I have an hourly rate of $50 and I need to double it. Fifty bucks an hour! Wow! That’ is huge! Is it? Consider how much a garage charges to service your car. I recall back in 1997 the prestige motor vehicle dealership I was selling cars for had an hourly rate of $105 and were putting it up to $120. The odds were an apprentice would be doing most of the ‘grunt work’ like changing oil and filters, taking wheels off and checking brake pads and so on. The qualified ‘technicians’ (a cut above mechanics, apparently)went from car to car doing the more technical jobs or overseeing the apprentices. There was even a $20 charge added to every bill for ‘ workshop sundries’, meaning cleaning rags, hand cleaner in the washroom and so on. Nobody escaped a basic logbook service with much change out of a grand. But if you want your car serviced, you pay.
I went to the dentist the other day and had my daughter’s teeth cleaned, checked and one of them extracted. I have health insurance that pays 65% of the cost of most things and all of the cost of ‘basics’. One would have thought a clean and scale was a basic item and it was. For her. For my wife it was additional as she needed some gum treatment. $240 additional for less time in the chair! But if you want your teeth fixed, you pay. Why so much for a job that took maybe ten minutes and used up very few materials? Or did it? How much was the chair, the x-ray equipment, the rent on the premises? The advertising to compete with outer dentists and the cost of keeping the doors open? The year’s in Dental School?
What about the workshop with the ten hoists, full store of tools and spare parts, a dozen or more technicians and all the other overhead that goes with running a service center? We seem to accept we have to pay for our cars and our teeth but not for getting something written. After all, the writer loves writing or they wouldn’t be doing this, right? Anyone can write, we all get taught at school so what’s the big deal, right? We all brush our teeth and changing the oil isn’t difficult either but perhaps for the more technical things we need a professional?
I have on my desk a 27inch iMac, along with a MacBook Air laptop, an iPhone 4, a printer that scans (sometimes) and copies as well as a back up one just in case. I also have to have internet access, mobile phone connectivity and of course paper, ink and stationery. It all costs money. I have to have electricity, insurances and a motor vehicle, my license, maintenance on the car as well as fuel and clothes to wear. Everything costs money. On top of this I have professional association expenses, licenses and let’s not forget ongoing education expenses. There is the aforementioned health insurance as well as needing a basic wage to live off. No doubt you have these items of essential equipment too. Even if you got them while still working a full time job, they had to be paid for and one day they will need to be replaced.
If you charge $50 an hour and would like to earn the equivalent of just $52,000 pa, then you need to make $1,000 per week, every week. That means 20 hours of work. So what do you do with the rest of your week? Never forget for every hour you can bill you will spend at least the same amount of time looking for that work. Then there are the hours you spend on administrative tasks like sending those clients their invoice, waiting for the payment, managing the money when it comes in and so on. So that covers your salary and a pretty modest one at that. Now what about all those expenses? When you are self-employed you have to pay for all the equipment, services and insurances and such. Even if we accept you work harder as a self employed person than as an employee, at least as far as the number of hours you put in, we should not be factoring more than a 40 hour week. Why work more? Didn’t you take the risks of self employment to have more time for yourself and your family? A better work/life balance? Of course you will probably work far more but let’s use the same number of working hours as the average wage slave.
Forty hours a week means 20 hours of billable time. At $50 a week that gives you just $1000 a week. If you are off sick, don’t work public holidays and maybe take a vacation each year then in the 48 or so weeks a year you will be operating you can expect, providing you have those 20 billable hours every working week, an income of $48,000. Actually that is turnover. Gross turnover. Even if you were able to bill for all 40 hours, that is still just $96,000 for the year. If you pay yourself a salary of just $52,000, you will need to deduct income tax from that. You should add to that 9% superannuation if you are an Australian, so that is $4,680, leaving you $39,920 for all the other expenses. Workers Comp insurance, professional indemnity and public liability insurance, car insurance, property insurance on your office and equipment, utilities like electricity, phone, broadband, stationery supplies, phone, computer, vehicle and transportation costs, advertising, web site hosting and so on. If there is anything left it is net profit and guess what? You’ll have to pay tax on it.
This presupposes you bill 40 hours a week. Less than that and you are not in business, you are saving the government the trouble of having to include you in the unemployment statistics. Now, charge $100 an hour and you can work less, make more and enjoy the process. If it takes you at least an hour to find a billable hour’s work at $50/hr, I am sure it will take just as long at $25/hr. Even if it takes longer to get the higher rate, in time as you establish a clientele the time spent finding will lessen and the hours spent grinding will increase and so too your income. So why not value yourself at $100 per hour?
You can read more about this concept of charging what you are worth over at Carol Tice’s web site. Click on the Writer’s Den on the right of this article and step up in the world of freelance writing online.