As a freelancer, you’re hopefully doing what you love. The work doesn’t feel too gruelling, and most of it is actually fun.
But money still matters.
Gone are the days when your employer worked it all out for you – how much to pay the tax man and your retirement (superannuation) fund, and how much you were worth per hour. All you had to do was rock up to work every day and repeatedly prove you were worth a pay rise once or twice a year.
Now it’s up to you. And there’s a lot to take into consideration.
I’m not an accountant, financial advisor or money expert. This is something I still struggle with, and I’m sure I’ll struggle with it for years to come. So I’m going to stay pretty general here and recommend you hire yourself a fabulous accountant or financial advisor (or both) to keep you on track.
You need an Australian Business Number (ABN). You may need to register for GST. You need to work out whether you should be trading as a sole trader or a company. Speak to an expert about all this. And keep speaking with them about it.
Unless you’re a filing and Excel master, you’ll also want to invest in some good bookkeeping software to issue invoices, and track your income and expenses. I use Rounded, which is designed specifically for Australian freelancers and is rather user friendly. But shop around and find the right solution for you.
If you have a fantastic accountant already, have a chat with them about bookkeeping tools before you buy one. Some accountants specialise in some apps and won’t work with others, so that might be a deciding factor for you.
How much are you worth?
The correct answer is “You’re priceless”. Unfortunately, it’s not an answer we can really work with.
When working out how much to charge, you need to think about a whole raft of things. And it can all get kinda messy.
Start with your basic requirements. What do you need to cover your adult expenses? These are things like:
- Rent or mortgage
- Bills – internet, mobile, electricity, gas, water, Netflix, car loans, etc.
- Insurance – car, home and contents, health, and maybe life
- Fun and fabulousness
- Clothes and fashionables
- Home upkeep (to replace broken espresso machines, pay for improvements, or handle emergency fixes)
- Children, school and all kid-related expenses (if you have kids)
- Savings (you know, for holidays and houses)
- Retirement planning (because we should never neglect our superannuation!)
Then add in your business expenses, things like:
- Web and email hosting
- Support from designers, VAs, etc. for your business. (But not for client work – that’s separate.)
- Software subscriptions (like bookkeeping, project management, design, etc.)
- Professional memberships (if required or desired)
- Professional liability insurance (which you might find wrapped up in some professional memberships)
- Office equipment and upgrades (because you really can’t be working on a 2010 laptop anymore)
- Bookkeeping and tax lodgement costs (if you don’t do it yourself)
- Advertising (if you do that)
So that’s what you have to earn. Minimum.
Then consider how many hours a week you can bill. Remember here, freelancing is not like in-house. When you’re jumping from client to client, project to project, audience to audience, there’s a lot going on in your head so an 8-hour day isn’t necessarily reasonable. And the stuff you have to do for your own business (admin, marketing, networking, sales, etc.) is unpaid.
You also need to take (unpaid) holidays into account and remember that work isn’t guaranteed. Just because you’re free to bill your time doesn’t mean you’ll have the work to bill.
Think about your experience and skills. Are you just starting out, or do you have years of proven awesomeness under your belt?
When you’ve got all that worked out, you can decide your base rate.
Add at least 30% for taxes, and you’ve got your hourly rate. And if you’re charging GST, it goes on top.
Stay on top of your rate
When you’re charging project-based rates, you need to stay on top of your time. If you’re charging for a project you estimated at 5 hours and it takes you 10, you’ve got a problem. And if it keeps happening, red alert!
There’s a heap of apps and websites you can use to track your time – some free, others not. Your bookkeeping or project management tools may even do this for you too. Or you can just keep a close eye on the clock.
I recommend checking in at least once a month to make sure you’re quoting right, and adjust your rates if you need to. If you’ve got ongoing clients, you may need to have D&Ms about the rate rises. But don’t get worked up about having these conversations. When addressing these, I’ve just included a short “I’ve increased my rate” note in my next quote, to which all my clients simply said, “OK”.
And your time
Efficiency is key in everything, and particularly in freelancing. Managing your time effectively and upping your work speed will help you increase your profit and spend less time on the unpaid part of your workday.
Later this month, I’ll talk more about time and project management, and cover some of the tools I use to keep everything under control.
Have I missed anything? Anything you’d like to add? Comment below! I’d love to hear.