The Simple Way I Plan For Time Off And Earn More
As a full-time freelance content creator, I've learned that one crucial aspect often overlooked by freelancers is how to adjust your rates—not just for inflation or increased expertise, but also to account for time off. After all, unlike those with traditional employment, when you’re not working, you’re not earning. So, let's get real about how to set your rates properly, especially since it's Christmas.
Reminder
If you’re not increasing your rates for your growing expertise and inflation year on year, here is your reminder not to sell yourself short. One of the beautiful things about working for yourself is that you don't need to ask anyones permission to earn more. No jumping through hoops to get a boss's approval, no waiting for the annual review of staff and pay. Instead you set your rates based on what you can offer and what you need. The market will tell you whether or not you’re aiming too high and that's all that matters.
The Harsh Reality of Freelancing
You might think you've got it all figured out with your day rate, but let me burst your bubble. You're not working every single day. Holidays, sick days, and admin tasks are all eating into your earning potential. So, how do you ensure you're actually getting paid what you're worth? So how do you ensure you’re truly compensated for your time and expertise? How do you make up for all the extra benefits that one would receive as an employee such as pensions, health care and all the other trimmings.
The Hidden Cost of Time Off
Let’s say your day rate falls between £250 and £400. Seems decent, right? But consider this:
Even freelancers deserve a break! Factor in at least 28 days (the UK statutory minimum) for holidays. If you’re in the US, normal holidays are way less, but guess what, it doesn't matter what the standard is in any country because you do what you want and need. However let’s use the UK for calculations further down.
Everyone gets ill. Realistically, allocate 5-10 days for unexpected sick leave.
Chasing invoices, managing clients, marketing yourself—these tasks take time! Assume at least 1 day per week is dedicated to non-billable work. As you get more efficient at finding clients and managing the business it will be less but when you start out, it takes way more time that you’d think.
Afterall this, suddenly, that lovely day rate doesn’t seem so generous when spread across the actual working days in a year.
Doing the Math
Here’s a simplified way to calculate a sustainable rate:
Annual Working Days
Start with 365 days, subtract weekends, holidays, and sick days. Let’s be generous and say you have 220 working days left.
Desired Income
Decide your target annual income. Let’s aim for £60,000.
Calculate Your True Day Rate
Divide your target income by your working days: £60,000 / 220 = £272.72 per day.
This means to earn £60,000 while taking time off, your day rate needs to be closer to £273, not the initial £250.
Adjusting for Different Scenarios
Higher Day Rate
If you typically charge £400 per day, you might aim for a higher income. Using the same calculation, aiming for £80,000 per year would require 220 working days at £363.63 per day.
More Time Off
Need more holidays or anticipate more sick leave? Reduce your working days in the calculation. For example, with 200 working days, your £60,000 target requires a £300 day rate.
The 6-Figure Income Club
Aiming for a £100,000 annual income? Let’s break down the math:
Annual Working Days
Assume you have 220 working days after accounting for weekends, holidays, and sick days.
Desired Income
Your target annual income is £100,000.
Calculate Your True Day Rate
Divide your target income by your working days: £100,000 / 220 = £454.55 per day.
This means to earn £100,000 while taking time off, your day rate needs to be around £455.
Adjusting for More Time Off
If you need more holidays or anticipate more sick leave, reduce your working days. For example, with 200 working days, your £100,000 target requires a £500 day rate.
Communicating Rate Changes
Transparency is key when updating clients about rate changes.
Give Notice
Provide ample notice, ideally a month or more, to allow clients to adjust their budgets.
Explain Clearly
Outline the reasons for the increase, emphasizing your value and expertise.
Offer Options
Consider offering packages or retainers to soften the impact for long-term clients.
NB: make sure that the client already feels they get a lot of value from you - if you’re providing just an average service, they wont appreciate putting your rates up a great deal.
Beyond the Numbers
While the math provides a solid foundation, remember to:
Value Your Skills
Don’t undervalue yourself! Factor in your experience, specialization, and market demand.
Review Regularly
Re-evaluate your rates at least once a year to account for inflation, skill development, and changing market conditions. Also, consider the expenses that are vital for you to do business: IT equipment, software, travel, and insurance, for example.
By incorporating time off into your rate calculations and communicating transparently with clients, you can build a sustainable income and not end up playing financial catchup should essential item prices go up, like petrol, food, utilities, and insurance.
Freelancing is a marathon, not a sprint. If you want to build a sustainable business, you need to plan for the long haul. Factoring in time off when setting your rates is a crucial step in this journey.
This newsletter is for the dreamers, the doers, the rebels—those who refuse to settle for mediocrity and demand more from life. So, take a step back, reassess your rates, and make sure you're setting yourself up for success.
Until next time, keep hustling, dreaming big, and enjoying the magic of Christmas. Make sure you're not just surviving, but thriving, both in your business and in your personal life.
Happy holidays!
Want to see if you’re ready to embrace the freelancing lifestyle? Download my free ebook here: https://mailchi.mp/afccaff52a96/the-freelancing-revolution-ebook
Curious about whether freelancing makes financial sense? Try my risk calculator for free: https://mailchi.mp/8862aa51e803/risk-calculator.