Best Option

Find the right accountancy solution for your requirements

The best approach is to firstly find out what other agencies and freelancer’s charge, which means carrying out a bit of a ‘mystery shopper’ exercise. Call various freelancer’s and agencies (or ask friends to help you if you feel the need to remain anonymous) and ask what their hourly rate is – and then maybe ask for a typical price for a specific project. For example – managing a rebranding project or running an email marketing campaign. Once you have this info you can them make sure that you pitch your pricing correctly – so that you are not way too expensive, but at the same time not way too cheap either, or people will not take you seriously.

The key thing with any pricing structure is that you must be able to live on your income. So work backwards. Decide how much you need to make per month (after putting at least 30% of all income aside for tax) and then work out what your hourly rate for billable work must ideally be. Remember of course that not all your hours in a week will be chargeable, as you will need time for admin, marketing, attending meetings and so on.

If you can live on the final figures you calculate and cover business expenses such as marketing, mobile phone, Internet connection and so on – then you have a viable charging structure. If not, you need to charge more per hour, or accept that you will need to work longer hours, assuming you have the clients to enable you to do so.Once you have all of this information you can then make sure that you pitch your pricing correctly, but remember to take into consideration the following…

Level of experience

A junior marketer, or one that has just left college, is of course not going to be able to command the same rates as one that has been working for 30 years and has an impressive portfolio of work. It  is really just a case of being sensible and knowing what you’re worth. It’s also true that some clients will pay more than others. As soon as you start talking to a prospect, you’ll instantly get a feel for whether they are expecting you to market snow to eskimos for five pounds, or have marketing budget to throw around.

Covering tax and NI

Once you have a figure in mind, the next factor is to decide how much you need to put to one side for tax and national insurance. As a sole trader, if you put 30% of everything you bill into a separate account to cover these two items, you will be fine so long as you do not go over the 40% tax threshold. Once you do, you really need to increase this figure to 40%, which sounds like a lot – but better to have some left after your tax liability has been calculated, rather than fall short. You accountant will be able to help you plan accordingly and it’s worth taking advice early on to make sure you’re covered.

Consider different rates for end clients vs agencies

Another thing to consider is whether you charge different rates depending on the type of client. For example, you may be able to charge a companies marketing department £60 per hour as you are billing them direct – but a marketing agency will need to mark up your rates and charge them on to the client so they will expect a lower fee. The payback of this of course is that, with an agency client, you are not just getting one customer – you are in effect getting potential business from all of their customers – with no marketing effort or ‘cost of sale’ to you once the relationship is established. So it’s only reasonable that you might need to charge a lower rate.

Formal quotations

It’s easy to agree a price verbally and then never get round to formalising that. But it’s essential that you do – as you need to avoid misunderstandings later. With commercial work especially, be clear about the price you’re quoting and how many hours of work that actually allows for. And also make sure that your Ts & Cs include details of whether you charge for meeting time, travelling time, expenses and so on. Just so there are no issues when you send in your invoice!

Reselling other services

This is a key decision that you will need to make. If a client wants you to manage the print, or the photography as part of a project, will you buy that, mark it up and sell it on – or will you ask the supplier to bill the client directly and just charge a project management fee? There are pros and cons to each – as with the first option you make more money, but risk credit and cash-flow issues, and with the second option you make less money, but it minimises your risk and your admin requirement. Either can work, so you just need to decide which is best for you.

You may also find the following pages useful:

Need help finding the right accountancy solution for your requirements?

Answer the questions below for our recommendation.

Do you: (select the first that applies)
Please select an option