Do you know that working with just 2 freelance clients you can make up to $40000 (N14Million) annually?

Join me in this special series of #IncomeOfAFreelancer discussion from Wacademy Bootcamp.

AGENDA

1. INTRODUCTION
2. EXCEPT FROM PAYONEER FREELANCE INCOME SURVEY REPORT 2022
3. CALCULATE YOUR MINIMUM HOURLY RATE
i. Calculate The Number of Days Invoiced for Your Business
ii. Estimate Your Expenses
iii. Set Your Minimum Hourly Rate
4. SET YOUR PRICES
i. Choose A Price Strategy For Your Business
ii. Add a Basis for Calculation to your Pricing Strategy
5. HOW TO ACQUIRE HIGH PAYING FREELANCE SKILLS

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See you at 3 PM

This spot is for important announcement

1. INTRODUCTION

What Is Freelancing?
Essentially, a freelance job is one where a person works for themselves, rather than for a company. While freelancers do take on contract work for companies and organizations, they are ultimately self-employed.

Freelancers are responsible for all sorts of things that traditional employees are not, such as setting their work hours, keeping track of time spent on different projects, billing clients, and paying their own employment and business taxes. Freelancers are not considered “employees” by the companies they work for, but rather “contractors.”

Fields, professions, and industries where freelancing is predominant include: music, writing, acting, computer programming, web design, graphic design, translating and illustrating, film and video production and other forms of piece work which some cultural theorists consider as central to the cognitive-cultural economy.

2. EXCEPT FROM PAYONEER FREELANCE INCOME SURVEY REPORT 2022

The past two years have brought unprecedented disruptions
to the global employment market. As billions around the
world continued to shelter against COVID-19, the global
work force, including millions of freelancers, has adapted to
a new reality.

In this fourth edition of the Freelance Income Report, using
data from a survey of 2,000 Payoneer customers from over
100 countries who work with international clients, Payoneer set
out to better understand who today’s freelance workers are,
what unique challenges they face, and how they are
weathering the global pandemic. See excepts from the 2022 report.


1. 32% of respondents reported higher demand for their services since the
COVID-19 pandemic began, with a further 45% saying demand stayed
constant without slowing.

2. The worldwide average hourly freelance rate is $28, much higher than the
$21 average rate two years ago.

3. The fields of programming, marketing, and finance showed the strongest
growth in demand.

4. Younger freelancers were the main beneficiaries in the surge in demand,
while more seasoned freelancers saw a slight slowdown.

5. 40% reported higher hourly rates since the start of the pandemic. Only
12% saw a decrease in rates.

6. Despite the increased representation and higher rates of education among
women, the gender pay gap persists, and has even widened slightly
since our 2020 Global Freelancer Income Report. Women are making 82%
of what their male counterparts make, at $23/hour on average compared
to men’s $28/hour.

7. The fastest growing specialties - finance, marketing, and programming - are
among the top earning professions, while the lowest-earning freelancing
specialties are in decline.

8. Female participation has increased from 24% to 29% since the 2020
Global Freelancer Income Report.

9. Younger freelancers were able to command higher rates, offering them a
bright future in a growing freelancing market.

10. LinkedIn, Instagram, and YouTube continue to gain popularity among freelancers,
inching closer to Facebook as the top platform for freelancers to promote their work.

Discussion 2.0 - Which of these statistics and fact interest you the most?

3. CALCULATE YOUR MINIMUM HOURLY RATE

Knowing your minimum remuneration per hour worked is an advantage, especially during your prospection and negotiations. This is your compass for deciding whether to accept or turn down an assignment, and it will determine how you set your prices.

In some cases, the client will have already defined the budget for the assignment, with no possible flexibility.

Example:

Motocycle couriers who use platforms are paid according to set rates (number of rounds, mileage, time, etc.). Translation agencies pay freelance translators a fixed rate per word.

In that case, you need to know the minimum price that you could accept per day, and/or per hour to check that the client’s budget suits you. By setting your minimum hourly rate, you’ll have a sum below which you can’t accept an assignment.

