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Dear Ed archive

August/September 2008

I reduced my quote to get my last job, but when I added up all the hours I spent on it, I realised I’d only grossed $30 an hour. How can I stop this happening in future?
Sandy

Hi Sandy

The bad news is that you probably earnt closer to $15 an hour than $30, but I’ll come back to that. You’ve got time to make yourself a hot chocolate before I’ve thought my way through to the final paragraph, so why don’t you do that while I clear these dictionaries off my soapbox.

That’s better. Can you hear me now? Okay. Freelance Rule #1: Never underquote just to get the job. There are lots of really good reasons for this, but the best one is that it’s the financial equivalent of cannibalising yourself.

I presume you put in an estimate, then your client asked you to reduce either the number of hours or your fee per hour. So you won the job, it arrived, you unpacked it and started work, glad to have a job to get stuck into. Then, without realising it, you started resenting the job because:

1. it was taking too much time (even though it was only taking the amount of time you thought it would take in the first place before you took a knife to your original estimate)
2. the manuscript was so bad you felt like you were operating a text-based reverse garbage truck
3. you could be earning real money working on something else, rather than being shackled to this absolute dog of a job.

Don’t get me wrong; I like dogs, just not when they arrive via courier and have numbered pages, so I’m about to share Ed’s Pie Theory with you. Imagine that your hourly rate is a pie. In this case, the whole pie is $30 (your hourly rate), which means that already there’s not a lot of pie to go around. From that $30 you need to put aside 30% for tax ($9), 10% for superannuation ($3) and 10% for savings, holidays and periods of no work ($3). So your $30 fee is actually $15. The next time you’re tempted to take a knife to your quote, mentally halve the hourly rate you’re asking for and consider it seriously. In this case, would you still have taken on the job for $15 an hour (which is all you’re really earning)? Or would that have been sufficient incentive to seek better-paying work?

You can apply Ed’s Pie Theory to any hourly rate. The percentages remain the same. You may not always need to set aside 30% for tax, although it’s reassuring to have when your income dips but your quarterly PAYG instalment remains the same.

Ed