As a freelancer you need to develop a sense of what your time is worth. Knowing what an hour of your time is worth will help you to set rates for your work, to decide whether or not to take on a particular job, and to know when to walk away from work that is simply not paying enough.
Your base rate is the minimum that you need to earn in an hour in order to live at the level and pace that you want to.
It’s worth taking some time to work out your own base rate so that you have a number in your head that you can compare to when considering if a job is worth it.
Your base rate reflects the choices you make about your freelance life. These include:
- How many hours a day do you want to work?
- How mach leave time do you want each year?
- How much time do you need to build your business?
- How much do you want to or need to earn?
Part of the pleasure of freelancing is that you get to make choices about your work, like wanting more leave or a shorter working day. You may want three months off a year to climb mountains. That’s possible, but it means you will have to make enough money in the other nine months of each year to meet your expenses. As a freelancer you are not bound to an eight-hour day, but if you choose to work for four hours a day you need to charge more for each hour.
A freelance business also involves a number of tasks that are not productive and can’t be billed to a client, but which are important to get your business established and running smoothly. These include things like marketing and finding new clients, completing your tax returns and following up on outstanding invoices. You will also want to spend time improving yourself, taking a course or learning to use a new piece of software. Time spent on these tasks is time that can’t be spent working for a client and earning, but these tasks are important for the sustainability of your freelance business and can’t be ignored.
Our free spreadsheet works out how much you need to charge per hour to cover your salary, given the time you want to work, the leave you want to take and the percentage of your time that you will be able to spend on billable work. Download our free spreadsheet to calculate your freelancer base rate, based on your choices for your business.
Of course you have to be realistic. Deciding you want six months of holiday, working one hour a day and earning ten million a year will give you an hourly rate of R90000 and its unlikely that the kind of work you do is able to command that kind of rate.
What is realistic will depend on where you are in your career. If you are starting out you will have to work more and spend more time finding clients. Once you are well established you may find you spend less time finding clients, and are able to give yourself more leave. This is why, in the downloadable spreadsheet we give three example calculations, one for someone starting out, one for someone getting established and one for someone well established. These examples will give you some idea of what your calculation should look like.
Our downloadable spreadsheet includes a space (on the 3rd tab) for you to calculate your own rate. In fact it allows you to calculate three different rates for yourself, so that you can experiment with different scenarios. You might want to work out a realistic base rate for how you currently spend your time and an aspirational rate for where you want to be in 5 or 10 years time.
Questions? Comments? We’d love to hear how this works for you, so please keep in touch below.
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