For other situations, you’ll need to propose a price for your various services, which must be at least equal to or higher than your minimum hourly rate.

As an independent worker, your turnover is different from your remuneration (your personal income). The turnover corresponds to the total sum invoiced to all of your clients over a given period. Your remuneration is the salary you pay yourself once you have paid your expenses. For independent workers, this personal income can vary each month, as turnover depends on client orders.

How do I calculate my minimum hourly rate?

Two things must be taken into account to work out your minimum hourly rate: the number of days invoiced and your expenses.

3.i. Calculate The Number of Days Invoiced for Your Business

Each year comprises 250 working days (not counting weekends and public holidays). However, as a freelancer, with a few rare exceptions, you are only paid for the days invoiced.

The days invoiced are the days during which you work, on behalf of the clients to whom you have sold the services. During the non-invoiced days, you still work, but without pay (prospection, training, business administration). Added to that are holidays and possible days off work for sickness which need to be planned for since they are often not covered by your social security or insurance scheme.

Here’s the formula to assess your number of days invoiced per year:

Number of days invoiced = (Number of working days) - (Number of non-invoiced working days) - (Number of days holiday) - (Provisional number of sickness days)

Example:

John is a Lagos-based SEO specialist, specializing in On-page and off-page SEO. He estimates his time spent on accountancy at 10 days per year, and his time spent prospecting for clients (telephone, meetings, tender submissions, etc.) at 72 days per year. So, he has 82 non-invoiced days. He wants to take 25 days leave a year and allows for seven sick days in case of winter flu.

John’s number of invoiced days is (250 - 82 - 25 - 7) = 136 days.

He expects to spend 136 days working on client projects (creating SEO campaign for them).

Discussion 3.i - Comment below the number of days invoiced for your business.

3.ii. Estimate Your Expenses

The expenses are all the costs the business incurs to carry out its mission.
In the case of an independent worker, it means all the costs associated
with providing services to the clients.

What expenses do independent workers have?

The expenses depend upon your status, the nature of your services,
the remuneration you want, and all the purchases needed by your business.

Here is a non exhaustive list of all the expenses that you might have to pay:
your salary, your rent if you have a professional office, raw materials,
the equipment needed for your business (car, bicycle, computer, IT program subscriptions,
insurance, etc.), your supplementary health insurance, and, finally,
the taxes, fees and Social Security contributions on your turnover.

To calculate your expenses, i.e. the total amount of money that you need to pursue
your business (including your salary), you need to take the following into account:

Expenses = (Salary and professional fees) ×1.(personal income tax)

Note that taxes is shown here as a percentage of turnover,
which is the case for self-employed workers. Get your accountant’s advice
or that of your collection organization about the calculation methods that
apply to your situation and adapt the formula if necessary.

Example:

Let’s return to the case of John.
He wants to pay himself a salary of N500000 net each month, i.e. N6000000 a year.
In order not to have to work alone, he’s joined a co-working space which costs him N50000 each month (N600000 a year).

Added to this are the SEO premium tools subscriptions ($1000/N350000 a year),
a fairly powerful computer that he changes every three years,
as well as a tablet with the same lifespan (N500000 a year),
professional insurance (N50000 a year), his public transport season-ticket,
which he mainly uses for going to meet clients (N200000 a year) and his top-up health insurance (N30000 a year).

This represents salaries and professional expenses of N7,080,000 each year.

He is self-employed, and the sum of his dues and contributions amounts to 24% of his turnover.

John’s annual expenses are, thus: 7080000 × 1.24 = 8779200

John has to achieve a turnover of N8,779,200 each year so that his self-employed business is profitable.

Discussion 3.ii - Based on your calculation, what is your annual turnover?

3.iii. Set Your Minimum Hourly Rate

Define your minimum hourly rate to ensure that you only choose assignments that will help you secure your business in the long run.

Minimum hourly rate = {(Annual expenses) / (number of days invoiced)} / (number of hours worked per day)

Example:

John needs to focus for about six hours per day when he performs an SEO service. His minimum hourly rate is as follows: {(N8779200) / (136 days)} / 6 hrs = approximately N10758/$30 per hour.

