set your prices to be profitable, Become a self-employed entrepreneur

There is an almost universal rule among freelancers: initial rates are too low. The fear of not being able to sell (or the impostor syndrome of some) limits neo-independents who think it’s normal to have to scrape by, or even work for free at the startup to claim their place in the near future. .

When you are a first-time entrepreneur, the cost of an activity can quickly overwhelm you. If you’re used to a middle-class employee lifestyle and paying attention to your budget, it’s hard to project yourself into the finances of a business. (…) The cost of an employee alone is staggering, as it is approximately double the net salary for the employer, without however guaranteeing him productivity or results. When we put this data into perspective, paying a freelancer 300 or 400 euros to deliver work in a well-defined perimeter is not easy. (…)

The freelancer is in control of his invoicing

In principle, it is up to the freelancer to determine his prices and his invoicing method. In reality, the customer may decide to refuse and go to a more malleable competitor. Pricing also depends on the power dynamics between the client and the freelancer. The independent with a full order book has less to lose than one struggling to pay his bills. And that, most of the time, prospects feel it! (…)

It is important that you find your way about the energy invested. Finally, you can play between two variables in the invoice: a calculation method and a calculation basis.

Your rates = Calculation method × Calculation basis

For calculation methods, you have a choice between:

the flat rate: charging a certain amount for a service, regardless of the time it takes you (for example, €2,000.00 for a website); the time spent (with agreement on almost a maximum duration, or no limit); commission: deduction part of the cost of the service from the amount fixed in advance or unlimited (invoicing 10% of a real estate transaction or receiving €100 for sponsoring the opening of an account ). Often it is a matter of business contribution, affiliation or mandate; the result: paid only in case of success (by becoming a partner in shares in the company. In this case, the payment will come on the day of their sale. sharing with other shareholders, a takeover of the company or a IPO). As for the calculation basis, it can be: the ADR (average daily rate) or the hourly rate (a lawyer can charge 200 € per hour), the amount created could be a quantified result or a goal achieved (10% of a contract won for business contribution for a salesperson), an average market price (€120 for an 800-word article written for the web) , d ‘a unit price determined by the independent (€1,200.00 for a logo and a graphic charter ), · sometimes the customer will have his own price list. This is a practice that has limited legality because the self-employed must choose their own salary. However, this is also a fact that must be understood in order to better combat it.

With a quick internet search, you can find information on the rates of freelancers in your sector of activity. This will let you know if your rates are relevant. (…)

Calculate your ADR

I invite you to calculate the minimum acceptable in return for your time. This data is affectionately referred to as TJM by freelancers and clients (sometimes meaning minimum daily rate, sometimes average daily rate).

This is your rate per workday (7 to 8 hours). Even if you decide to invoice at a flat rate, per unit or as a percentage of the amount produced, it is interesting to calculate this ADR. You can use it to assess the profitability of a mission. It couldn’t be easier. All you have to do is estimate the time spent performing a service, multiply that by your TJM and check if the estimated amount is equal to or less than your invoice (to maintain a margin).

For example, the ADR of a junior graphic designer can start at €300, the ADR of a confirmed developer at €600 and the ADR of a consultant with a bottle at €1,200.

This does not mean that these freelancers charge this amount multiplied by 20 working days of the month. Unless working on long, full-time assignments, only a few days are spent on behalf of clients. Others are busy with tasks related to sales or administration.

(…) You will not be paid for all the time you spend working. Therefore, your salary should be divided between the days spent performing services billed to customers. When a freelancer succeeds in selling his services well, he can expect to invoice between 80 and 120 days per year.

You can consider several elements: · your minimum salary: you can calculate what it costs you in time according to what you want to receive; · use the market price: competition from freelancers, but there is a risk that they are not expensive enough and neither are you; · your popularity: you can increase the price until you feel it is blocking. A former politician turned lecturer can be paid €30,000.00 per speech. But the same client will have a hard time paying you $500 a day if you come out of nowhere. (…)

Rates must include all labor costs

the compensation you pay yourself,
your computer equipment (computer, tablet if necessary, mobile phone),
raw materials to perform certain services,
the amount of software required for your activity,
your subscriptions and various charges (telephone, internet, area),
· your neighbor to protect your health and your insurance in the event of an accident that may prevent you from continuing your activity, · your business trips (to go to your customers),
the training costs and the time needed to improve your skills (since you will not be working during this time),
· the cost of your paid vacation (since you cannot produce and sell services during your vacation), · social contributions related to your turnover, your income or your salary (depending on your status). (…)

The right price, a matter of “feel”

The best price is the one where you feel good. If that means you want to start at a low price to insure yourself, go for it! A price that is too high in the beginning can paralyze you when you have to communicate it to your prospects. (…)

Over the course of the missions, you will gain confidence in your abilities (…). In addition, your business expertise will improve and you will be able to do a better job. Therefore, the most important thing is not your TJM at the present moment, but the development curve.



Lise Slimane, author of “Everything to be freelance” (Editions Caliopea).
– Photo Luis Villanueva

AUTHOR:

Lise Slimane is a trainer and entrepreneur specializing in the freelance economy. He founded the training site “La Minute freelance”. This text is taken from his book “Tout pour être freelance” published by Caliopea, 400 pages, 39 euros.

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