How Much Do I Charge, Anyway?

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photo: anonymous flickr member

Yesterday, while we were discussing designers not knowing how to charge for their work, Stu noted that:

first, the “value” of your work at a monetary level is heavily influenced by your location. A designer in California has a lot more overhead to cover than a designer in Kansas. The internet has removed the barrier of having to select from the local guy so Mr. Kansas is going to be able to charge a hell of a lot less.

This is very true. But let’s start one point behind that: how to charge for your work so you don’t go broke. I want to look at Stu’s point tomorrow.

Essentially, the formula for determining the hourly rate you need to make is pretty simple. Do this:

  1. Find all your costs for a month. Include everything, from bills to IRA payouts to savings.

  2. Divide those by the number of hours you want to work each month. (Be honest.)

Voilà. Your hourly neccessity rate.

So, let’s look at an example. Let’s say my monthly cost to keep my business afloat is $4000. Also, I don’t like working because I’m a lazy pampered cow, so to make sure both those things line up, I divide $4000 by 80 to make sure I can work 20 hours a week. Magic number is $50, so I have to make $50 hourly for 20 hours a week to stay afloat.

Now, just because I have to make that an hour doesn’t mean I have to actually use that number in my proposals, but I have to make sure my proposals are actually higher than that number.

So let’s say I have four proposals out for logotypes each month, and I charge pretty low amounts for them, say $5000 per logotype.

I’m actually going to spend 25 hours on each logotype, considering the jobs are smallish. There is no way in hell anyone is going to put in 500 hours on a logotype that ostensibly gets finished quickly, because you would be working solidly every day, seven days a week, and have six hours a day left to yourself. For a month. I’m definitely making money on this.

So since I am a lazy pampered cow, I decide that I can actually stretch myself just a little bit and work thirty hours a week. I will be so tired. But I’m still actually getting through each of these projects relatively quickly, because even if I stretch and work at thirty grueling hours each week, I am making cost.

Anyway. Just wanted to get that simple formula out there so you folks can start making your banking count a little better. More on Stu’s comment about borders and the disintegration of the local, tomorrow. In the meantime, it seems like some people out there might want to look at my “Quit your job!” series from last year.