Like John, always be sure of the profitability of your business. For example, John knows that he needs 30 hours to complete a local SEO service. So, he doesn’t accept contracts for less than N322,000 (30 hrs × 10578) to produce a logo.

You can also use these formular to set an ideal hourly rate, for example with more holidays, or a slightly higher salary.

Be careful to make your minimum hourly rate correspond with economic reality. For example, it’s difficult to sell a courier service for N10000 an hour, even if that is your ideal hourly rate. The turnover you want to achieve must be in line with the type of service offered, and not with what you hope to earn.

If your rate is high, you have to be able to provide an efficient level of service, be specialized, and create a high value for your clients. In case of doubt, don’t hesitate to test different prices. If you’ve aimed too high, you can always adapt your proposal, either by bringing your rates into line with those practiced by the competition or by training yourself and by improving your services so that the price and service are in tune with your client’s expectations.

Now you are ready to set the prices of your services with a clear measure of profitability!

Discussion 3.iii - What do you think is the best hourly rate for your service in Naira and dollar?

4. SET YOUR PRICES

You’ve understood this: a clear and well-defined offer of
services is the basis of your business success.
You’ve learnt to calculate your break-even point.
The next step is to fix the price of your services.

The same question arises for all freelancers, whether
beginners or experienced, in all lines of business:

How much should I charge?

You’ll learn to set the price of your services:

By choosing a pricing strategy from among the financial models most frequently used by freelancers;

By adding a basis for calculation to assess the total sum for the service provided.

Be careful to keep your minimum hourly rate in mind so you only propose fees that will be profitable for your business.

I discourage you from working for free, especially for trading companies,
even if the client emphasizes the visibility or experience you’d gain.
If you don’t yet have references or examples of past work as a freelancer,
think about highlighting your school or college work, other work experience and hobbies.
You can also reassure the client by proposing that they give you a brief assignment as a trial.

4.i. Choose A Price Strategy For Your Services

Adopting a strategy will allow you to find a method of calculation relevant to the assignment and the ability to explain your rates if necessary.

There are several pricing strategies:

>> Cost-based pricing
>> Matching the market price
>> Value created

Strategy linked to the cost of the service provision
This method consists of evaluating the resources needed to deliver a service.
The client will be invoiced on that basis.

Pricing according to the cost of the service comes back to time spent using your minimum hourly rate.
This is ideal for freelancers starting out with new services.

If you don’t yet know your hourly rate or daily rate, you can calculate it with the help of the previous posts.

Strategy linked to market prices
Identify the costs of competitor solutions and align yourself with those provisions to set your price.
This could involve the average market salary according to your skills, or the price charged by other freelancers for identical services.

This technique is sometimes necessary for standardised services in a fairly competitive sector.

Check that the market price is higher than your minimum hourly rate. Otherwise, it’s better to go for a different strategy.

Strategy linked to value provided to the client
This technique is used by well known freelancers who offer very specialised services (rare in their sector), or who can demonstrate previous results (references, portfolio, priced results obtained for clients, etc.).

Example:

Tracy, an expert in digital marketing, knows the value she brings thanks to previous work. On average, she increases the annual turnover achieved by her clients, on the Internet, by 10%. She only works with businesses having a turnover of between $1 million and $5 million a year. So, she knows that she can help her clients earn between $100,000 and $500,000. Tracy's annual fee for this support service is $20,000 per year. She spends about two days a month on each client, which is well above her minimum hourly rate of $60 per hour. The clients are delighted, because Tracy is an expert and gives them extraordinary results compared to the investment of $20,000.

With this strategy, the client needs to be aware of their requirements and concerned only with the results (the resources required to get there being of minor importance). Beginners can try this out using the figures (studies).

To determine which strategy to select, ask potential clients lots of questions to assess their needs and what they see as important.

Discussion 4.i - Over to you, which pricing strategy will you adopt?

4.ii. Add a Basis for Calculation to your Pricing Strategy

You now have an idea of the strategy to adopt. But how should you calculate the overall price of a service? To do this, you need to add a basis for calculation to the selected strategy.

