Freelancers and people new to the service industry ask this often enough: Should I charge an hourly rate or should I give people specific quotes?
Going hourly is often the best, and the easiest since you can avoid the headache of trying to charge more when a client changes the scope of a project (that happens more often than not, in my experience).
Neil Tortorella from Creative Latitude has written an excellent guide for those thinking about billing your projects hourly. He answers the important question of how much to charge per hour to meet your profit goals.
The process to figure out your hourly rate:
- What’s your target salary? How much do you want to make in a year?
- On top of that, you’ll need to figure in other associated costs like taxes, FICA, insurance, etc.
- Total up the number of working hours available to you, subtracting vacation, sick days, and holidays
- Figure out what percentage of your day is non-billable and subtract that (typically 25% – 50% depending on a lot of factors)
- Divide your target salary by the number of working days you have
- Figure out what your overhead is, and calculate the total cost of overhead for each working hour
- The final rate is the number you’ll use to do your estimating, whether you charge by the hour or by the job. It’s the number you can’t afford to go below.
Does that make sense? Read Neil’s article for the full details.
I’ll spend some more time in the future talking about providing clients with fixed-bids, and how to avoid problems with scope creep and avoiding endless projects.