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Rate Calculator


neilmcbean
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I built a rate calculator - mostly for freelancers, but could probably be used for small businesses (micro-businesses?). Basically it adds up individual costs, savings, investments, and taxes, and then figures out a billing rate based on how much billable time you probably have. Using 1000 billable hours as a rule of thumb. It doesn't capture any data - it's just for playing around.

 

For me it feels about right, but I set it up. ;)

 

I was thinking I can enhance it for business by adding salary or production costs? Would that be useful for anyone? Did I miss anything else?

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Thanks Francisco.

 

I noticed after I launched it that it screws up if you don't put in a four digit number. Working on that bug now. Everything is meant to be an annual budget amount so I didn't think it would come up that often. I'll put that next to each input so it's more clear.

 

Retirement Savings and Investment would be a round number. I can add that instruction to the form. I mean whatever you put aside every year for retirement funds for whatever investment strategy you use - I'm not prescriptive, but I do notice a lot of freelancers (including myself for far too long) don't consider that as part of their annual budget.

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Well, I don't know man, this is not working for me, if I put some info, it shows me way more than what I get paid hourly on my company. This can mean that I am very underpaid, (I don't think so) or your calculation is wrong.

 

Also if I put some values on my side freelancing costs, it shows a very small amount per hour.

 

The Tax rate also the default is .25 from web or number standard you should use 0.25 or 25 and mentioned it is divided by 100 to get % but not .25 this is not a standard and it is confusing.

 

If you enter anything else than .25 it add lots of zeros to any other result in all the fields.

 

I appreciate the effort, Neil, I don't want to be a pain in the neck, I am just testing your tool that otherwise I think it can be very useful.

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Thanks Francisco. You're what we call a good tester. I appreciate it. :)

 

The hourly freelance rate shouldn't match your full-time rate - it has to be higher because as a freelancer there are a lot of things you have to do that aren't billable. That's why I like the 1000 hour rule of thumb there. You'll never be billable 40 hours a week, 50 weeks a year as a freelancer.

 

I actually get a few freelancers saying that the number is low - a freelance software developer living in Utah might have low expenses, but the market will let them charge a lot. That's totally fine.

 

But it should still work for side gigs. You would just set it up as though you are full-time freelancing, and use that as a start point. You'd probably have reduced marketing costs in that case.

 

I think I fixed the percentage calculation. I think the formula was too complicated so I broke it down into smaller steps server-side (even though it's not a complicated formula). Now you just enter the tax % as a round number and it should work. I tested it a bunch of times and it updates interactively like it should.

 

Thanks again!

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  • 2 weeks later...

Then the hourly rate wouldn't work. It actually doesn't give you a salary, it only adds up your expenses and then adds a small buffer for unexpected costs. So those are your expenses....it may seem high, but it's a realistic target, especially for a fulltime freelancer.

 

Also I should clarify - this is not a salary calculator, because salary takes a lot of costs out of the equation. For example cost of sales, legal costs, taxes, training etc. will probably be taken on by your company. Healthcare and employment insurance may be handled by your country if you are a salaried employee (they are here in Canada, but not if you are self-employed). The calculator uses the 1/1000 rule because of all the non-billable time required for starting/maintaining a service business. This is for people looking at side gigs, bootstrapping their own shops, or freelancing full-time.

 

I see a lot of people who bill for freelancing like they would for salary, or maybe adding a small premium. I don't think that's enough.

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Thanks Nevile! I hope the pricing works out.

 

I think you have to bill based on what you need, not based on what the market will bear (unless market prices are much higher than what you need :). Then it's about finding clients and projects willing to pay. I totally get the "too greedy" thing, but I also think people should remember that their price impacts everyone else's price. By pricing fairly, and taking all of our needs into account, everybody does better.

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