What price freedom? Part II Finding your ‘ceiling’ rate
Time to read: 3 minutes
Second of three posts from Sam Howard on the commercials of freelancing. Following on from my last post, which looked at calculating your bottom line day rate as a freelancer, this one looks at the day ceiling rate.
My child’s first bake sale. He was about seven and asked to make scones.
“How much are you selling them for?” I asked, dispensing with the niceties. He hadn’t given it much thought but guessed 10p each.
“Why?” I asked. He didn’t know. I told him to think harder. “OK, cost of ingredients,” he said.
So how does that help the charity you are making them for? “OK, cost plus 10p,” he said, so we discovered the concept of profit.
“So what about packaging and wastage?” So we got up to 30p. And he hoped that might be the end of it.
“But then,” I said triumphantly, “have you thought of what the market will bear?” He looked pretty annoyed at this point. “No”, he said, he had not.
Part 2 What the market will bear
I explained what people paid for a scone in a nice tea shop at one end of the scale and how much you paid for a pack of scones in a low-end supermarket. We decided that if ours were freshly baked and prettily presented with a winning toothy smile, we could push that up to 50p a scone. It was a pretty successful bake sale by all accounts…
So, what will the market bear for your services? Given that you are not baking muffins, all proceeds are not going to charity, and that you’re probably not as cute as the average seven-year-old salesperson?
Local rate
First stop: what are local freelancers charging? Do they compare to you and your skills? Make sure these are valid, long-term freelancers/independents. It’s a competitive market out there, but if people are offering to work for ‘silly money’ like you see on the bid sites, are you really going to compete with them? What are you competing for? To see who can go bust first?
Agency equivalent
You need to understand what local agencies are charging. If you’re a former agency employee, this is a no-brainer. If you’re not, then you need to research to understand where you map to the agency hierarchy. Don’t go on your old salary (probably higher) but more on your experience and responsibilities. Here’s a very rough guide:
- 1 -3 years PR experience – account exec: Support role – admin, research, supervised outreach, supervised content creation, reports to account manager. I’m not sure this is a good time to go freelance unless you have very low outgoings.
- 3 – 6 years PR experience – account manager: Implementation role, heads up tactics, main outreach person, day-to-day client go-to person, Directly manages juniors and reports to account director. Possibly know the account better than anyone else.
- 6 – 8 years PR experience – account director: Lead role, heads up strategy, leads client relationships, oversees budgeting, heavily involved in pitching, manages account managers, reports to group account director/director. Tasked with making money.
- 8+ years of PR experience – group account director, senior account director, etc. Same as above, but entrusted with more clients, more accounts, bigger budgets, bigger teams, and some development initiatives, reports to the director.
- 10+ years of experience – director, running division, sits on key strategic accounts: Leads new business drives, develops new services/territories, leads team, responsible for the financial health of division, runs P&L, reports to CEO. Tasked with making profit.
Once you can map your role to an agency hierarchy, find out the local day rates for this role. Then, to my mind, you don’t just round your rate down but slash it. You don’t have the group expertise or the combined reach of an agency. Also, you don’t have the overheads. I tend to charge under half as this makes me viable for agency work, too.
The bitter pill
Compare your market research to your notional day ceiling rate. If your notional day rate tops the market rates, you have a problem. Really, why will anyone hire you in this climate if they can tap into the same services and expertise elsewhere for less?
And if you take on a loss leader project, there is only one of you. While you’re not making enough money, no one else can make any money. Every day you work at the ‘wrong rate’ only puts even more pressure on the other days to overprice. You need to think long and hard about making this work.
Possibly, this is not the right time in your career to go freelance. Maybe you need more skills/experience to charge a more substantial ceiling rate. Or do you need to wait until there is a time in your life when you don’t need to earn quite so much (e.g. the mortgage isn’t making your eyes water, the kids’ daycare bills aren’t making you wish you’d got a dog instead.)?
The ceiling rate sweet spot
The sweet spot for a freelancer is having a low-cost base and a high/in-demand skills base. If your notional day rate is at the low end of the market rate scale, you’re looking at win/win. You can round up your notional rate, still be highly competitive, and know you will earn enough to sustain your freelance life over the long term. Perhaps you can develop a sideline in home-baked goods, too…
Next blog looks at the variables that allow you to tweak the day rate.
