- How to Compare Consulting or Freelance Rates to a Salary
- The Risks of being an Independent Consultant or Freelancer
- How to Set Your Hourly Consulting Rates
- How to Quote Fixed Price Independent Consulting or Freelancing Jobs
As an independent consultant or freelancer you can charge many jobs based on the number of hours you spend on the job. To do this you have to set your hourly consulting rate. You also need to make an “apples to apples” comparison of your consulting income to a potential salary as an employee. For some gigs you may be asked to quote a fixed price for the job, rather than an hourly rate. This is often the case for e.g. writing blog entries, developing web content, designing websites, drafting business correspondence, etc. This article describes a simple way for quoting such jobs.
Calculating the Right Price to Quote
The simplest method is to estimate the number of hours you expect the job to take and multiply that by your hourly rate. If you’ve done similar work before and have a good basis of estimate, by all means do so. However, a fixed price quote puts the risk of a too-low estimate on you. Your client will not usually be willing to pay more simply because you under-estimated your level of effort. If you don’t have a solid basis of estimate, add a margin of safety to your estimated number of hours, based on your level of uncertainty.
If your offer is reasonable, your client won’t balk. After all, she doesn’t know how long it will take you to do the work, which is why she’s asking for a fixed price quote. If she declines and counter-offers a lower amount, consider that you may end up spending more than the number of hours implied by her offer and your hourly rate. If you don’t have enough work, you might accept the job at what is effectively a lower hourly rate, since some income is better than no income. However, walk into such a situation with your eyes open to avoid later upset.
The Crucial Importance of a Clear Statement of Work
One final caution on fixed price quotes – you absolutely must have a very clear understanding, in writing, of what your client expects of you. That way if the client changes requirements in mid-stream you can decline, or tell her how much extra you will charge for the changes. If you don’t have a clear statement of work, you may find yourself a victim of “requirement creep” that never seems to let you finish the job and get paid. Besides its many benefits, there are risks to being self employed. Don’t let unclear requirements in fixed price jobs add to those risks.
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