establishing your billable rate


By Professor John T. Drew
California State University, Fullerton
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In order to understand what you should charge for a particular job, for example a brochure, you first need to know two very important things. One, how much should you be charging per hour, and two, how many hours does it take you to finish a job. In this case, a brochure. Most freelance graphic designers, graphic design studios, or ad agencies bid a flat fee for the job, but it does not mean they don’t know how much time, on average, it takes them to do the job. In other words, what is the minimum amount they can charge a client so that they can break even. You need to know what your total amount of expenses are so that you have a good understanding what to charge to make a profit. For example, $65.00 x 12 hours = $780.00. If this is the time it takes to do the job on average to break even, then I may want to charge 17 hours ($1,105.00) making a profit of $225.00.
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Every graphic design student should be keeping track of the hours it takes to complete each type of project. Once you have done a project, for example, five times you will have a good understanding (on average) the time commitment necessary to do a good job. Without this understanding you’re just gambling with your time and money.

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The formula listed below is one way to determine your hourly rate. Everyone’s rate will be different. So don’t be surprised if the person sitting next to you has a different rate than you do. Everyone’s expenses are different.
The total amount for the year should be divided by 20 hours per week. If you’re a full-time freelance designer then 20 hours a week will be all you can put into design time. The other 20 hours a week will be spent on developing new clients. Take the total amount of your expenses and divided by the total number of hours—see below. This will give you your hourly rate.
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52 weeks x 20 hours = 1,040
50 weeks x 20 hours = 1,000
48 weeks x 20 hours = 960
47 weeks x 20 hours = 940
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The total hours above is based on how many hours vacation and sick leave you want?
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Finally, even if you work full-time as a graphic designer your hourly rate should be used to determine what you are going to bid for a freelance job.
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If after completing your hourly rate you find that you are grossly under estimating the amount you’re charging, then you should be trying to think of ways to make yourself faster. For example, almost all graphic design work as five categories, type, image, color, grid, and composition. If you start to save all your typographic expressions for each project (printing them out and putting them into a three ring binder) you will begin to create a typographic morgue file. You would do the same for color, grids (including formatting), and images. Some of these categories would be better on the computer, in different folders, so that they’re ready to be used.
 It is also advisable to, in your free time, experiment with different typographic expressions, color combinations, and grid systems so that you can continuously add to these morgue files.
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By using this type of strategy you can bring down your price point so that it is competitive. As you become more experienced your speed will increase, your work will become consistently better, and you will be able to charge more. Remember, this is a snapshot of your rate. You will need to revise it on an annual basis.

 

Billable Rate

Expenses

Home/Office Cost x 12 =

Rent/Mortgage            
Gas                              
Water                            
Electricity
                      
Subtotal                  

Office rent
Gas
Water
Electricity

Car Cost x 12 =

Car payment
Gas per month
Insurance
Tires (yearly =)                     
Maintenance                                            

Subtotal

Food Cost x 12 =

Business lunches                   
Business dinners                    

Subtotal                  

Travel Expenses (Business yearly =)

 
Airfare 
Rental Car 
Gas          
Hotel                                                             

Subtotal                  

Computer hardware                 

Computer (over three years)
Software Cost x 12 =       
Printer 1 (over three years)
Printer 2 (over three years)
ipad (over three years)

Subtotal

Phone & Internet (Cost x 12 =)


Cell phone 1
Cell phone 2                                             
Home phone/hard line
Internet service per month                 

Subtotal                  

Art supplies per-month (Cost x 12 =)

Sketchbooks   
Printing paper
Ink cartridges
Toner cartridges   
Pencils     
Illustration board  
X-Acto knife and blades
Portfolio book                       


Subtotal

Business clothing per month (Cost x 12 =)

Shoes    
Shirts/blouses
Pants/skirts
Dresses      
Suit and tie                                               

Subtotal

Entertainment (Cost x 12 =)


Movies
Restaurants
Dancing
Museums

Subtotal
                                                      
Medical insurance per month x 12 =                              
Dental insurance per month x 12 =
Vacation (total amount you want to spend per year)
Savings (Bank Account--what you want to save)                        

Retirement 401K (see financial advisor)                                  


Subtotal                  

Total