How-to Set your Price?

Christophe Berg
Dec 9, 2019 · 6 min read

as a Freelancer, a Independent pro or an Artisan

Where to start? How much costs your time?

One simple idea: know your costs to avoid working at loss. It is useful to know your hourly burning rate i.e. how much costs one hour of your time. If you would agree that your time is precious, it makes sense to know its real value. We will start by evaluating the expenses: personal and professional (including taxes). Then we will look at how much time you can dedicate realistically to your work especially deep, creative and meaningful work.

Note: I will use a fictive John Smith to illustrate each step of calculation. To simplify our friend John Smith is a freelance designer, single and minimalist. He has no child, commutes on his fixie and lives alone in a rented studio.

Step One: How Much do you Spend?

We have to add up the monthly recurring expenses of John Smith to evaluate his strict but safe minimum: housing, food, transport, activities…John Smith monthly expenses equals 1000€ (rent + food & beverages + transportation + sports/activities…).

Step Two: How much it costs you to Work?

Before your start to work, you need to spend money. I know, it sounds strange to pay in order to be able to work, but that’s the world we live in. So back to John Smith, and let’s add the mandatory Healthcare, Insurance, Bookkeeper, Bank services, computer and communication expenses (WIFI, Mobile phone). John Smith work related expenses equals 500€ per month.

Step Three: Evaluating your Minimal Monthly Burning Rate

John’s Total Expenses (1+2) equals 1500€ + a minimal tax percentage (20%). His Minimal Expenses equals 1800€ per month. Per year, it is a minimum of 22 000€ to live and work as a minimalist John Smith.

You need to calculate your own Monthly Minimal Expenses based on your lifestyle, location, work and obligations.

Step Four: How much can you Work?

Here I am talking about the conservative, realistic and sustainable amount of time that you fully dedicate to paid work. I am not interested by the fastest road to a burn-out.

John Smith is a creative designer with quite some experience. He knows that 4 hours of Deep Work Daily is a very good output. Since he has also to deal with administrative tasks, networking, communication, prospecting clients and such... John Smith’s evaluation of his productive work is 4 hours per day, 5 days a week and 4 weeks a month equals a total of 80 hours monthly. John takes some holidays, day-offs… again by experience, he noticed that he is really working 11 months per year .

Step 6: What is your Minimal Viability Number?

It’s time to combine the expenses to cover and the working time to get the break-even point, your survival number or minimal viability.

  • John’s Minimal Viability = Yearly Burning Rate / Months working = 22 K€ / 11 = 2000 € / month.
  • John’s Minimal Hourly Rate = Monthly Viability / Monthly Working Hours = 2000 € / 80 = 25 to 30 € per hour.

John bills preferably around 35 to 40€ per hour. He knows that if he works for less than 25€ per hour, he is working at loss! He also knows that it is better for him to have his accounting done by a professional bookkeeper working at 25 or 30€ /h. Knowing his Minimal Hourly Rate helps him to decide when to subcontract.

Don’t compromise your viability and personal sustainability

Working too much is initiating a vicious circle, that can lead you to projects half-done, a lower quality or even a burn-out. From day one, you should think, plan and price in term of sustainability and viability.

Keep only the good ones!

It is true that it is hard to select clients when you start. But as you go, you can keep working only with the good ones. Good Clients are companies, pro or individuals, who pay you in time, understand your work and for some of them support your work. These solid clients are critical from any small business. If you keep chasing new gigs, you won’t be available for your good clients and the relevant projects. So learn progressively to become more selective with your clientele and how to say a diplomatic but clear NO!

Work on Project, get paid by phases…

John Smith is an independent designer, he is not freelancing at an hourly rate. He is in charge of each project, delivers in time and guarantees a quality. He defines a project plan, decides the time to spend and puts the right resources in place to get the project done. John knows what time is required to execute, finish and deliver each phase of a project. He makes sure that his project-related expenses are covered by his clients (-”Going to NYC? sure!” if you pay me the tickets and housing). John is a gentle control-freak, he sends a proposal with a budget by phases usually three (“Pre-Prod”, “Prod”, “Post-Prod”). He gives an evaluation of resources, time and pricing for each phase. After completion of each phase, he may readjust the next phase duration or budget. If you want John to start working on your project, you just need to pay him a 50% deposit. When each phase is completed, you have to pay the remaining balance.

Finally ZE QUESTION: HOW MUCH IS ENOUGH?

At first while still in a Survival Mode, you don’t imagine that you can ever have enough… With the time, you will realize that it is key to know when it is enough and that you have to take time for you. John Smith knows that being in charge, means that he has to save for the unexpected, but also to take time to travel, explore, relax, regenerate and obviously to work on his own projects.

Self-care ideally happens daily and weekly , but it makes also a difference to take a longer break. John Smith plans to take a 6 months sabbatical every 3 years to really explore, get lost, get inspired, found accidentally new ideas…

I propose three levels from your Survival Number or Minimal Viability.

  • Level 2: “Safety Net” is when you reach 3 months or 25% of your Minimal Viability in savings. John Smith knows it, by multiplying three times his Minimal Viability (2000 X3 = 6000€).
  • Level 3: “Visibility” when you have 6 months or 50% in savings. That’s a great achievement and it puts you in a safe and stress-free position. For John, it is a whooping 12K (2000 X6).
  • Level 4: “Thriving Number” 9 months or 75% in savings. Clearly you can take time for you and/or a dreamed project, you will comeback stronger and better after even a break. John dreams about his magic number of 16K€ (2000 X8).

John is a badass, who knows well his numbers so that he doesn’t waste too much time calculating or even thinking about them. He is well aware that as an independent pro, he is the one and only “in charge”. He has to manage his time including outside of paid projects like learning, relaxing and exploring.

Gone Surfing, Be Back Soon — John Smith

Gone Surfing, Be Back Soon — John Smith
Christophe Berg

Written by

Project Coach, simplifier, planner & fixer. Director of Education at Blue Lotus 🌱 #plantbased

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