Third of three posts from Sam Howard on the commercials of freelancing: How not to give away your work as a PR freelancer:
The last two posts, looked at how to calculate your base rate ( how much do you need to charge to survive) and your ceiling rate, (what the market will bear).
Hopefully the first calculation is lower than the second one, if not please stop reading this now and use this time to send out your resume. You’re are not going to be able to make it work as a freelancer.This post briefly covers what factors to consider when contemplating discounting your work.
Reasonable reasons to discount
- Do you know the client? Sounds obvious but if you know them already, then proving you’re the right person for the job, aka pitching and then over-servicing, shouldn’t take too long as your immaculate reputation will proceed you. So the time you save in not going OTT in the early months can be passed on in a discounted rate for the same period. (not indefinitely)
- Do you know and like the client? By that I mean do you know that they are really easy to work with? That your judgement is valued, that the client will take risks, that emails can be six words long (and four of those spelled incorrectly), that decisions are made in real-time and it’s OK to vent rather than labouring over such a delicately worded email you might as well have crocheted it. (This is my idea of a perfect client, I concede you may have a different set of selection criteria.) If you have a perfect client, then treasure them, working with them is a pleasure and you’re rate should reflect that.
- Is it something that will help you grow? OK so moving into an adjacent sector, expanding your skill set, working with a client that you can learn much from, these are all reasons to invest in your portfolio and discount.( again just for a while say six months while you ‘come up to speed’).
Just double check the sum total of all these discounts isn’t lower than your basement rate and for every client you take on that skims or even dips below that rate you need to take one with a higher yield, remember this always has to be win/win.
Rubbish reasons to discount:
- You’re really broke: So you’re staring at your laptop, willing for that one email to arrive, that will put a smile on your face and some cash into your account. But when it comes, (and it will) think carefully about pricing. It’s so tempting to come in really low, ‘cos you’re desperate. But what does it say about the value of your work? As scary as it is, put in the right price, that reflects the skill and effort involved to do a great job. Yes, you may end up negotiating down, but no one ever gets to negotiate up.
- They’re really broke: Whether they’re those sparkly eyed start-ups or family friends, those customers that really, really want to work with you, but have no money… FYI they’re not customers, they’re window shoppers. So move them along and find someone to work with that can treat you with the respect you’ve earned. And with the money generated from real work for real customers you can afford to buy the sparkly eyed start-up or the family friend a pint – or three if they really do need your support.
- Discounted trial projects: Not convinced myself. You need to be hanging out with people that know how to be professional in business, after all you have to represent them. If they come across as timid amateurs to you then that’s how thy are going to come across to press.
Doing it for free
I hate working on the cheap, feeling like someone has got something over on me, de-valued my contribution – but I love working for free. One of the best bits about working for yourself, is being able to contribute your skills and expertise to a cause you believe in and make a small difference in the world. Maybe it’s providing your professional services to a cause, or painting fences or washing out kennels. But if you’ve managed your finances and time sensibly, then you can afford to give it away and come home with your pockets full of physic income and your conscience having had a spa day.Image courtesy of wallpaper.com
Second of three posts from Sam Howard on the commercials of freelancing: Following on from my last post, which looked at how to calculate your bottom line day rate as a freelancer, this one looks at the ceiling day rate.
My child’s first bake sale, he was about seven and asked to make scones.
“How much are you selling them for?” I asked dispensing with the niceties.He hadn’t given it much thought, but guessed 10p each.
“Why?” I asked. He didn’t know.I told him to think harder. “OK cost of ingredients,” he said.
So how does that help the charity you are making them for? “OK cost plus 10p,” he said and so we discovered the concept of profit.
“So what about packaging and wastage?” So we got up to 30p. And he hoped that might be the end of it.
“But then,” I said triumphantly, “have you thought of what the market will bear?” He looked pretty annoyed at this point. “No”, he said, he had not.
Part 2 What the market will bear
So I explained what people paid for a scone in a nice tea shop at one end of the scale and how much you paid for a pack of scones in a low-end supermarket. We decided that if ours were fresh baked and prettily presented with a winning toothy smile, we might be able push that up to 50p a scone. It was a pretty successful bake sale by all accounts…
So what will the market bear for your services, given that you are not baking muffins, all proceeds are not going to charity, and that you’re probably not as cute as the average seven year old salesperson?
First stop, so what are local freelancers charging? Here’s a jan 2010 survery that I found that might be helpful, and this on a freelance website, but I’m not sure how fresh it is. Do they compare to you and your skills? Make sure these are valid, long term freelancers/independents. It’s a competitive market out there, but if people are offering to work for ‘silly money’ like you see on the bid sites, are you really going to compete with them, what are you competing for? To see who can go bust first?
