Are you thinking about going freelance and want to know what to charge?

Let's pretend you are a forensic accountant with a large High Street accounting firm. You have been working in a large office with sea views, you’ve had a car park, your own personal assistant and four junior accountants working in your team. You always were incredibly good at what you do and your clients know it. No one can get to the nitty-gritty of a fraudulent case quite like you do. But you hated the time wasting meetings and the office politics and now you’ve quit and are working from your home office, answering the phone yourself.

You are still the hot shot you always were but will your clients still see it that way? Now you’re working from home should your charge out rate still be $800 an hour as it once was or has something changed?

You may think that nothing has changed in terms of the quality of advice you dispense and the service you provide but in reality, other subtle things have changed. For instance, you are now out of the loop in terms of corporate knowledge, to keep up to date you may find you need to attend more conferences and network more.

Now you are at home your client is no longer buying the intellectual property of the corporate brand they once were. What price do you think they may have put on that? They are also no longer buying the surety of the brand--the fact that in the past people like you may have come and gone yet the company has performed regardless. Will they have the certainty they are used to in terms of commitment to providing a back up if you are unavailable--and what price do you think they may place on that?

Your client may have liked the prestige and convenience of the High Street location and may have been willing to pay for that, and now he knows your business doesn’t carry the same overheads how much less does he expect to pay? If you are going to do all the administration jobs yourself then you may need to decrease your hourly rate as you are now diluting your $800 an hour thinking with $20 an hour secretarial services.

To keep up with your workload you may decide to employ a secretary and two book-keepers (yours are more efficient because you don’t waste their time in unnecessary meetings). You may need to allow yourself an annual training and networking budget. You may also have to subscribe to professional organizations and journal subscriptions that when charged as an expense works out more costly than when you were in the corporate world because now you are the only person using these resources.

To decide whether you think you are still worth $800 an hour you need to build a case in your defense so you can give an explanation to your client. Perhaps you’ll decide to lower your rates because your overheads are lower or maybe you’ll charge more because now you are going to get better qualified, specialize even further and take on fewer clients so you will become even more exclusive and valuable in what you do.


© 2007 Jane Francis is the author of ‘Price Yourself Right: A guide to charging what you are worth’ [ISBN 0-595-38601-6] which is available at Barnes & Noble (US), WH Smith (UK) and at amazon.com.

Could the 80:20 Principle apply to your business?

If you are a freelancer or contractor selling your time you may find inspiration in the book by Richard Koch entitled ‘The 80:20 Principle: The secret of achieving more with less’.

I love this book for its mind-expanding qualities. Written in an easy to read style, Richard Koch is both edifying and entertaining. I especially like what he has to say about time. In particular:

• Time is not the enemy. If we make good use of only 20% of our time, there is no shortage of it. Now doesn’t that take the pressure off? So often we panic in reaction to the ticking clock when we would be better off withdrawing and regrouping and approaching the situation from a stronger position.
• We should collaborate with time: ‘Insight and value are likely to come from placing ourselves in a comfortable, relaxed and collaborative position towards time’. [p163]
• We should act less because action drives out thought. It is because we have so much time we squander it.
• Be eccentric and unconventional with time – you can not conform to everyone’s wishes.
• Under no circumstances give everyone a fair share of your time. Why should you? Pay the most attention to the activities and clients who comprise the 80% of your profits. AND pay the most attention to the activities that bring you the most pleasure; you only have one life you may as well enjoy it.

Whenever I find myself busy beyond belief it is good to be reminded that most of what I am doing is of low importance in the big scheme of things. However - when faced with one of those moments (or decisions) that are much more valuable than all the rest - it is helpful to be reminded, and encouraged, to ‘do something radical and stop tinkering around the edges’.
I bought this book so I could refer to it whenever I feel I have lost direction or focus and need some sage advice. Though some of his examples may not be relevant in all circumstances, I find the book works as an efficient ‘thought jump starter’ and is highly inspirational. I recommend it.