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How do I set prices as a contractor or freelancer?

Mon 21st Oct 2019
Deciding to go freelance is just the beginning of some big decisions you need to make about your career, the next logical one being what you should be charging. Here are some tips to help you with coming to an educated decision and starting off on the right foot.

Overheads
Does the freedom of working for yourself come with any overheads that you need to meet? This includes any workspace costs, website costs and insurances. Start understanding your pricing by taking these costs into account.

Market Research
Do you know what your competitors are charging? It’s worth understanding your market including what your peers and competitors include for their fee. Be aware that comparison can be the thief of all joy so only look at those who have the same level of skills and experience to you. If you have 10 years’ experience your prices should be different to someone with only 6 months industry experience.

Annual Income
Working in an industry or role that you love is a huge achievement but if you’re only earning half of what you need then you need to consider what your annual income needs to be. Consider any goals you have in the next 3, 5 or 10 years for your finances and ask yourself if you will be earning enough to reach these. For example, is getting onto the property ladder or taking the trip of a lifetime on the cards for you?

Work Backwards
Once you understand your annual income goal, work backwards incorporating your time into this. How much will you need to earn per week to achieve this? Also factor in how many weeks a year you want to work for, if one of the reasons you moved into contracting was for the time freedom then don’t work on a 52 week calculation as this will leave you short.

Look Ahead
Ensure you are taking into account and putting money aside for your future, having a pension plan is vital and you need to start building it now. The rate you charge should allow you to not just save for your pension but also feed into a retirement fund so you can enjoy the long term ambitions you spend your working life working towards.

At 2020 Accountancy we deliver leading accountancy services to freelance contractors, sole traders and limited company contractors working in a broad range of specialist industries, from construction to IT, so you can focus on maximising your income.
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