Step 1: Calculate your day rate. What do you need to earn to survive?

Did you go freelance to become rich? Really? Most people I know have gone freelance to regain control of their lives. To make their own decisions. To be there for their families and generally to feel like they are living a more balanced, healthier life.

In that sense, we are all very successful, though none of us are ‘rich’. So when you are working out what you need to earn as a freelancer, I doubt if it’s anything like what you used to earn. Do a monthly budget of what you can cope with, (you’ll be surprised freelance currency goes a long way).

This gives you your baseline figure of what you need to clear after tax. For easy maths’ sake, let’s say that’s £1,500 a month, or £18,000 a year. So, how does that convert to a day rate?

Step 2: How many days a year do you have to earn? Answer: It’s not 365

Though this is where you start:

• Days in the year: 365
• Minus main public holidays: 5
• Subtract weekends:104 (don’t schedule to work weekends)
• Remove holidays/family/emergency days: 25
• Factor in sick/jet lag/ hangover days: 12 ( just being realistic)
• Days available to work: 220 ( standard industry figure)

Now assume that 50% of that time you are not doing client work, either because there just isn’t any, or because you are working but not being ‘paid’ for it, eg admin, networking, training, research, marketing, pitching, preparing materials etc. That leaves 110 days to cover your budget, plus tax plus expenses.

Step 3: Not all that money is yours; provision for tax and expenses

Let’s stick with our notional sum of £18,000 a year.

Plus expenses, say 15% £2,700 ( if you work from home, it can be easier than if you are not).

Plus tax, say 25% = £4,500.

Theoretically, you need to earn around £25,200 to give you £18,000 and meet that £1,500 budget.

Step 4: Freelance pricing and calculating the notional day rate

Now, look at how much you need and divide it by client days.

In our model, that’s £25,200 /110 days = £229/day notional day rate.

That’s your freelance pricing sorted. You’re welcome.

Next blog: how does that compare to what the market will bear? Favourably we hope. After that, take a look at when to discount your work so that you find that sweet spot that keeps your clients happy and your finances healthy.