How Much Should I Charge?

How much should I charge?

How much should I charge, how much should I be paid for my creative work?

All too often, I hear the story that employers, organisations and friends expect creative work, especially from emerging artists, for nothing or for peanuts.  Often the creative obliges to gain the experience and work for their portfolio in the hope that ‘good paid work will come’. To ask for payment may also be somewhat a challenge for creatives unsure just what to charge.

A helpful rule of thumb is to check out what other creatives in your discipline of similar experience are charging.  However, a charge  per hour that relates to what you need for income and how much it costs to run your business can be estimated by the following process that enables you to arrive with at a realistic hourly rate.

1. Create a personal budget.  What do you need or want for an annual salary.  A good tool is Get Sorted — https://sorted.org.nz/get-sorted/.  This tool will help you identify weekly, monthly and yearly your expenses.  Without this calculation, you have no base to determine a starting point for your hourly rate. 

2. Just image your personal annual salary calculation came to $48,000 / year.  The next step is to determine the ‘possible’ hourly rate.  You need to ask the following questions to create the formula to achieve this:

  1. How many weeks in the year are you going to actual work?  While there are 52, you need to plan for:
    • annual holidays – on average 3 to 4 weeks
    • time off for sickness or other personal matters – on average 1 week
    • the statutory holidays that all employed people have – 2 weeks
  2. On average, self-employed people might work 52 – 7 weeks = 45 weeks.
  3. How many hours a week will you work?  These are the actual charge out hours.  A self-employed or contracting person doesn’t charge for administration time, promotional activities or other activities that aren’t directly related to actual work for your client.  As a rule of thumb, if you are charging out 30 hours a week, you will be working at least 40 to run your business well.
  4. If you are working 45 weeks in the year at 30 hours charge out hours a week, your base hourly rate would be: annual salary divided by the sum of the weeks worked multiplied by the hours worked each week.
    Eg. 48000 / 45 x 30 = 35.50 / hr

3. The next consideration is the cost to run your business.  You need to create a budget for your business operation to determine the total business costs in a year. Here is a link to a good range of free business budget templates https://www.vertex42.com/ExcelTemplates/business-budget.html
Personal income needs and your business costs both need to be factored into your hourly charge out rate.  Factors to consider for a design business for example, might be:

  1. Operating costs: phone and internet,  software licences, promotion on Google ads and FB etc,  rental costs
  2. Equipment costs.  Make a list of all the assets like computer, camera, printer etc.  Total the cost of purchasing them from new and divide that cost by 4.  In business, we would consider replacing such digital equipment every four years.
  3. To determine the hourly cost of running your business: total the Operating costs and the yearly Equipment costs and divide this by the sum of the weeks worked multiplied by the hours worked each week.
  4. For example if your yearly Operating costs were $4800 and your yearly Equipment costs were $2800, you calculations would be:4800 + 2800 / 45 x 30 = 4.82This figure per hour is added onto your personal income hourly rate giving a total of 35.50 + 4.82= 40.32
  5. Having completed all the costings to arrive at your hourly rate, the final consideration is your cost in relationship to the going rate in your market.  Are you costed above others of your experience and profile or below? If you are a new entrant, do you want to discount your charge for a period to secure business from and against your competition?  Discounting has its own perils.  Once started customers expect it in their pursuit of the best price.  An option is not to discount but initially put in a few extra hours that you do not charge out to ensure a quality product or service that keeps your client.
  6. Lastly, when quoting for a job, we have a tendency to under quote rather than over quote.  I suggest building into your quote a 10% cost creep. Murphy’s Law provides for the unexpected, complications and interruptions that are unanticipated and can mean repeated loses.  You do not list this 10% on the quote, you just increase your estimated hours by 10% and make that your quote.  Keep a database of each job you quote, the actual hours you spent on each job and monitor if you are under or over quoting to determine a more accurate cost in relation to your time investment for each job.

Lynn Lawton

Manager and Business Advisor

Depot Artspace