The basis for calculation is a tool that allows you to represent the service in a tangible way. What is the client buying from you? A turnkey solution? Your presence during a given period? Remote work?

Here are several examples of basis for calculation for your business:
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Basis for calculation of pricing: Hourly/Daily

Definition: Pricing mainly relies upon an exchange of time and skills.

In what cases should it be used?: Short-term assignment. Transparent to the client (price + services shown in advance)

Example: Naturopath paid per consultation (one hour).
================================

Basis for calculation of pricing: Weekly/Monthly

Definition: Pricing mainly relies upon an exchange of time and skills.

In what cases should it be used?: Long-term assignment. Transparent to the client (price + services shown in advance)

Example: Support by an IT consultant over several months.
=============================

Basis for calculation of pricing: On commission

Definition: Remuneration is a percentage of performance achieved. No remuneration in the case of failure.

In what cases should it be used?: Ideal to convince the client (no risk) and ideal for the freelancer on very large budgets.

Example: Headhunter charging 20% of the annual salary of the person they recruit for a business.
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Basis for calculation of pricing: Lump sum

Definition: Firm, fixed budget for a final service provision.

In what cases should it be used?: Provision of a turnkey solution. Transparency for the client and the freelancer.

Example: Creation of a logo by a graphic artist for $1600 excluding tax.
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Basis for calculation of pricing: Fee (by time spent)

Definition: The time spent by the freelancer is recorded during the assignment and invoiced in full at the end.

In what cases should it be used?: The amount of work to be provided is not known in advance.

Example: A commercial lawyer charges $180 excluding tax per hour and bills for time spent at the end of the assignment.
==============================

Basis for calculation of pricing: By task

Definition: A fixed sum is allocated to each task performed.

In what cases should it be used?: Need for transparency for the client, and need for the freelancer to be motivated to work quickly.

Example: Cycle couriers (remuneration by round).
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Basis for calculation of pricing: By unit

Definition: Each unit processed is payable.

In what cases should it be used?: In the event of assignments not being uniform, with an average value applied.

Example: A translator paid per word.
=============================

Basis for calculation of pricing: Budget based

Definition: The client has a specific budget. The freelancer makes a proposal according to that budget.

In what cases should it be used?: The client has limited and inflexible financial resources.

Example: A client has a budget of $1500 to produce a website. Their freelance developer offers them three simple pages for that price.
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If the difference between strategy and basis for calculation seems hazy to you, the following examples will help you:

Example 1. A coach for entrepreneurs prices their consultation by the hour (basis for calculation), but taking into account the value of the transformation they will achieve for their client (strategy). Some charge £50 per hour and others $5000 per hour according to how well-known they are, the type of client and the perceived quality of service provided.

Example 2. A remote secretary can price her services by the hour (basis for calculation) according to the hours when she provides cover for telephone calls and email. Her strategy is certainly based on market competition (strategy), because clients are used to paying a certain price for these well-defined services.

Example 3. An IT repair person working for individual clients might choose to charge according to type of repair (basis for calculation), taking into account their labour and equipment costs (strategy).

The basis for calculation is generally what is shown on your invoice (the unit of measurement), and the strategy is the explanation of the sum due (the rate), your price being equal to a unit of measurement multiplied by a rate (e.g. the number of hours spent, multiplied by your hourly rate).

Try to experiment by making a list of all possible options for rates for your services, putting together each strategy element with each basis for calculation element.

Don’t censor yourself, especially if you’re a beginner. Above all, don’t impose personal judgement on the price. What might seem too expensive to you, might be acceptable to your client. Trust your justified price setting process.

Good price setting contributes to a win-win strategy for you and your client. Take care over this stage, so that it is in line with the conditions of your future assignments and so that, during them, you remain motivated and enthusiastic.

Discussion 4.ii - Based on the freelance service you offer what is/are the pricing strategy you adopt from the example above? (Please also mention the service you are providing)

It's been good I shared my post without interruption.

In upcoming post over the next few days, I will share information about high paying freelance skills and how to acquired them.

Stay tuned!