It’s time to set your freelance prices for you and on purpose.
That means not what other people are charging.
That means not what you read in an article is the going rate for any particular service.
That means not what you’ve always charged since you started freelancing.
Austin L. Church has 7 numbers you have to know and the math to set your freelance prices year over year to meet your financial goals and living standards.
“No one got into freelancing to merely survive.”
Let’s make a big note here that this is not you setting a budget. We’re not looking critically at your expenses or your spending habits. This is a realistic look that what you ARE spending. Let’s get into it.
Pull up your personal bank statements for the last 90 days and add it all up. Then divide by 3. This will give you an actual monthly average.
Again, this is not a budget conversation. This is a “what did I actually spend for the last 90 days” conversation. Let’s take the average for 3 months so that way we cover for when you were in the house for 2 weeks straight because you were heads down in a project and the times when you were living free and easy and getting an egg nog latte every day (hypothetically).
Do the same for your business expenses. 90 days of transactions added up. Then divided by 3 for an average.
Now. Taxes. Yes. They must be considered and included as an expense you must pay because it’s one of the only certain things in life according to the saying. Ask your accountant for what your tax rate is. And thank them. Where would we be without accountants? We could get really in the weeds for math here, but that’s now what you came here for.
That will be on top of what you must bring home so add taxes on top of your average expenses to solve for what you need to make to survive.
You are not going to work 5 days a week for 8 hours a day for the entire year. You’re just not. You’ll get sick and need an extra long nap. You’ll go on vacation. You’ll go on an extra long lunch break. This is not a conversation about what you “should” be working.
You’re a freelancer. You’re setting this number for the life you actually have.
Figure out how many days you’re not working over the next year taking into account holidays and vacations. There are 11 federal holidays in the US. Divide that number by 7 and then round up to the nearest whole number. Subtract from 53 and this solves for how many weeks you’ll be available to work during the year.
For examples, if I take all 11 federal US holidays plus 12 days off with my family, that’s 23 days. Divided by 7 is just over 3. Round that up to 4. 52 minus 4 is 48. So I’ll work 48 weeks during the year.
Now take a think about how many hours each week are actually sustainable for you to work. Yes, you might work long, late hours now, but is that how you want to work for the next year? Our friend Kat Boogaard has long talked about her 3 day work week. Austin who presented this workshop works about 38 hours per week. Solve for your number of hours per week considering lunch, school pick-ups and weekends.
Now take that number and cut yourself some slack. We are not always at 100% efficiency. And we can’t bill 100% of our hours. So figure out how much time you can actually bill and turn it into a percentage. Austin uses 60%. Take your total number of hours and multiply by the decimal. For 60%, that would be .6. This gives you your billable hours per week, your true availability. Multiply by 52 for your annual true availability.
Phew! Let’s take a big stretch here, right? Nice work on all that.
Now, let’s put it together. Take the number annually that you need to make (number 1 above) and divide it by the number of effective hours you will work (number 2 above)
That’s your survival rate. The amount you need to charge per hour to just get by.
That’s not why we set out for this though. So now for the fun bit. Dream about what you’d like to be saving for. Could be making a payment on a past bill or saving for something new.
Put a dollar figure per month that should go towards this dream. Multiply that number by 12 for the annual amount and add it to your survival number (number 1 above). There’s your dream number.
Divide your dream number by your true availability (number 2 above) and that’s your dream rate. The amount you need to make per hour to survive AND dream.
Now you have a reason to set your prices where they are. And a reason for what clients you want to pursue and which ones aren’t the right fit for you. You chose freelancing for the freedom. And you stay with freelancing because that freedom can also give you this sort of stability and ability to dream.
So now you’re going to take a look at the stuff you do for your clients and give it a time. Either make your best guess in 15 minute increments or use the time that you’ve been tracking.
Add up the total and round up to the nearest hour. That’s pessimism. Stuff always takes longer than you think.
Multiply by your dream rate. That’s how much the project cost. That’s your rate, BUT it’s not your price.
Set your price pessimistically. You’re going to build in a 20% buffer. That’s pessimism. Allow for your clients to be on their worst behavior.
Now, you’ve done a lot of math. Nice work. Especially if you’re not a numbers person. Let’s make your price reflect that amount of work.
There’s something in our brain that respects a specific price. It feels like there’s a reason. There are calculations that went in to creating the price which helps us say yes easier.
Salt your prices with specificity.
Remove any double zeros in your pricing and replace them with 25s or 75s.
Now you’ve got it. How to set your prices meaningfully and on purpose for the life you want to live. Don’t miss more of Austin’s coaching on his website or the full workshop here.
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