Being self-employed isn’t easy, especially with more and more of us heeding the call to set up alone every year. And when the market’s this competitive, often it can be something as simple as your day rate that wins you business or loses the deal. Finding that sweet spot is harder than it might seem.
Go too low and you’re in danger of under-selling yourself – you get what you pay for, don’t you? That, or you’ll end up working long hours for peanuts. But go too high and you might as well not pitch at all – why pay more for the same work? You need a price that says you’re good and that people will be willing to pay. But how do you work that out? How do you decide what you’re worth?
Do your research
Knowing the industry standard at large is a good place to start when setting your day rate, and sometimes, all you have to do is ask. Bribe your contacts with a swift pint – people who’ve been there and done that will be great for helping you find a reasonable ball-park figure. Or, if you prefer the anonymity of the internet, professional freelance forums can work in the same way.
Salary benchmarking guides, like the one at creativepool.com, are a handy way to find out what’s going on in the industry and figuring out what you should be charging according to your skills and experience. Then use an online calculator to work out how much you need to charge to fund your lifestyle.
Hourly or day rate vs project rate
You might prefer approach to the other, or maybe you use a bit of both, but there are strengths and weaknesses to each.
An hourly or day rate ensures time spent is money earned. It’s particularly effective for subjective projects like web design, when it’s tough to estimate how much time it’s going to take overall. We’ve all had well-meaning clients who think that their ongoing suggestions are helping, but they’re actually creating more work for you. With an hourly or daily rate, that’s not an issue.
After all, they’re paying for your time. However, there are only so many hours you can work in the day, or days in a week, which restricts how much you can earn. Plus, there’s no incentive for efficiency. If you give a timeframe to a client but complete the work in half that, your reward for early completion is less money. Not exactly a lucrative business strategy.
On the other hand, a project fee quotes a single figure for the work and is great for rewarding your efficiency. For example, you quote a project fee of £200 thinking it will take two hours to complete. The client thinks the project will take 4 hours, so £200 seems like a good deal. Everyone’s a winner! But beware those over-involved clients. Making changes every two minutes will have you swearing allegiance to the hourly rate.
A bit of background research can go a long way towards setting your day rate easily. Assess how much business your work is likely to bring to your client and use that to influence your quote. This method of setting a fee makes a lot of sense when you’re working for larger companies. Your skills are an asset that will create a significant return for them, which means you’re valuable. Don’t be afraid to reflect that in your fees. To quote a famous shampoo, you’re worth it.
If you’re looking for advice on how to set up the financial side of your new company, whether as a freelancer, contractor or small business, get in touch with My Accountant Friend. As one of the UK’s largest online accounts, they have a wealth of experience that can help you find your feet. 0207 100 6011.