Dear Design Doctor
I am a new web designer and need to know how much I can charge for my daily or hourly rate. Do I just charge what others are charging, or is there another way? How to calculate my freelance design rate?
The Design Doctor is Patricia van den Akker, Director of The Design Trust:
“Web design is a very competitive area to work in, and indeed very often the price is set by your employer or agency you work for. Your daily or hourly freelance design rate depends roughly on:
- What experience you have for the job and how unique your skill set is
- Where the work is e.g. London pays higher hourly rates
- How long the work is for: if the work is for a longer period then often the daily rate goes down
- The market rate: what are others charging?
- When the work is: for night or weekend work you get obviously paid more, or if there is an emergency job to be done
- Your ability to negotiate
You can find more info about the different ways to price your services here. As a web designer you might like to check out in particular ‘value-based pricing’ where you look at how much financial value you add with your work. For example if you can show that your web design has increased a previous clients’ turnover by 25% then you can charge a higher rate than if your design has had no a limited proven value.
There are 3 steps in how to calculate your design rate:
Step 1: Identify your annual expenditure
Firstly identify how much you spend annually on your business: What are your annual overheads?
You might need to go through your previous years’ bills to get the facts. Don’t forget to include your phone, travel, insurance, meeting space, materials, marketing.
As a freelance designer this will be pretty low in comparison to people who run a product-based business, have stock and require a studio.
Let’s say for this example this would be £ 3,500 p.a.
Then identify how much you would like as a salary.
Be aware that you will need to deduct tax and National Insurance in the UK, so let’s say that you would like to earn £27,000. (This figure very much depends on where you are and what seniority you hope to get within the business).
So you need to earn £30,500 to cover your annual overhead costs (personal and business costs = £3.5 + £27K).
Step 2: How many working hours can you invoice for?
This is tricky! You will need to have holidays (we all do!) and you might get ill. You will need to spend time on admin and marketing too!
And then there are slow periods in the year such as Christmas or the summer holidays (although you might actually get booked for that to cover holidays by employees!)
As a web designer I expect that you get fairly often regular bookings with the same clients for a longer period, so I would expect something like 60 – 70% of your hours to be billable throughout the year.
If you are a recent graduate than I would expect your billable hours to be far lower, and if you would work in other design sectors it would also be harder to find regular repeat business, so than you might be looking at 40 – 50%. This means that you get paid on average for only 2 days per week, other days you might work but don’t get paid for it.
My suggestion is to be on the cautious side with the amount of days or hours you will be able to invoice for.
So I would expect you to have something like the following annual billable hours:
48 weeks x 40hours x 60% = 1,152 hours p.a.
Step 3: Calculate your hourly freelance design rate
Now divide your total annual expenses by your total hours invoiced and you get the hourly rate that you need to charge to break even:
In our case that is £30,500K/1,152 = £28 p.h. or £212 p.d. for an 8-hour day.
And that’s it! You calculated your daily and hourly freelance design rate.
A couple of notes on your hourly freelance design rate:
Does that hourly rate sounds like a lot?
Remember that you might have been earning far less than this in a PAYE job, but that this is the hourly rate from which your tax, National Insurance and all expenses will be deducted.
Also be aware that you actually need to get the work to get this hourly rate. If your billable hours are far less than anticipated than your annual income will decrease dramatically. However, when you become more known with potential clients or employers your billable hours percentage should naturally increase due to repeat work, which means that your annual income also will increase without having to change your hourly rate!
Your actual daily or hourly rate will depend on a variety of factors, incl. market, your expertise and experience, total work involved, budget. You can read more about this in another blog post about pricing your work.
Be flexible with your daily or hourly rate. For long-term fixed contracts decrease your hourly rate in return for a more steady stream of billable hours. Longer term (part-time or full-time) contracts provide stability and increase your % of billable hours in the year.
Get it in writing. Make sure that you get your hourly or daily rate confirmed in writing or in a contract.