How much should I charge?

June --

I have been a Web Developer / ASP.NET Programmer / Writer / Educator for 4 years.

I agreed to a rate before researching the real cost of taxes etc... is there a rule of thumb for consulting so I don't make this mistake again?

For example, should I add 35% to my minimum rate to ensure that I take home what I need?

Thanks.
David, M.Ed. from Seattle


Hello David,

I think you are asking two different questions.

I will ignore taxes for a moment and look at how much an indie should charge. Let's say you were making $50 per hour as an employee. All your work expenses would be covered and so $50 per hour meant $50 an hour -- less taxes -- into your pocket.

Now, as an indie you have many expenses that you must pay and they must be figured into your hourly fee. Not only do you need to look at things like the costs of a computer purchase and publications you read and the costs of running a home office, but what about hours on the phone with your computer guru who is helping you after your computer crash? What about your time or someone else's time cleaning your home office? Your time doing your own bookkeeping? Your time on the web getting answers to tax questions?

Most new indies -- that is, those without experience who have no history on which to judge their rates -- severely undercharge. They usually should double or triple their fees. When they give a fee of $500 for a project they think would take them 10 hours, they should have charged $1,000 or $1,500. Most often the project takes at least twice as long as they thought and they didn't figure in things like the two hours at Best Buy exchanging the modem they just bought.

The market and your reputation may limit how much you can charge but it is important to know your actual costs and to strive to charge what works for you. Especially at the start of your indie business it is important to keep a log of time spent on each client as well as on "general" time -- that's the bookkeeping, cleaning, errand running kind of stuff.

Your other question about fees and taxes: Plan on 1/3 to 40% of your net profit going toward taxes. Read more here Taxes: Which ones and how much do I pay?

Best,
June