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Kim Wilson
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Determining Your Going & True Rates
by Brian S. Konradt of BSK Communications and Associates

Determining Your Going Rate
You should know how much you want to earn in one year and what you ought to be charging per hour. This is called your "going rate." You can figure out your hourly rate or how much you want to earn per hour by using the familiar 60-30-10 rule.

Commercial freelance writers spend 60 percent working on projects and assignments, 30 percent of their time marketing, and 10 percent doing administrative work, like sending out invoices, doing bookkeeping duties, etc. Suppose you'll be working eight hours a day, five days a week. Since 60 percent of eight hours is four hours and forty-eight minutes, you will be working about 25 billable hours a week.

To figure out your hourly rate, follow this example: 50 weeks (in one year) x 25 billable hours per week=1,250 billable hours per year.

Let's say you want to earn $65,000 in a year. Divide $65,000 by 1,250 billable hours. You come up with $52 per hour.

This means, in order to earn $65,000 in one year, you'll probably charge $52 per hour for your time. The average gross income of an established commercial freelancer is between $50,000 and $85,000. If you want to earn $50,000 in one year, you'll probably charge $40 an hour for your time. I say "probably charge $40 an hour" because you can also charge less per hour and put in more billable hours during the day. Or you can charge $40 an hour, work less hours, and have a second source of income, such as seminar-speaking, writing articles and books, or doing other consulting-related work.

Another way to figure out your going rate is to decide how much you are committed to earning this year. Let's say you want to earn $65,000 in one year. You'll be working about 2,000 hours a year.

Step 1: Multiply 2,000 hours by 40% (non-billable) marketing and administrative work combined. This equals 800.

Step 2: Subtract 2,000 - 800. This equals 1200. This means you'll probably be working 1,200 billable hours a year.

Step 3: Divide $65,000 by 1,200 hours. The answer is 54. This means you'll probably be charging $54 per hour to earn $65,000 in a year. Notice how similar this answer is to the answer from the 60-30-10 rule. Both processes are similar.

Determining Your True Rate
As you plan out how to start and manage your business, you must figure in your overhead; these are costs of social security, health care, paid vacation days, paid sick days, and what it'll cost to run your business on a daily basis. Your overhead also includes costs of marketing on a continuous basis. All of these "hidden" costs are a pain-in-the-neck and generally take out at least between 15-30 percent of what you expect to earn in one year. It's almost impossible to figure out your overhead the first year you're in business; to figure out an accurate overhead, you'll need to rely on information from the previous year. However, keeping a daily account book will help you assess your costs on a continuous basis. Overhead, if you're not careful with your expenses, can drain your business.

If you expect to earn $50,000 in one year, your profit then is ($50,000 - 30% overhead) $35,000. This means that your "true" hourly rate is really ($40 an hour - 30%) $28.00.

In order to make $50,000 as your True rate in one year, you'll "probably charge" $52.00 per hour for your time, instead of $40 an hour.

The best way to figure out what it'll cost you to run your business and what you might be paying for self-employment tax and health insurance is to call up your local Small Business Association for a free consultation. You can also visit your local accountant for professional advice. Once you have this information, it's necessary to begin a thorough, specific business plan and to record all expenses in a ledger or a software program (I use QuickBooks), updating it at least once a week. THE END

Brian Konradt is the owner and operator of FreelanceWriting.Com (http://www.freelancewriting.com), a web site dedicated to help writers master the business and creative sides of freelance writing. Mr. Konradt is also the principal of BSK Communications & Associates, a communications/publishing business in New Jersey, which he established in 1992.










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