How to Estimate your work
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- frannyc28
Hello everyone:
A while a go somebody posted kind of sort of a formula to estimate the price to estimate a client. I can't find it. Any idea about that post or about how to do it in a "FAIR" way?
Thanks a lot
F
- bored2death0
cost of living + 40%
- frannyc280
It is not for me. A friend of mine which just moved to New York is asking me how to charge for his job. I totally forgot how did I reach to my hourly rate and he wants something more than JUST MY OPINION ON THE PRICE. So I remember there was a posting a while a go about this with like a long a complicated formula but VERY INTERESTING ONE that I though I could easily find and send to him. 2 days later after looking for the posting I am asking for your help.
UKIT 100% with you on that but my friend thinks that just fix a price for your work based on talent, experience and bla bla bla will take him to nothing. So I want to give him the formula and make him to STFU! :)
- ukit0
Well ya know I was kidding...but there's no magic formula out there. Most of the time it's a crapshoot based on your own credentials, what you think the client will accept, and how badly you want the job. If you need a ballpark figure of rates in different regions, I suppose you could use the yearly AIGA salary survey.
- ETM0
http://free lanceswitch.com/rates/
Remove the space, QBN won't let me post the URL.
- This is good. Looks similar to the spreadsheet I use.noneck
- gramme0
First: figure out a salary for yourself. Always start a process like this by paying yourself first. This should be a figure you want to make which will cover all living expenses, savings, donations, vacations, and miscellaneous costs.
Second: divide the above number by an estimated hours of billable work per year. An fairly common percentage is 60%, which is 1,142 hours per year.
Third: add 30% to your salary for taxes. So, say if your salary you pay yourself after taxes (this is a business expense, NOT your profit) is $40,000, then you need to add $12,000 for taxes. Your salary would thus be $52k before adding any other expenses which should also be part of your hourly rates.
Fourth: Divide your salary by the estimated number of billable hours. This is your hourly labor rate.
Fifth: tally up all office expenses. Typical items in this list are computer, software, printer, scanner, studio supplies, mileage, business meals, office space (if in your house or apt., figure out sq. foot percentage of costs for that area), shipping, Pantone books, furniture, professional association fees, competitions, self promotion. For a one-person operation, these costs can be anywhere from $10k on up.
Sixth: Divide your overhead costs by your salary. This will be a percentage for your hourly overhead rate. Then, multiply this percentage by your hourly labor rate. The resulting figure is your overhead rate, i.e. the amount per hour you need to charge to simply cover costs of running a business besides your salary.
Seventh: Add your hourly rates for labor and overhead. This is your rock-bottom, break-even rate.
Eighth: Determine a profit margin you'd like to make. This is money that will put you in good stead through hard times, and will help grow the business—especially when the projects aren't exactly rolling in. A common range of profit margin for small businesses is 10–20%.
Ninth: Add your profit percentage to your break-even rate. This should be the hourly rate you charge clients. Stick to it if at all possible, because otherwise you won't be profitable—you'll only get by at best.
Tenth: Don't be like me and wait till the end of your first year in business to crunch all these numbers and then find out your fees—which you thought were quite competitive—are actually much lower than they should be.
Oh and one more thing: don't tell clients your hourly rates, unless you're freelancing for an agency who needs to know. Otherwise, it's not your clients' business. The only need to know net costs and phase breakdowns if applicable. The hourly rate is for your eyes only, and it is how you'll decide what to charge people. Otherwise, you're just pulling numbers from thin air.
- gramme0
^ I should clarify that office expenses, like everything else, should be calculated per year. So if your computer costs $3,000 and lasts for 3 years, then your yearly computer cost is $1,000.
- gramme0
Oh and don't charge different rates for designing in different media. Design is design is design. I've been learning even for myself, there are critical, yet subjective decisions which must be made all the way up to the end of a press check and even when checking bindery. So having a lower "production" or "production management" rate is stupid.
Revision rates are different. Say you draft a proposal and state the number of revisions you're willing to give. Your hourly revision rate for scope creep should be an almost uncomfortably high number. This will discourage the chiselers.
- frannyc280
A-EFFING MAZING! YOU ARE THE BEST!!!! This (all) is what I was looking for. The posting I mention was the one from Gramme but the web-address was perfect too!
THANKS A BUNCH!