Hello you,
Last week we covered elements of knowing your worth as a contractor. Especially when it comes to day rates. This week is the second part to help y’all think about project rates and day rates.
I want to start off by saying that I did do my research on this. And it was a f*cking mind-field. Conflicting advice. Complex “systems”. Of course it wasn’t going to be simple. This is what annoys me about running a business. Someone, somewhere (probably a middle-aged-white-man) came up with a complex methodology to make the simple seem hard. I know some of you relate to this or have even been put off thinking about putting numbers on the table because you haven’t know where to start.
But after the end of this article, you’ll be ready with your numbers. Knowing your worth. Making that cash-money. Ready? Let’s go.
This has been my approach.
Over the years I have found that I have needed to either charge an hourly rate and/or a project rate. Confession: When I was starting out, I seriously undercharged. I was misguided and naive. I wasn’t sure what was right. And I am NOT going to let you do that.
So, here is how I now figure it out. Btw - this is all invoiced via my Limited Company/Outside IR35. No umbrellas here.
Hourly rates:
Day rate is £500.
A day being 7 hours.
Maths: 500 / 7 = £71.42. (I would always round up, so that would £75 p/h).
Summary. If the day rate is £500. I would charge £75 per hour.
Project rates:
I would always raise the price if the project has a rapid turnaround or generates significant revenue for the client - I would add around 10% to 15%. If I am going to be hella stressed to get this done, I need that reflected in the reward. AKA payment.
I always add a buffer for scope creep. Even with a statement of works (SOW) in place, I always add 20% to 30% extra for unexpected revisions, client feedback, client contacting me outside of scheduled time with this (because you know they will) and, yeah, scope creep.
For example I advised a web designer: If a website build takes 20 estimated hours at £60/hr (£1,200), add a 25% buffer for scope creep (£300) to land on a £1,500 project rate.
Don’t forget to factor in your own expenses
This is where it can get a little complicated. The above is the simplest way to break down the numbers and add in those contingencies. But - there are a few things I invite you to consider:
How much do you need each month to cover your bills?
How much per year are your accountancy costs?
Don’t forget insurances.
Do you pay into a pension? (You should be).
Do you want your business to contribute to your private health care?
Do you need to invest in new phone? Laptop? Car?
Here’s your action: Do your calculations on how much out-goings you’ve got sliding through your accounts on the regs. I suggest doing this across a monthly and a yearly view. Then once you’ve done that, take another look at those rates. You might find you need to add an extra 5% to 10% to cover the cost for to actually run your business.
How did you get on? Leave a comment and let us know.
And, just like how I ended last week: Knowing your worth and charging the correct amount sets your contracting career up for success. Sure there might be times where you might take less, perhaps for exposure or learning or opportunity. Always weigh up risk vs reward.
Do the work. Know your worth. Be ready to negotiate (another letter/article on that in a few weeks).
Keep smashing those glass ceilings.
Lucy xo
P.S. come and sign up to one of our free events.
October:
Wednesday 14th October. 11am UK time. Part of Women in Tech Week: The Glass Ceiling Called. Have you Considered Contracting?
Wednesday 21st October.18:00 UK time: Will AI help or hinder us?
Wednesday 28th October: 17:30 UK time: The Green Room: How Clients Actually Find (and Choose) You
November:
Friday 13th November: 12pm UK time - Fractional and Contract Work: Where's the Next Client Coming From? With me and Rina Gohel.
Wednesday 25th November. 17:30 UK time: Roundtable - You bring the questions. We will provide the answers.