You’re a freelance writer because you want to make money. However, you need to be clear on how much money you want to make, how you will go about earning it, and all the factors that affect your earning power.
Two crucial concepts for understanding the relationship between your time and your compensation are your desired hourly rate and your true hourly wage.
Computing Your Desired Hourly Rate
Your desired hourly rate is the amount you charge your clients.
Let’s assume your goal is to earn $100K per year from full-time freelance writing. Let’s break it down the conventional way and assume you “work” from 9-6 Monday through Friday with an hour for lunch, and with 2 weeks a year of vacation (unpaid, of course, because you’re a freelancer):
- 50 weeks per year for a total of $100,000
- $2000 per week
- $400 per day
- $50 per hour, if you actually work 8 hours per day
Now here’s the rub: hardly any freelance writer, including you and me, will actually work on paying projects 8 hours a day, 5 days a week. Even if you are highly productive with excellent time management skills, you still have to:
- Seek new clients and markets
- Maintain existing relationships with clients current and past
- Learn new information about your specialty, about writing, and about all the other things that affect your career, including new software, etc.
- Deal with communications—e-mail, phone, snail mail
So we need to make an adjustment to the $50 per hour figure we just computed. Let’s make it easy and say that you actually only work on paying projects 4 hours a day. Now we get your desired hourly rate:
- $400 a day divided by 4 hours of paying work = $100 per hour
Determining Your True Hourly Wage
So what’s your true hourly wage? It’s simply the total amount of money you make in a year, or a month, divided by the total time you spend on actual paying projects and all the work-related activities we just discussed.
Let’s continue with our example and assumptions, and also assume that you actually do make $100,000 in a year by working 50 weeks a year, 5 days a week, with 4 hours devoted to actual paying projects averaging $100 per hour and another 4 hours taken up with work-related activities.
This makes your true hourly wage $50 per hour. This is your average compensation for all the time you put in to your work.
Use These Two Numbers to Your Advantage
There are 2 important points here:
- The projects you work on must, on average, pay you $100 per hour, your desired hourly rate, for you to meet your income goal of $100,000 per year.
- Take your true hourly wage into account when deciding when you should hire someone to help you in your professional or personal life. Often you should hire people to do things you don’t want to do, don’t have the time to do, or aren’t well-qualified to do whenever the total cost per hour of hiring someone is less than your true hourly wage.
Get These Two Numbers As Close Together As Possible
When you practice good time management skills, and when you are well known in your niches, you’ll spend a greater and greater percentage of your time actually working on projects that pay you really well: you’ll be a true Productive Writer!
Why Your Freelance Writing Earnings Need to Be 30% Higher Than Your Old Salary
Jenn Mattern left such an excellent comment that I pulled it up here, to make sure you read it.
Here’s an earnings goal trick I learned several years back (especially for those looking to move from a full-time job to full-time freelancing).
Freelancing should cover everything a traditional job covers — base pay, taxes, retirement savings, health insurance, paid vacations and sick time (a common mistake is to assume freelancers don’t get these, and then fail to plan to for them).
Most people I know tend to think of salaries in terms of what they could expect to earn as actual pay if they were apply for a traditional job. What I did was compare the salaries of full-time writers across numerous U.S. cities with their true cost to their employers. Freelancers have to think in terms of an employee’s full compensation package — not their salary — if they want to set equivalent earnings goals.
I found there was a 30-40% difference between those two things. Here’s what it means for setting freelance goals:
Let’s say you earn a $100k salary at a full-time job as a copywriter. If you want to freelance full-time, you can’t set a yearly goal of $100k if you want an equivalent lifestyle. You would need to earn $130-140k instead. That’s closer to what your old employer actually paid you every year through various benefits. And as a freelancer, we’re responsible for all of those things ourselves.
By all means, if you can get by on less and you’re comfortable with that, go for it. But if you want that vacation time, sick days, insurance, and savings available to you, you have to remember to account for it when setting your rates. I see new writers make this mistake all the time. They’re hitting their income goals, yet they struggle to get by from one client payment to the next, and they don’t understand why. That can be devastating, especially if they have families to support.
I suggest checking salary sites for this info in your own local area, especially if you target mostly local clients. But if you still think in terms of just “salaries,” it’s a good idea to add a standard 30% or so padding to whatever you initially think you need to earn. It’s much easier to cut your prices later than it is to suddenly raise them, and potentially have to target a completely different of clients, if you made a mistake.
Questions and Suggestions
1. What is your desired annual income? Be realistic about it, but don’t sell yourself short. Remember to factor in health insurance, retirement accounts, vacations, and other factors.
2. Spend a week—or better, a month—analyzing how you spend your work time. Figure out how many hours a week you actually spend on paying projects, and then, using your desired annual income and the example above, determine your true hourly wage.
3. Figure out ways you can be more efficient in marketing and all the other things you do for your business.
What are your thoughts about desired hourly rate and true hourly wage? How can you apply them to your freelance writing career?