Setting fees

A frequent problem for freelance technical authors, specially when starting a business, is deciding how much to charge. Many people, including some experts, suggest 'as much as the market will bear' or 'find out what your competitors are charging'. That is a vague method of costing.

According to The Chartered Institute of Marketing, a good guideline is the 1% rule (www.cim.co.uk/MSDirectory/ViewArticle.aspx?Id=8&cid=1). On average, most consultants have approximately 100 fee-earning days a year. Therefore, their daily rate is 1% of an equivalent salaried role. However, the guideline ignores the cost of running a business.

Some people suggest basing one's fee on an employee's wages, and adding a mark up for employer's costs such as National Insurance and administrative costs. However, this method is not sufficient, because it does not cover all the costs.

In the STC 2002 conference proceedings, Christopher Juillet discusses the issues in the article The Meter is Running: Setting Consulting Rates for Independence (www.stc.org/confproceed/2002/PDFs/STC49-00051.pdf). Christopher's article contains the best formula for calculating fees that I have seen. The high-level view is:

daily billing rate=daily labour rate+daily overhead rate+daily profit

The article explains in detail how to calculate each of the values. Christopher asked me to mention that the numbers in his article are old. Therefore, use your own numbers. (Contact Christopher on chris@juilletlaw.com or www.juilletlaw.com. The old csi.com e-mail address is not correct.)

Whether you charge by the day or whether you charge a fixed fee for a job, calculating your rate has the following benefits:

You will know whether your rate is leading you to profit or to ruin
When a potential client says that your rate is too high, you know that that is not true, and you can reject the project.

Download an Excel spreadsheet (blank-consulting-rate-calculator.xls) that uses Christopher's formula.