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Calculating Your Freelance Fees: Key Factors to Consider for Success

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Your compensation as a freelancer or self-employed will largely determine your success. If you ask too much, you may not be marketable to competitors – if you sell yourself below value, this will have a negative effect on your overall balance over the medium term.

So you should think about your share amount at the beginning of the foundation and you need the income side for the business plan.

Fee calculation for freelancers: key facts

There are a number of factors that all need to be taken into consideration when calculating your fee as a freelancer.

Consider the administrative effort that comes with being self-employed.

  • Your high time expenditure on procurement, bid preparation, scheduling, communication with service providers and subcontractors, and the entire process from invoicing to accounting and taxes.
  • Networking, part of the acquisition, also costs money but above all time: you should also calculate the effort you put into creating and maintaining your website and other marketing measures.
  • In the daily work of a freelancer there are many tasks that are not directly related to an order, but still have to be done. Your business operations, from reading and replying to emails to maintaining your facilities (even if it's just updating Windows or Mac on your machine) also take time and money. By the way: Experience shows that this expenditure of time can usually amount to up to 40 percent of your working hours.
  • This also means that you have to inform yourself almost every day about the current state of the art, the legal framework and relevant political decisions (currently, for example, closures caused by Corona). This too takes time.

Pay attention to the costs you incur as a result of your freelance work.

You also need to know how much money you actually need to spend in order to get your job done. This cost side will largely decide how much you need to earn to have a positive operating result in the end. Then calculated which

  • Current expenses for office rent, company equipment (furniture, operating material, etc.),
  • Costs for communication (telephone, mobile telephony and internet contracts),
  • Expenses for consumables, software equipment, maintenance and repairs,
  • Costs for tax consultant, lawyer, commercial insurance,
  • Reserves for new acquisitions in which you will have to invest for the foreseeable future,
  • Costs for further and further education, specialist literature and seminars, including travel costs
  • Expenses for employees, subcontractors, other service providers e
  • the tax burden on companies
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get closer.

Don't forget: your personal costs

And of course you don't just want your income to cover the costs of the business, you also want to finance your life with your work.

You must also build up tax reserves (e.g. for your income tax), have personal insurance, pay social security yourself, you must take out (private) health insurance for yourself and take care of your retirement.

Our specialized article offers help with this Writing a business plan: This is how you calculate your entrepreneurial salary.

Don't underestimate the cost and effort

Of course, if you want to try and get your rate as low as possible so you can get started in the market… then it makes sense to simply waive the costs for further training. It is not needed.

But be warned: it might still work in the beginning, but you want to be there in the long run as well. And then you can't avoid further training.

To be able to estimate the average effort and usual costs of freelancers, you can use the Freelance compass by freelancermap.

Some compass facts to keep in mind when planning:

  • 68% of respondents see the acquisition as the biggest challenge
  • 83% attribute their success to expertise
  • 55% cite too low an hourly rate as the biggest mistake they made in their business
  • Freelancers take an average of 27 days off
  • 998 euros per month are set aside for retirement provision

Hourly rate, daily rate or fixed rate?

An important first decision for the rate you want to charge for your service is the question of whether you charge by the hour, by the day or at a flat rate.

Calculate freelancer rates based on hourly rate

An hourly rate is common. The advantages:

  • 90 euros/hour sounds less than 720 euros/day
  • Clients can understand your time investment very accurately
  • you are flexible about new details and job requirements
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However, the disadvantages should not be underestimated:

  • labor and administrative costs (see above) must be integrated into the hourly rate
  • Time management and time recording must be done order by order
  • Clients actually want budget planning, you are responsible for not going over budget

In any case, you should integrate a good time tracking system into your daily work right from the start. This is also possible today in the form of a mobile time recording via app.

Calculate freelancer rates based on daily rates

Daily rates are also common. They give you a little more freedom in planning your working hours and you can also manage unproductive working hours (for example for all the work that is part of coordinating your company) in one working day. On the other hand, the working day is not so easy for the customer to understand. Does a daily rate therefore mean respecting 8 hours? Did you include or exclude interruptions? And what if you only work on it for half a day or even just want to bill for an hour of the meeting?

Modern pricing for freelancers: the fixed price model

With the fixed price model, the total costs of a project are estimated. To do this, you need to calculate the number of hours required for the project and your hourly rate, and use that to calculate a total price.

The advantages of a fixed fee:

  • In any case, customers are happy with the model because they can count on a fixed budget.
  • First of all, you have a clear budget and don't have to justify every (additional) hour.

Indeed, some argue that the hourly model is psychologically unsuitable for modern freelancers. Because it is ultimately based on the sale of its working hours, it therefore corresponds to the “day laborer” principle. Not the actual performance (your creative service) but your time is paid for.

Appreciation of your actual performance would increase if customers paid for the result and not for your time. Could be.

In fact, the fixed-price model also has some practical disadvantages:

  • If project requirements change, you must do the extra work at no extra cost or renegotiate with the client.
  • You must have a lot of project experience in order for your estimate to be realistic.
  • Very clear communication even when ordering: your project management needs detailed specifications and specifications.
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Clear figures: this is how you calculate your compensation

Ideally, you would add up all the costs you calculated as described above, add the contractor's salary, and then calculate these costs down to the single working day or single working hour.

Tip: You should definitely do this once in a while, because if you know your ideal rate, you can better estimate your work efficiency.

Calculate the ideal rate

Here's how to calculate your ideal rate, you need the following data:

At all costs (incl. salary) per year / Potential working days (365 calendar days per year – 104 public holidays – 13 public holidays – 20 vacation days – 12 sick days (average) – 5 childhood sick days (average)) = daily rate

Research: Check the rates of freelancers on the market

It would be great if you could actually calculate your commission claims from your customers using the ideal rate. There may be very special services where you are completely free with pricing. As a rule, however, you have to keep an eye on what prices are actually being paid in the market – that is, what the competition demands.

Direct comparison with freelance colleagues can be as useful as market studies and analyses. In the Freelancermap Freelancer Compass you can find the average values ​​for the monthly income of freelancers from various specialist areas.

Averaging here always means that the nationwide numbers are averaged. You should find out in detail what taxes are in your region. You can help with that too Project exchanges for freelancers.

Further information

Becoming self-employed as an app developer – IT freelancer

Become self-employed as a photographer

Tariff negotiations for freelancers and self-employed workers: the six golden rules

Pension fund for self-employed artists, freelancers, artists: application, requirements, benefits, contributions (+special case as an employee)

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