And of course knowing your hour rate is important, getting it is a challenge too. That is why you will learn about the art of negotiating and tendering too.
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No more doubt about your rate
The ebook guide contains the most current rates of more than 200 professions and freelance jobs. The rates are also mentioned for other entrepreneurs, as a guideline to establish their rates and prices. With the information in this guide, you can determine your hourly rate or your prices or, if you are the client, check whether the requested rates or prices are reasonable. This guide also includes five calculation methods to determine prices or rates.
Determining the price
As a freelancer or as an entrepreneur, you have to deal with the expectations of your customers. They choose you because you are good at what you do and work for a good price. Your customer expects a price that fits your abilities. You can influence the perception that your customers get of your products or services, including through your pricing. This guide provides guidelines for determining the price of services and products. You can set your price based on mathematical models and strategies or on the basis of standard rates charged by profession. We also discuss some methods for determining the value of your products or services. This allows you to formulate and establish your pricing.
Fixed rate does not exist
The rates listed in this guide are based on market research and several surveys. There appear to be major differences between the highest and lowest rates. These rates are listed in chapter three. The lowest and highest prices per profession are listed. The median rate asked is indicated under the heading ‘middle’ (Low Mid High).
According to the results of the surveys and market research, there is a positive relationship between education, experience and the height of the price. However, this relationship is not very strong. There may also be regional differences in rates..There are several factors that affect the rate:
Duration of the assignmentThe kind of client
The degree of competition
Negotiating skills (of the entrepreneur and the client)
Calculate your rate
The guide contains five methods that you can use to calculate your base rate. With the first method, you determine your market value through a calculation that includes your experience and training and other weighted factors. The second method focuses on the market, to find the rate that is currently reasonable and realistic. Method three is based on your own goals and method four focuses on the difficulty of the job. The fifth method is based on the prices asked by people in comparable occupations.
Method 1: What is your market value
Your value is not fixed but determined by the market, that is, by supply and demand. You can estimate this value for yourself using the following method. All the factors that are important are assigned a certain value. Additionally, you can also factor in your specialization, skill, reputation or authority. All these factors are taken into account to determine a fee.
This method is most appropriate if you have unique skills, reputation or authority.
In this method the estimation of the market is of great importance. Although today you may be an authority at the centre of attention, tomorrow that may be over. Your market value can, therefore, fluctuate significantly. The following principle of this method is simple, but in practice it the effect can be tricky: determine the number of factors that are important in determining your market value.
These factors may include:
- Education
- Experience
- Authority
- Specialism or competitive advantage (e.g., a patent)
- The minimum hourly wage, which serves as the basis for this calculation
Note, the factors listed above are relative and training is absolutely unimportant for certain professions. If that is the case, let this factor be one and focus on experience.
Minimum Hourly wage: At present, the minimum hourly wage in most parts of the US is about 7.25 dollars per hour (2016). To find out the current minimum wage in your state, go to http://www.ncsl.org.
Method 2: Benchmarking
Another common method used to calculate pricing requires some market research. For this you need to consult with colleagues and competitors and get to know their rates. You can determine your price according to their rates. With this method it is important to take the experience, training and the quality of your colleagues into consideration. The more data you have, the more accurate the outcome will be.
Method 3: How many do you have to earn?
It is good to know what you actually have to earn. With this method, you must know two things:
- How much you want/have to earn and
- How much time you really are productive
The math is simple: take the amount you want to earn, add your expenses and divide the result by the number of hours you work.
Method 4: Rate Determination on the basis of market values and the job
The rate also depends on the size and risks of the job. Many freelancers sometimes work for charities or nonprofit organizations. These organizations are often largely dependent on the “labor of love” rate.
The nature of the client is just one of the factors that are important in determining the hourly rate. Other factors include time pressure, use of equipment, travel, importance of the contract, and exposure.
All of the factors are listed below. Some factors have been given a certain weight. Overtime, for example, has a weight of 1.5. That is to say that the rate is during overtime is increased by 50%. If you hate to work at night, you can choose a high weight for this so you get well paid for night work.
Weights
Overtime
Weekend work
Risk of contract
Duration of the contract
Client Relationship
Use equipment
Nice work / tedious work
Prestige
Other weighting factors
· Total -
Method 5, compare with employees
How much do colleagues in permanent employment earn? As a freelancer, you must take care of your own retirement, insurance, etc.
Using a quick calculation that takes into account the differences in expenses, a self-employed person can determine what his rate must be to earn as much as his colleagues working in companies In this rough calculation, the market monthly salary must be multiplied by a certain factor to determine the required annual turnover of the freelancer. For examples, we refer to the e-book.
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