You need to understand what local agencies are charging. if you’re former agency this is a no brainer. If you’re not, then you need to do some research to try and understand where you map on to the agency hierarchy, don’t go on your old salary (probably higher) but more on your experience and responsibilities, here’s a very very rough guide:
- 1 -3 years PR experience – account exec: Support role – admin, research, supervised outreach, supervised content creation, no direct reports ( not sure this is a good time to go freelance myself unless you have very low out goings), reports to account manager.
- 3 – 6 years PR experience – account manager: Implementation role, heads up tactics, main outreach person, day to day client go to person, directly manages juniors, reports to account director. Possibly knows the account better than anyone else.
- 6 – 8 years PR experience – account director, lead role, heads up strategy, leads client relationships, oversees budgeting, heavily involved in pitching, manages account managers, reports to group account director/director. Tasked with making money.
- 8+ years PR experience – group account director, senior account director etc – same as above but entrusted with more clients, more accounts, bigger budgets, bigger teams, and some development initiatives, reports to director.
- 10+ years of experience – director, running division, sits on key strategic accounts, leads new business drives, develops new services/territories, leads team, responsible for financial health of division, runs P&L, reports to CEO. Tasked with making profit.
Once you can map your role to an agency hierarchy, find out the local day rates for this role. Then to my mind you don’t just round your rate down, but you slash it. You don’t have the group expertise or the combined reach of an agency, also you don’t have the overheads. I tend to charge under half as this makes me viable for agency work too.
The bitter pill
Now you compare your market research to your notional day rate If your notional day rate tops the market rates, you have a problem. Really why is any one going to hire you in this climate if they can tap into the same services and expertise elsewhere for less? And if you take on a loss leader project, there is only one of you, while you’re not making enough money, there is no one else to make any money at all. Every day you work at the ‘wrong rate’ only puts even more pressure on the other days to over price. You need to think long and hard about how you are going to make this work. Possibly this is not the right time in your career to go freelance, mayber you need more skills/experience, so you can charge a stronger day rate or you need to wait until there is a time in your life when you don’t need to earn quite so much (eg the mortgage isn’t making your eyes water, the kids day care bills aren’t making you wish you’d got a dog instead.).
The sweet spot
The sweet spot for a freelancer is having a low cost base and a high/in demand skills base. If your notional day rate is at the low end of the market rate scale, you’re looking at win/win, you can round up your notional rate, still be extremely competitive and know you are going to be earning enough to be able to sustain the freelance life over the longer term. Who knows perhaps you can develop a side line in home-baked goods too…
First of three posts from Sam Howard on the commercials of freelancing:
If you are good with words, I’ve noticed, sooner or later you need to get good with maths.The first of three posts looking at how to price up your freelance comms work.
A recent survey in PRmoment, showed that most freelancers charge between £200 and £500 a day. So where might you fit in? The next few blogs share my ideas on how you decide what to charge. Hopefully useful if you are considering becoming a freelance PR, starting out, or just sense your business model might be a bit broke.
Part one – calculating a notional day rate, AKA what do you need to charge to survive?
Step 1) What do you need to earn?
Did you really go freelance to become rich? Really? Most people I know have gone freelance to take back control of their lives, to be able to make their own decisions, to be there for their families and generally to feel like they are living a more balanced and healthier life. And in that sense we are all very successful, though none of us ‘rich’. So when you are working out what you need to earn, if you really want to be a freelancer, I doubt if it’s anything like what you used to earn. Do a monthly budget of what you can cope with, (you’ll be surprised freelance currency goes along way).
This gives you your base line figure of what you need to clear after tax. For easy maths’ sake lets say that’s a £1,500 a month so £18,000 a year. So how does that convert to a day rate?
Step 2) How many days in the year do you have to earn it?Answer: it’s not 365,
Though this is where you start.
Days in the year 365
Less main public holidays 5
Less weekends 104 (don’t actually schedule to work weekends)
Less holidays/family/emergency days 25
Less sick/jet lag/ hangover days 12 ( just being realistic)
Days available to work 220 ( standard industry figure)
Now assume that 50% of that time you are not doing client work, either because there just isn’t any, or because you are working but not being ‘paid’ for it, eg admin, networking, training, research, marketing, pitching, preparing materials etc. That leaves 110 days to cover your budget, plus tax plus expenses.
Step 3) Not all that money is yours you know.Tax and expenses.
So sticking with our notional sum of £18,000 a year,
Plus expenses say 15% £2,700 ( if you are working from home, can easily be more if you are not),
Plus tax, say 25% £4,500.
So in theory you need to earn around £25,200, to give you £18,000 and meet that £1,500 budget.Step 4) Calculating the notional day rateSo now just look at how much you need in total, and divide it by client days. In our model that’s
£25,200 /110 days = £229/day notional day rate.
Next blog: how does that compare to what the market will bear? Favourably we hope. After that, take a look at when to discount your work so that you find that sweet spot that keeps your clients happy and your finances healthy.