If you’ve read part one, you had the sense to not scream “I quit, you bastards!” and stomp out the door. If you read part two, you know how to take control of your environment. And yesterday, we talked about getting your basic plan and structure together. Today, the good stuff: making money.Billing is a super simple equation, and a vital one to our craft, and yet something design schools never seem to address. (design educators, where are your courses on business for designers? Is it that we don’t need to know about money because we’re so busy drawing?)
To figure out how much you need to bill, start with this very basic formula:
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Tally your costs for a single month. Find the cost for rent, phone, utilities, food, cable, whatever you deem a necessity, for a particularly harsh month. Say, December, since it’s the coldest for most of us and therefore the most expensive to heat and eat.
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Add the number of all those items. This is your baseline necessary monthly income.
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Figure out how many hours per week you want to maintain a billable status. (40 is probably not sustainable; you’ll go nuts trying to account for every hour. The 40-hour workweek was developed for factory employees doing less mentally challenging work on assembly lines.)
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Multiply the hours per week you work by four. That’s the number of hours per month you need to work.
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From your baseline income, find 30% of that number. This is an allowance for taxation, which is usually about 30%-ish. If you want a more exact estimate, ask your accountant to find it based upon past taxes.
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Add that 30% to your baseline income, then divide that number by the number of hours you want to work monthly. This is your hourly billing rate.
So. To meet this goal every month, you’ll probably need to be billing your clientele in a particular range below which you shouldn’t fall. If you do fall below that amount, it’ll need to come from either savings, other income (like royalties on typeface sales), or next month’s take.
And, in closing, I welcome you to the world of the self-employed. It’s a lot more interesting on this side of the fence. It really is. Occasionally you’ll envy your employed friends because they don’t need to budget as much as you, nor will they work as much. But when recessions come around, they’ll lose their jobs, and you won’t. You’ll make it through with your self-esteem fully intact, and they might not, because they will have other people judging their skills. You won’t.
That little bit of insurance is invaluable.
Be sure to check out the full “Guide to Quitting” series:
Part 1: How to QuitPart 2: Establishing ControlPart 3: PlanningPart 4: Billing