How to Calculate Your Fees

By Myriam Callegarin • February 23rd, 2010

earnings When you sell services, for example if you have a consulting business, you need to calculate your fees. What a challenge! Because it is connected with so many practical and emotional aspects: how much you value your work, how much your clients value it, how much you need for a living, where you are located geographically, your competition, etc.

There are several ways to calculate your fees, here is one very practical way you can do it.

Your basic calculation

(Total expenses + Desiderd Profit) / Billable hours.

6 Steps to calculate your fees

Step 1: Calculate your working hours per year

Considering that there are 52 weeks in a year, you can deduct:

4 weeks for vacations
1 week for sick leave
1 week for national holidays
1 week for miscellaneous: medical check-ups, dentist, etc.

= you work 45 weeks per year.

If you decide to work 8 hours a day, 5 days a week, you come up to 40 working hours x 45= 1,800 working hours a year.

Step 2: Calculate your billable hours

A big part of your time will not be billable, because you need to spend time on networking, marketing, sales, training and administration, plus anything else that may come up (always add a good buffer). These may include:

answering emails
online and offline networking
writing proposals
website maintenance
issuing invoices
solving technical or administrative issues
etc.

How much time will you allocate for these activities every day, week or month?

For example, if you spend 30% of your time on your networking, marketing, training, and 20% on administration, book keeping etc., you will only be working with clients 50% of your time.

This means 1,800 hours – 50% = 900 billable hours.

Step 3: Calculate your average business expenses
These can include:

Taxes
Phone
Web Hosting
Office rent
Stationary
Travel costs
Computers and softwares
Insurances
Legal services
Meetings and conferences
Training and education
Memberships

Step 4: Calculate your personal expenses

Food
Housing (mortgage, rent, maintenance)
Insurances
Entertainment (sports, movies, etc.)
Retirement
Vacation

Step 5: Calculate the profit you want

This is the money you want to earn in order to reach and keep the lifestyle you want. This is basically how much you want to save per year for things such as:

House renovation or buying a house
Buying a new car
Longer vacations
Education for your children
Etc.

Step 6: Do the final calculation
Put your business and personal expenses together (from Step 3 and 4), then add the profit you want (Step 5).

Then divide this amount by the billable hours (Step 2), and as a result you will see how much you need to charge per hour in order to cover the expenses you have and have the desired margin.

Conclusion

As mentioned above, this is just one way to calculate your fees. Even so, it’s a good way to get a feeling of how much your time is worth.

If you do this calculation accurately, you may be surprised. Many of my clients realize they are undercharging, and they wonder how they could ever charge the fee they have just calculated.

This reality check is vital if you want your business to be profitable for you in the long run. Even if you love your work and “you don’t do it for the money”, your time is precious. And often it’s just a matter of re-adjusting your focus and organization. Earning what you are worth is a huge energizer and motivator that helps you enjoy your work much more, and serve your clients even better.

***

Take action now

You are welcome to use our free Business Start Up Program. Should you have any questions or comments, simply contact us.

***

About the author

Myriam Callegarin works with action-oriented managers, professionals and business owners communicate value to their employer, clients and teams, in order to earn what they are worth in a work they enjoy. If you want to find out how you and your business could benefit from her expertise, simply request an initial consultation.

Comments(2) Business Startup, Top Posts

Comments

By dora ziamou on August 31st, 2010 at 5:45 pm

dear myriam,

thank you for the “plan B” article. Inspiring text, written in a simple yet efficient way. Concrete plans and steps are useful but this kind of reflexion (where we are/where we want to be) is a must and certainly the first step to everything.

best regards,
dora

By Myriam Callegarin on September 2nd, 2010 at 10:29 am

Dear Dora,

Thank you! I’m happy you found it inspiring and hope it will help you get started with your own Plan B.

All the best to you,
Myriam