Calculating Rates

One of the main differences in going truly freelance* is having to have a consistent formula for calculating quotes and pricing for jobs, as for most things this basically comes down to a time and materials calculation, but the time part has a load of variables in its own right, So far these seem to me to break down into the following

“Basic” = This is the hourly rate you would pay for a permanent member of staff who could do the job to the competency you require.

This is our baseline, it represents the ultimate “bulk buy” and so offers the cheapest rate but is the least disposable.

“Contractor” = “Basic” + A pro rata amount representing all the stuff that a permanent would normally get as part of their job e.g. Holiday, Pension, Sickness, Insurance, job security etc etc

In actual fact a contractor tends to cost the same as a permanent in a holistic way, it is just that you see all the costs up front, more expensive but also more disposable than a permanent member of staff

“Consultant” = “Contractor” + Business over heads (such as travel, time lost, project overruns and changes)

Consultant rate is in fact a reverse form of “bulk buy”, you are only paying for people for a short period of time so they have to maintain them selves when you have finished with them before they pick up their next role, consultant rates also tend to cater to sudden client demands and changes, very often when you see a project start to get picky about every change and alteration, it is because the project has been aggressively priced according to “Contractor” rates (either because of rate negotiation or competition) which means every time there is a change it ACTUALLY costs the consultant money

“Jump” = “Consultant” + Cost of Impact to other clients

More properly called “On Call” or “SLA Maintenance” rates, “Jump” rates mean you stop what you are doing and immediately attend to the needs of a client, you see them all the time in the different costs associated with a support contract, you have to consider the impact to other clients if their work is interrupted and if that is not permitted, someone must be constantly waiting for a client to make them “Jump to it” which cost money, of course many large clients expect “Jump” performance for “Contractor” Rates, so you must decided if such business is worth the Loss leader Behaviour that this represents

Of course you can throw all of this out of the window due to a number of reasons e.g. Really Interesting work, Worthy cause or to improve your skill set.

So this is what proper managers do…………

*That is having no one main client but lots of nearly equal clients.

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