From Agency to Freelance - What Should I Charge?

Question

I have been asked back for one week at an establishment that I used to work for. In the past, whenever I worked for Establishment A, I would go through an agency, Agency B.

However, Establishment A have told me that they want me to invoice them directly without involving Agency B.

The problem I have with this is that I have never billed anyone for any freelance work in the past as I have always worked directly for an establishment, and I have no idea what I should charge.

When working for Establishment A via Agency B most recently, I was paid an hourly rate (by Agency B) of £10.86; however, Agency B were paid considerably more by Establishment A, of which I unfortunately do not know the specifics, but I would estimate that Agency B received approximately £19.00-£20.00 per hour as this is something that I saw many years ago whilst working elsewhere that also dealt with Agency B.

The questions I have are as follows:

1. How should I charge Establishment A? Hourly or a one-off fee?

2. How much should I charge Establishment A? Do I charge them somewhere in the middle ~£15.00ph/£600 one-off (5 days at 8 hours per day) or should I aim lower / closer to the top-end like Agency B were being paid for me? The problem with this is that I don't want to take the proverbial and cause offence as I know the people at Establishment A very well. However, being self-employed, I now have overheads which I will have to account for, such as tax calculations and travel.

Any help would be wonderful as I am unsure what the best practice would be here as both appear to have an equal balance of pros and cons.

Answer 1

Ahhh the age old problem: "How much should I charge?"

The short answer is: As much as the client will pay.

The longer beginning of an answer is: What is the client's budget for the project? If they are a reputable company then they should have a budget for the project. Ask them. If they play coy that is first of all a warning sign that things may not be smooth down the road.

The second part is how much do you want to make from doing this project? Thinking about how long is it going to take you to to complete the task. Then think about your cost benefit of spending time on this project versus a different project. Will you enjoy this work? Is there potential for more work? etc. If you are comfortable getting the normal rate you were paid by the agency then you have just saved the client 50% of their budget. That can make you look much more favorable down the line. If you are just starting out on your own it may be more important to have reliable work than high paying work. Cash flow is the most important thing to keep in mind as a business owner.

Keep in ming that you may have trouble getting them to pay more later on.

My suggestion is to talk with them about the project and learn more about why they don't want to work with the agency anymore. A general assumption is that they want to save money, but that doesn't have to be the main reason. They may like being able to communicate directly to you, in which case saving money isn't their focus so you should be charging the existing rate.

If you propose a price and they accept it without question then you are leaving money on the table. Keep that in mind for the next project or client. Negotiating about the price is part of doing business.

The important thing to remember with pricing is that its completely arbitrary. It is based on what the client perceives to be valuable, and what you need to earn to put food on the table. Get paid what you need.

I have been in sales for over 14 years and running my own company for 5 and I still don't know what I should be charging.

Best of luck!

Answer 2

You should charge what Agency B charged Establishment A previously. If you charge lower you create a precedent and you will never get from Establishment A what you work actually worth's.

Until now, Agency B handled all the PR and bore the risk implied by working with Establishment A. This was the cost you payed by receiving just half from what Agency B got from Establishment A (you didn't have to search for, manage and handle the client which is a plus from a standpoint).

What's the best practice on how to charge them?
Many charge by the hour. If you think it will take 5 days (8 hours a day) to get the job done, add another 10 hours and after that divide the Total Value you believe your work is worth to the total number of hours.

Example: £600 / Hours 50 = £12/hour

If the hourly rate you get is lower than a minimum threshold you know will cover all your expenses (lets say £15/hour) than you should charge by the hour at £15/hour.

Now, if you ask for a fixed amount or you negotiate a hourly rate and get hired for the exact amount of hours that will ensure the total you aim for, this is only a matter of semantics.

In my case, I charge fixed amounts for one/first time projects (of which costs I can estimate with precision) or for fixed services (monthly maintenance, new versions, etc.) and hourly rates for on request maintenance or similar situations.

If you know your costs and are familiar with the client and the way he/she works with contractors (pays on time, knows what to ask and expect for, has clear ideas, it is a good communicator) than, I encourage you to charge a fixed amount (as high as possible) based on the value of your work and not by calculating the total amount of hours you invest in getting the job done. If the project spans (requires you to work on it) more than 10 work days than you should consider charging by the hour.

Answer 3

Since you are new to the standalone work and you have no idea should your hourly fee be $15 or $55 and you also don't know how much the Agency charged the client (I frankly doubt the took only double hourly fee), you should avoid working hourly for some time. Why? Because if they're used to pay $55 per hour and you ask them $15, you will hardly reach the fee they are used to pay. So I strongly suggest you go with fixed price as long as you are 99% sure how much they were used to pay or what is your own hourly price (for the later, there is a good topic how to calculate it, but for that you need time and experience).

You can however calculate fixed price based on the hourly work you estimate in the background (10 hours x my_guess_fee = total_sum_to_work_for).

This is IMHO the only way to protect yourself and to be able to work for the real hourly rate. At this point all above 10/h seems OK for you, but if you start freelancing professionally and the bills start coming, you may find yourself not to work for $0/h but maybe -$10/h.

We all started with fixed prices, while those who work via freelancing sites had a chance to see average hourly price. You do not have such luxury.

Answer 4

Are you absolutely sure that your contract with agency B allows this?

Agencies are generally wise to this tactic, and probably included a clause in their contract that prevents you from working for their customers within a specific time-period.

With regard to the rate it'd be nice if company A was prepared to pay you the agency rate, but probably their motivation behind the change is to reduce costs; I'd go for something around £15, but if you feel that is on the low side, you could formally tell them it is an 'introductory rate', which could give you the option to increase it when you have settled in to the new arrangement.