One of the first things many new freelancers, myself included, struggle with is setting their rates. Should you aim high, and maximise your earnings per hour, or aim low to fill up all of your time? Should you compete on price with off-shore teams? Should you charge per hour, per day, per week or per project?
One important step in working out what your rates should be (or even if you can afford to go freelance) is working out what you need to charge just to break even. For many people considering going freelance, they want to know what they need to charge to earn at least the same as they make in their current job.
With that in mind, I’ve built a very simple JavaScript-based tool (also available as a spreadsheet) to help work out what a daily rate translates to as an annual income. Just enter your daily rate, and your estimated costs, holidays, expenses and tax and it will give you a rough idea of what net income you can expect every year. Below the tool is a run-through of the fields with some suggested values.
Freelancer Rate Calculator
Daily Rate
£
Item
Days
Income
1 Year
+ 365
£36,500
Weekends
– 104
£26,100
Holidays
–
£24,100
Sickness
–
£23,600
Sales Admin ( %)
– 46
£23,600
Unpaid Time ( %)
– 23
£23,600
Total Income (annual)
£23,600
Total Income (monthly)
£23,600
Expense
Amount
Income
Professional Services
– £
£23,600
Hardware
– £
£23,600
Software
– £
£23,600
Office
– £
£23,600
Sales
– £
£23,600
Insurance
– £
£23,600
Miscellaneous
– £
£23,600
Total (less expenses) (annual)
£23,600
Total (less expenses) (Monthly)
£23,600
Tax ( %)
– £23,600
£23,600
Net Income (annual)
£23,600
Net Income (monthly)
£23,600
Please Note: Many expenses will be deducted before tax, but some may not be – this tool provides an estimate for net income, but for an actual calculation you should always speak to an accountant.
The Fields
Daily Rate: The daily rate you charge to clients (£100 by default).
Holidays: How many days of holiday a year will you take? One of the most alluring advantages of being a freelancer is the opportunity to take more time off (30 days by default).
Sickness: How many days a year will you be unable to work? And for freelancers, a couple of days of sickness often translates into more lost time, as you try to catch up with delayed work (default 5 days).
Sales Admin: What percentage of time needs to be spent on sales calls, meetings and administrative tasks (20% is the default here, but this is a low figure, especially for people just starting out).
Unpaid Time: As a percentage of total earnings, what is the amount each year likely to go unpaid (5% by default).
Professional Services: This includes accountants, lawyers and any other professional services you need to make use of.
Hardware: How much per year do you spend on hardware, including computers, phones, printers, paper and so on.
Software: Including licensed software like Photoshop and software as a service like FreeAgent.
Office: Including office rental, phone line, internet connection and any relevant taxes
Sales: Any cost of sales, including your own website, PPC, marketing materials, business cards and expenses for meetings.
Insurance: Including professional indemnity and office insurance.
Miscellaneous: Other expenses, including travel, bank fees and so on.
Tax: What percentage of your after-expense income will go on taxes (25% by default)?
