the rate will be lower for new workers and higher for those with specialized expertise. But if you have a general idea of what other people are charging, it will help you set a rate that does not shock your customers.
contently Rate database offers a good distribution of rates in certain industries, including drafting, revision and design. You can also check the industry forums or simply talk to people in your network. Openly talking about pay is frowned upon in traditional business circles, but social workers should do it. After all, it's the only way for anyone to know if they are being paid fairly.
Should you bill at the hour?
Calculating your hourly rate is one thing, but deciding whether to charge at the time is another.
Except in cases where you absolutely must, we do not recommend charging on time. Why not? Once you have taken some paid freelance projects on time, you will probably understand why.
When you charge an hourly rate, it creates a strange relationship between your money and your time. An hourly rate encourages you to work more slowly: the faster you work, the less you get paid. However, you can not work too slowly, otherwise your customers will feel that you are taking advantage of it.
You have to try to find a compromise between maximizing the time you spend on a project and lengthening it too much.
However, if you spend more time on a project, it's not really a good thing. The faster you finish (with quality results, of course), the more time you have for other projects or much needed downtime. And most customers like it when you bring things earlier than expected.
Plus, when you charge every hour, you face the constant distraction of trying to charge accurately. When you take a 10-minute break on social media, whether you're out walking your dog or a little longer at lunch, it affects your calculations. This can become an important source of unnecessary stress.
If you can avoid recharging at the time, do it. Try one of these methods instead:
Flat rate: Bill a specific amount per project. You always set a deadline for completion, but you earn the amount, no matter how many hours you spend on it.
Per day, per week or per monthYour client pays you a fee to keep your services for a specified period, regardless of how many hours you spend each day.
Performance-based: The more you get good results for a customer, the more you will do.
Each pricing method has a situation in which it is best. However, flat fees tend to be generalized for most projects and in most industries. You must maintain a strong relationship of trust with a client before trying one of the other two methods.
You may also want to add a performance-based bonus in addition to your package. For example, you could receive a fixed amount for each blog post you write and a predetermined bonus for all those who become viral.
You can also estimate how many hours you will spend on a project to define your flat rate. However, remember that your client does not really pay you for the hours worked; they pay for the benefit they derive from your work. This advantage could be worth even more than the hourly rate you would set.
Of course, it can happen that the hourly rate is the most appropriate for a specific task or customer. By gaining experience, you will learn the best way to set your rates in all situations. In any case, always have a contract with your client that indicates how, when and how much you will be paid before starting work.
Whether for ancillary activities or full-time freelance work, it is always important to set the right rates for you to be paid what you are worth. Whether you have to bill at the hour or not, this guide will help you get a fair price for your job.
Are you looking for better tips? Check-out this budgeting cool hacking following!