How to calculate your Professional Fee | Service Charges? When you first start working on your own, one of the biggest concerns is usually how much to charge for your services or how to calculate your professional fees. Whether you are a programmer, graphic designer, digital marketing expert, editor, translator, etc., your professional services should have competitive and profitable rates at the same time. To be able to collect good professional fee and be successful as a freelancer, there are a number of considerations to consider when calculating your professional fee or service charges.
Determining Professional Fee | Services Charges
At the start, you have to draw a monthly budget of what your living expenses are food, payment of services, mortgage and transportation. It also takes into account things like purchase of labor inputs, medical expenses, debts, education, clothing and entertainment. Once you have it, add 20% or 25% of utility (It would be advisable, but in the end you decide how much you want to win).
This data will help you to know how much you need to cover per month to pay expenses and make a profit. This amount determines a kind of “desired minimum wage”. As a second step, define how many projects you can take in the month. Take into account not only what you are able to complete, but how many you can actually sell.
Then distribute the calculation you made at the beginning of the desired minimum, between the numbers of projects. Now you have an approximate cost for each project.
Take care of the Unexpected
Within every project, there can always be complications: a damaged equipment, an input that had not been contemplated, software that you must acquire, etc. You better take that possibility into account and add 10% to the cost of each project.
If you Want the Price per Hour
To calculate an hourly rate, divide the cost of the project by the number of hours you will need to complete it. To do this, multiply the number of days you will take by 8, which are the approximate hours you are going to work per day.
Some freelancers advise multiplying this by a factor of 1.5 or 2.0, since, as an independent professional, you must pay taxes and freelance work is less hours.
Do not worry, agencies and companies also charge their operating costs on the prices they give to their customers? You can work a little more, but it is never advisable to work more than 12 hours a day. Remember that in order to deliver quality, you should not overwork yourself.
A case study
If the “minimum wage you want” that you estimated at the beginning is $ 1,500 dollars and you can carry 2 projects a month, estimating that the number of hours you will use to complete them is 150; Dividing 1,500 out of 150 gives you $ 10 per hour.
If you multiply that by a factor of 2.0, it gives you a rate of $ 20 per hour.
If one of these two projects will take you only 70 of those 150 hours, then multiply the US $ 20 by 70. The price of the project will be US $ 1,400.
As you can see, you would be drawing almost the minimum US $ 1,500 you want, with only one of the projects. In this case, the second project will allow you to earn money to save, improve equipment, etc.
In short, $ 20 per hour is a profitable rate in this case.
With the hourly rate in mind you can estimate how much you will charge for a project in the month and know how much to recharge if the project requires more time.
Or, on the contrary, if the customer asks for a discount, you can negotiate to lower the price in exchange for fewer hours worked.
If you want to know how well you’ve done your calculations or feel that you need help, you can use a professional fee calculator online.
Just enter some data and it helps you to take a calculation by project automatically, based on your desired expenses and profits.
Difference between Charge Per hour and Charge Per Project
Depending on the type of work you do, it is best to present the fixed or hourly budget.
It is not the same to offer a product – a design, the correction of a document – that a service – like the case of the consultancies.
It is not the same to start a job from scratch to work on something that is already started.
If the job starts from scratch, you will have to submit several proposals before starting the job as such and this takes time.
Determine with your client what goals you want to achieve, what you will receive at the end of the project, how many proposals you are going to present and how many change sessions you are entitled to.
If the project has a set deadline and start from scratch, it is best to prepare a fixed budget, not hours. Then you must write the working conditions.
Charge for Project Phases
Another option to define a budget is to set prices in phases. Suppose a project requires the creation of a web application and then, in addition, you must train the client about its use.
Then you can divide the budget into 2 stages: Creation and training. This allows you to set a higher price for the most difficult work, which in this case is the first stage.
Even here you can make a fee per work with the schedule and one per hour for the training.
Divide and conquer
This type of payment divided by stages is very convenient when the client requires several services, because if you are asked to negotiate the price of your professional fees, you can exclude parts of the work:
Less training hours, simpler software, etc
That way, the customer gets a better price, but does not diminish the value of your professional services.
Do not forget to always delimit the scope of each stage, detailing what the customer will receive in each one.
Sometimes lowering the price in exchange for a testimonial or a couple of referrals is a good practice.
Different rates Depending on the type of Project
Sometimes, when you start out as a freelancer, when determining a fee for professional services, it is often forgotten that there are technical aspects that can make the job more difficult.
Imagine that you are a translator and a client is in charge of translating an article about a tourist destination. On the other hand, another commissioned the translation of a small technical manual on the use of a chemical.
The technical difficulty of both documents is very different. You cannot charge the same price for both, even if they have similar number of pages.
Always check the level of difficulty of all the projects you will do.
Little by little you will gain experience on which works will be easier and which will not be so much, and you will be able to be tuning the prices by your professional fees.
Competitive Prices in the Market
In order for your rates to be competitive and profitable at the same time, you must keep informed about the prices for professional services in your local market.
Check on the Internet how much other freelancers or companies offer services similar to yours. Even find out agency prices.
Write everything down as a reference, but be flexible about the possibility of negotiating. Above all, if you are a recurring customer and often give you a lot of work, you can give a special rate.
Always check the market prices, as the economy is constantly changing. Do not freeze your rates for years.
Remember that in addition, as you gain experience, you have more technical skills that help you to offer a higher quality job.
Update your prices on a regular basis, investigate different methods to establish professional rates and do not be afraid to charge better for a more specialized job.
Consult Customer for your Budget
Generally, when a client is going to make a project, he has an idea (realistic or not) of what he will need to run the project.
If it’s a company, there’s usually a budget assigned, but when it’s an individual, it sometimes tells you something like, “I do not know, it’s what I want you to tell me.”
In that case, tell him that the project can include X or Y amount of money, depending on how much you need and give some examples of what you can offer.
That will help you close the idea of how much you have and what you can get with it.
Knowing the clients’ budget will help you know if you want to accept the project, but also if your calculation of professional fees is too high or too low, and make the necessary adjustments.
Carry a Project Log
Once you are working on the project, keep a record of the real time you invest, not only at home, but in meetings, calls, reports, etc. You can use a time tracking app for this.
Also note the inputs you spent on doing it: printing sketches, drawing samples or others.
At the end of the project, evaluate what won versus final costs. So you can determine how well your rates are and how profitable the project has been.
If necessary, make adjustments to the results you obtain.
Success and work!
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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