What Are You Worth?

If you are a freelance graphic designer, marketing consultant or web developer, at some point you will have to determine what you are worth per hour. Being the best in the field, having the most amazing marketing plan, and even having a long list of clients may not be worth anything if you are giving away your services too cheaply. One key to survival in this industry is finding the appropriate billable rate, and sticking to it.

How Much ARE You Worth?

To figure this out, you must first start with your desired (deserved) salary. We all want to make a million bucks a year, but for most of us that is just not realistic. But what is realistic?

Step 1

I recommend that you determine the going salary for your position. Using the free salary estimator at Salary.com is a great place to start. You might also contact people that are hiring in-house and find out what they are offering for your position.

Step 2

Next, you need to determine your base hourly wage. This is done by dividing your target salary by the number of hours you will bill in a given year. The standard number of business hours per year, excluding holidays, is 2080. However, almost no one bills every hour they work. The average number of hours billed in a given year usually ranges from about 1200 to 1600 hours. If you don’t know how many hours you bill per year, I recommend using 1500 as your starting point.

If your target salary is $75,000 and you plan to bill 1500 hours, your base wage per hour is $50.

Step 3

You need to add in your overhead. If you have been in business for a couple of years, you probably have a good estimate available in QuickBooks. If you don’t, just estimate as well as you can. Think about how much do you spend on rented space, computer equipment, health insurance, travel, conferences, etc. For the average person this will be an additional 50-100% of your hourly wage.

For most people you will multiply your hourly wage by something like 1.5 or 2.0 depending on how much or little you estimate your expenses to be. If you work from home, 1.5x will probably be pretty close. If you rent office space, your multiplier will be more like 2.0x. If you know your exact yearly overhead, go back to step 2 and add the total overhead to your target salary and re-divide by the number of billable hours per year.

If your base wage is $50 per hour and you work from home, you would then multiply that $50 by 1.5 to get a new total of $75.

Step 4

You need to add a buffer for additional profit margin and company savings. This is not money that you should be taking as salary, it is ideally money that is saved within your business for future growth and unexpected expenses. Generally this is 15-25% to your hourly wage, and I recommend an even 20%.

Continuing from the example before: If your wage after adjustment for overhead is $75, you would now add an additional 20% resulting in a final wage calculation of $90.

Things to Consider

If you are new to business, you may want to start out lower and increase your rates as you gain new clients. Eventually your schedule will be full and you will be getting paid what you deserve – but you have to stick to it!

I also recommend offering package pricing on the things you do the most. This will lower your hourly a little bit, but it can really help to seal the deal on new projects.

Mistakes

I see WAY too many people in this industry not charging what they are worth. This is not only bad business for them, but it harms the entire industry. If a person is charging $50 to design a logo, they are either charging WAY too little or they are not providing quality services. Either way, this is bad for all of us. The design industry does not need consumers that believe $50 for a professional logo is a reasonable price – or else we will all go broke!

Before you start charging clients for your work, do us all a favor and give your deserved wage some serious consideration.

Have something to add to this post? Keep the conversation going below – I would love to hear your thoughts.

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