There are some types of freelance professions in which you do not work with deliverables or whose nature requires you to work and charge by the hour. This occurs mainly with services such as consulting or coaching, remote assistance services, technical support, training, tutoring, administrative office work, among many others.
If your work is of this type, you will surely be interested in knowing how you can calculate the price of your services. That is: how much to charge per hour.
Here is a basis for you to estimate a value for your services per hour.
1. Estimate your Living and Work Costs
The first important point is to know your living expenses and operating costs for carrying out each project, including transportation if the work is in person. Keep in mind that you must cover these when estimating the charge per hour. Get an estimate of all this per month. Make sure you don’t leave anything out.
Here is a list of items to keep in mind:
- Payment of municipal taxes, rent or mortgage
- Basic services such as water, energy and gas
- Telephone and internet expenses
- Medical and health expenses, including medical insurance or life insurance
- Public transport or gasoline, as well as vehicle maintenance
- Office or workspace rental,
- Work equipment or tools
- Stationery or consumables such as ink
- Software licenses or subscriptions to online tools, servers, etc.
- Advertising expenses (if you do it)
- Education
- Veterinary expenses, if you have pets
To the above, add an amount of monthly savings and a fund for unforeseen events.
Add it all up and you’ll have an idea of what your operating costs really are per month. Multiply it by 12 months and you will have your costs per year.
2. How many Hours Do You Actually Work?
The second step is knowing how many hours you actually have available to work within the week. Regularly, a full-time worker earns a total of 40 to 48 hours per week. Depending on the type of work you do and the volume of clients you have, your range of working hours may be similar.
In any case, you can take a look at your schedule to find out how many hours you actually work, since freelance work is almost always a little less than full-time work.
Keep in mind that you don’t work every day of the month, or of the year. There are days off and holidays that you will want to have free. There will also be some days when you may need to take time off to attend to personal matters. We all have them.
A regular worker usually has between 210 and 225 effective working days per year. As a freelancer you may have a few less, but the difference shouldn’t be too much.
Subtract from the 365 days of the year your weekends, the holidays in your country (you’ll want to spend time with your family or friends) and possible days you need for other procedures or due to illness. Also add days that you have plans to travel or take “freelance vacations”.
Then, multiply the days obtained by the amount of hours you actually work during each one. This will give you an idea of your effective working hours.
3. Get your Net Cost per Hour
Once you have obtained your annual costs and the hours you actually have in the year, divide the first data by the second.
This result is the operating cost you have per hour and is the minimum below which no work you do should fall, since you would incur losses. As we have already said regarding projects that you should not carry out, the worst job is not the one that is not done, but the one you do and you have to put money out of your pocket. Keep this in mind and write down this number obtained to know what amount you should not go below for any reason.
4. Add Payments to Potential Collaborators
When you are starting out as a freelance worker, you will most likely work alone. But as you gain clients, you may need help from someone else, at least on an occasional basis.
This means that this cost will also be part of each project you carry out. You must add it, because otherwise you will have a lower profit margin. It may even mean losses, if your profit margins or hours worked are few.
For example, if in a QA project you will need someone to perform tests with you or if you are working on conducting training and will require a collaborator to help you with the presentations, calculate the hours you will need this resource.
Think about how many times a year you could hire external help or partner with another user and check their costs to add it as well.
5. Add a Safety Margin
Naturally, as in any job, there can always be some margin of error or setbacks. Therefore, you should add an additional safety margin to the estimated cost per hour. This margin depends on you, but it is recommended to apply a multiplier of at least 1.5 or 2.
For example, if you have estimated that your costs per hour are $15 and you decide to multiply by 2, you would get a value of $30 per hour of service. A very reasonable price if you have enough working hours.
Also take into account the technical level and difficulty to establish the multiplier. For example, if your career is in programming, chemistry, high-level consulting, among other specialties, you could use a multiplier of 2.5 or 3.
Don’t be afraid to do it thinking that the cost is too much. Remember that there are agencies and companies that charge these costs in addition to those of payroll and facilities.
*Also try our freelance calculator to find out how much to charge for your project
6. Review Market Rates
Before finalizing the rates you have already estimated, check the local market. Search and compare hourly prices of professionals in your city, in your same specialty and with a range of experience similar to yours. Then, also review some more from countries or cities with market conditions similar to yours.
Once you analyze these competitiveness factors at a local and regional level, you will be able to better determine how much is the price you should charge per hour.
For example, if you see that your hourly rates have a cost of $40, but you see that in most cases others have a cost of $50 or $60, don’t be afraid to make a small increase to your rate.
This will give you a margin to negotiate in the case of new clients when agreeing on your fees.
When presenting your final offer, remember to detail not only the hourly rate, but what inputs or tasks will be involved. Add a section where you detail that hours, material, equipment or tasks outside of what is established will be calculated and quoted separately and detail examples. In this way, the client will have an idea of what new requests will cost them additional money.
In Conclusion
As you have seen, the calculations to establish your charge per hour are relatively easy. However, you must be careful not to leave costs out of it. Also, keep in mind that in order to offer competitive prices you must have enough clients and effective working hours.
If you need to be independent and have a good level of income, do not fall into the temptation of working few days a week or few hours a day. Also remember to always give after-sales follow-ups to your clients and maintain a presence on social networks and other electronic media.
On SoyFreelancer.com you can now add service packages by the hour. Simply add a new service to your portfolio and after setting the value of it, choose the option “service per hour”. Then, select the days and hours you have availability. Visit your portfolio to add a new service.
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