Marketing: Rates and allowances

Knowing how much to charge is always one of the most difficult things to work out. There are no hard and fast rules but the two key requirements are that it must be enough for you to live on, based on a determined maximum amount of hours per week – and it must be competitive in the industry.

From those two requirements, the first to address has to be what is a competitive rate for the services you are going to offer? The best way to find that out is some research and if necessary some mystery shopping! Look at freelancers on the web who offer the same services as you are planning to and see what they charge. And bear in mind that you can probably get away with charging more to clients who are in your specialist industry sector, if you have one.

A bit of market research at this point never goes amiss and might actually be a good way of marketing your services also. Approach a prospective client and ask them how much they would pay for additional specialist marketing resource if they ever needed it. They may have no idea so give them a bracket to work within – e.g. ‘Would you pay as much as £60 per hour or only £40?’ – from this you can then come up with a figure that works for you.

Once you have this figure in mind, the next factor is to decide how much you need to put to one side for tax and national insurance. This will depend on whether you are running the business a sole trader or as a limited company.

For example - as a sole trader, if you put 30% of everything you bill into a separate account to cover these two items, you will be fine so long as you do not go over the 40% tax threshold (currently £34,600 for tax year 07/08). Once you do, you really need to increase this figure to 40%, which sounds like a lot – but better to have some left after your tax liability has been calculated, rather than fall short. 

A normal working week would be 35 hours (five 7-hour days) but not all of this will be chargeable. Even if you do end up generating more work than you can handle, by the time you take sales, marketing and administration activity into account a more realistic number of chargeable hours for any one week would be 25. Based on these figures, you can work out what income you are likely to generate. 

If you are trading as a limited company these figures would be different depending on how much money you actually wanted to take out of the business at any given time, but your accountant would be best able to advise you on this.

If you can live on the final figures you calculate and cover business expenses such as marketing, mobile phone, Internet connection and so on – then you have a viable charging structure. If not, you need to charge more per hour, or accept that you will need to work longer hours.

Of course, in the early days, you may well not manage to bill 25 hours per month, but at least from this calculation you know whether or not your business model is viable assuming maximum possible income. Having said this, if you decide to go down the agency style route, you will of course be generating additional income from mark up on services bought in, so income from your hourly rate will not be quite so vital.

Gill Taylor, Contract Marketing – freelance marketing support for all industries, with specialist IT-sector skills.

www.contractmarketing.biz


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