This is part 2 of the “what do I charge” post. It’s a big subject! In part 1, I talked about the expenses that freelancers have.
Now let’s think about how much time you can work.
You might do the math: As an employee I worked 40 hours a week, and I got paid for vacation and holidays and sick days. So let’s see: 52 weeks x 40 hours a week = that’s 2080 hours a year I can bill.
Sorry, no. As a freelancer, you probably won’t come close to working 2080 billable hours a year. First, take off a few weeks for holidays, vacations, and days when you are too sick to work.
10 days (holidays)
10 days (vacation)
5 days (sick days)
That’s 5 weeks. So we are down to 47 weeks x 40 hours a week = 1880 hours.
Do you have personal obligations that will limit your working hours? Would you like to take an hour a day off every day to go to the gym or walk the dog? Stop work at 3pm to pick up the kids at school? Do you want to plan dentist appointments during business hours?
Do you have clients who will keep you busy every hour? Or do you have busy times and not-so-busy times?
Then think about all things you’ll need to do to run your business that are not directly billable. Bookkeeping, invoicing, marketing, being your own IT department, networking, goofing around on the web…
I’ve talked to a lot of freelancers. Most estimate they have 60-80% billable hours, but a significant number are only billing 50% or less of their time. In my unofficial survey, a typical full time (but not working all day and night) freelancer bills about 1000 hours a year. That would be a good place to start when figuring out your hourly rate. I’ll talk about tools and calculations for figuring your rate in a future post.
Your homework: Make your best estimate of how many hours you will be able to bill in a year. Start with figuring out how much time you will actually work (after vacations, holidays, etc.). How many hours a day? Then estimate how much non-billable time you are likely to spend on running your business.
Once you get started (and even before), you should be tracking your time. I’ll talk about time tracking another day.
If you’ve been freelancing for a while, how much time can you bill in a year? Is it more or less than you guessed when you started?