When you just start in the world of entrepreneurship and start offering your services as a professional, one of the first questions that arise is how much to charge for your professional services, that is, how much to charge for your work.
But calculating professional fees is not easy, that’s why we offer you this guide so you can learn how to calculate how much to charge for your professional services.
Graphic design, photography, text translation, organizing events? No matter the area in which you are starting to work on your own, it is important that you establish prices for services that are profitable for you and at the same time attractive to the client.
Next, we give you a general guide that will help you answer the familiar question: What price do I put on my services?
Guide to Calculate the Rates of Your Professional Services
Costs and time available
The first thing you should take into account before setting your rates and starting to work on your own is knowing how many projects you can carry out at once and how much money you need to keep the business running.
First: Number of simultaneous projects
Suppose, for example, that you are an interior decorator and you are entrusted with projects to redecorate houses that are going to be sold.
Think about the time you need to do numbers, visit places, coordinate, meet with workers, answer calls, etc., and to that add what you use for your tasks.
That means that in a certain period, you can only carry out a limited number of projects. Based on the above, think about how many they could be, for example, in a month, and find the number of hours you will work on them.
Second: Calculate how much money you need to live
Then take out your cost of living or budget for that same period, based on your personal needs: food, services, medical expenses, housing, transportation, school expenses for your children, etc.
Don’t forget to include a fund for emergencies and unexpected expenses.
Third: Add the profit margin
Once you have it, add a profit margin that can be 10, 20, or 30%, depending on the difficulty of the work you do or how often it is sold.
Fourth: Calculate the cost per hour
Using this budget and the amount of time you spend on your projects, you can estimate a cost per hour. To calculate it, distribute your monthly budget between the number of hours you will work in that same period.
Fifth: Add taxes
Then multiply that figure by 1.5 or 2, since you must pay your taxes for fees, in addition. Don’t worry, companies also charge their operating costs at their rates.
Practical Example
Imagine your budget is €3,000 per month and you work 160 hours covering 2 projects in a month. You divide €3,000 by 160 gives you $18.75 per hour, if you multiply that by 2, you get a rate of $37.50 per hour (you can round up to €38 or €40).
With that rate and distributing the 160 hours between 2 projects, you are in a position to estimate how much you will charge for each of them in the month, present a budget and at the same time know how much to charge for your professional services if they request services or changes that require hours additional.
Surcharges For Additional Work
The above is an easy way to calculate a rate and allows you to set both a fixed budget and an hourly charge.
However, keep in mind that it is not the same to offer a deliverable product such as a web design, or a collection of photographs, as an intangible service, as in the case of consultancies, for example.
Also, there is a difference between starting from scratch and working on what you already have.
If you start something from scratch, you will likely have to make several proposals for approval before starting with the work itself, while when it is an intervention to something that already exists, you can take a general look to estimate the level of approval. difficulty and time it will require.
With this in mind, determine with your client what are the objectives to meet with your hiring, what he expects to receive at the end of the project, and at the same time agree with him on how many change sessions will be carried out and what the cost will be. to request additional changes to that.
I Work By Job And Not By The Hour
If the project has an established deadline, it is best to prepare a budget detailing the conditions of the service. You can determine this based on the duration of the project in calendar days and the level of work required, and not on the hours as such.
For example, if you are a designer, maybe you create a logo in half an hour of the network, but you are not going to charge only half an hour, because it is a service that involves specialized knowledge and it is also possible that that half hour could become four meetings with the client, one or two design changes, change color, fonts, etc.
In other words, what you should take into account is not the time it would take you alone, but all the time it will take from the time you start until the design is approved.
For those cases, the ideal is to establish a rate for products, without always neglecting to detail what the service includes and what is not.
Another option that you can implement is to charge for phases or work progress. Suppose you are a mechanical engineer and you are commissioned to design and coordinate the construction of certain machinery and then you must teach how to operate it; You can present a budget divided into stages: design, construction, and training.
Do not forget to always define the scope of each stage: what the client will receive, how many times they can request changes, how many work meetings they will have, etc.
Differentiated Rates
Something that is not always taken into account when starting freelance work is the difference according to the degree of technicality that different types of projects require. Don’t set one rate for everything.
For example, if you are a photographer, it is not the same to go to take photos in a natural park as in a studio or closed place.
Differentiated rates apply according to the degree of difficulty required by each type of work that you are entrusted with.
Consult With Your Client About Their Budget
This might seem a little awkward at first, but when it comes to negotiating the price, don’t be afraid to ask the client what budget they have considered to carry out the work.
Of course, this is to know if it is convenient for you to accept the project and for the negotiation as such (don’t doubt that the client will ask for a discount until he can’t), but also to take a mental note about whether the rate you have calculated is too high, very low, etc.
In this way, you can make the necessary adjustments. Of course, without going below your operating costs, that would be negative and detrimental to your economy.
Remember, it is better to invest time looking for more profitable projects than to waste it on one that will not bring you profit and you will still have to spend inputs and effort.
Record Everything In A Project Log
Once you start working, try to keep a record of the actual hours you invest, that time that was not used in the development of the product or service as such but that involved dedicating it to the project: calls, writing reports, working lunches, supplies spent (take impressions, make prototypes, etc).
Write down in a notebook or log the time and expenses that you use, draw up a settlement of the project, and make the pertinent adjustments if necessary. Or at least that it will serve you for the next job.
Market Rates
As a final piece of advice, stay informed about labor market prices. You can check the rates of companies that offer similar services online and see if yours are competitive.
Focus on your regional market, as economies vary greatly from country to country.
Record everything as reference prices, but be flexible when it comes to assigning the final budget, especially if it is about recurring jobs or with good volume. A client who guarantees you one job per month may have better prices than one who orders one job per year.
Conclusions
If you are starting and feel unsure how to get all the calculations, you can look for a tool to help you initially calculate your professional fees, there are several online fee calculator services.
Regularly review what you are charging. Do not keep the same rate for years, because the economy is fluctuating and you must stay afloat.
If operating costs go up, you should raise your rates, especially since with each year and course you take you become more adept and your work is worth more.
Get your numbers, update yourself with prices, and don’t be afraid to charge more for more specialized work each time. Good luck and much success!
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