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	Pricing Your Projects

	by Rachel Goldstein

Determining how much to CHARGE for your services is often one of the biggest challenges for a new freelancer or consultant. If you charge too much you won't get hired and if you charge too little you'll starve. Take the time to read this article and you will figure out what you need to charge to thrive.

WHAT DOES THE INDUSTRY LOOK LIKE?

If you are a new freelancer or consultant, you have probably searched the Internet trying to look for AVERAGE rates of professionals in your field. Don't even bother. I will let you in on a secret -- now that the Internet is here, there aren't any "average" rates because demographics are too widespread. The United States has banned competitors from discussing rates amongst each other based on ANTITRUST laws. This is why you are having such a hard time finding rate surveys, there aren't any. Instead I will show you how to figure out what your rates should be by using a formula.

HOW MUCH DO YOU WANT?

Start by figuring out what you want your ANNUAL salary to be. To determine your salary, you might want to pay yourself what you earned as an employee or take a look at www.salary.com to find out what an average salary for your profession is.

UNDERSTANDING YOUR COSTS

For this formula, you will need to figure out what your overhead is. OVERHEAD is an expense that cannot be found BILLABLE to a client, it is just a cost incurred by running your business. Please fill in a monthly amount for each of the following items. If you aren't sure what your overhead is, then look back on last year's credit card bills and checking account statements. Then add each and multiply your total by 12 to get your yearly overhead.

rent or mortgage
income taxes (use 45% of your annual salary)
utilities
insurance
office supplies
marketing
postage and shipping
telephone
accounting and legal services
travel
office furniture
dues and memberships
licenses
health plan or medical insurance
disability insurance
retirement savings

NONPRODUCTIVE TIME

There are duties that must be completed for each client that are not productive towards COMPLETION of the project. Figure out the actual work HOURS are spent on the following duties. You will need this total later, so keep the number handy.

sales
emailing customer
phone calls
meetings
administrative duties
training

PROFIT

Now you will need to figure out how much of a profit you wish to make. Profit is the amount that you make OVER expenses. I recommend 20% in order to make an acceptable profit MARGIN. Profit is necessary for a successful business so make sure to count profit into your formula.

VARIABLES

There are always variables that you will need to take into consideration when figuring out what you will charge. You must take into consideration the following:

What does your COMPETITION charge?
What is your niche?
How many years EXPERIENCE do you have?
What skills do you have?
What CLIENTS do you want to attract?
Are you working online, via phone, or local?

YOUR FEES

Follow these steps to figure out what your HOURLY rate should be.

annual hours - nonproductive time = BILLABLE hours
SALARY + OVERHEAD = total (1)
total (1) x PROFIT margin (10% to 20%) = total (2)
total (1) + total (2) = total (3)
total (3) / billable hours = your hourly RATE

For example, let's pretend that your salary is $30,000, you work 2,080 hours a year, and 500 of those hours are non-productive. If your profit margin is 20% and your overhead costs you $15,000 -- then this is how you figure out the hourly rate:

2,080 - 500 = 1,580
$30,000 + $15,000 = $45,000
$45,000 X 20% = $9,000
$45,000 + $9,000 = $54,000
$54,000 / 1,580 = $34 per hour

FINDING BALANCE

The bottom line to your freelance business is that you want to make a good living. If your hourly rate seems too low then RAISE your rate till you feel comfortable with it. If several clients are way too eager to hire you, rethinking your hourly rate might be a good idea. On the other hand, if clients are very interested in you at first and then stop communicating with you after they hear what your hourly rate is, then you need to LOWER your rates. In other words, feel customers out to see whether your fees are correct or not.

ADJUSTING THE NUMBERS

If you have determined that your fees are too high then you might need to lower your overhead in order to lower your fees. Try cutting some of your unnecessary EXPENSES in order to make ends meet. When you make the change over to freelancing, sometimes there is a little suffering at first. Don't worry; it doesn't usually last long if you know how to save when times are good. Good Luck.

Rachel Goldstein has compiled a website with 1000s of freelance jobs, articles, and resources. She may be contacted at www.Allfreelancework.com.

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