Calculating Hourly Rate (Freelance Graphic Designer)

Assignment
Calculating Your Hourly Rate
How much should you bill for your work? Should you bill hourly or will you make more money if you bill by the job? How do you account for fixed and variable costs like equipment, health insurance, and the Creative Cloud? This assignment will help bring these issues into perspective!
Comment: I’ll bill my clients by hour(s) that I spend to complete each project.
There are two ways to do this assignment and you will ONLY need to do the assignment for one of the following: you can be a freelance/sole proprietor (ie, you work by yourself, and have no employees) or you can do the assignment as if you were running an agency (with employees!). Here are the differences in what things need to be considered as you are doing your calculation:
• If you are freelance, you will not have labor cost! The net profit that your business makes is your “salary.” So if you are using the worksheet in the textbook, you will want to eliminate the profit percentage, and any costs related to employees from your spreadsheet. You will, however, want to add your self-employment tax of 15.3% of your net profit. This isn’t income tax, this is the FICA and medicare taxes that an employer typically pays half of if you are an employee. (I chose this one)
• If you are going to run an agency, you will need to decide if you are going to be an employee and take a salary, or if you are going to take profit only as your salary, or if you are going to pay yourself a salary and take profit as a bonus. The spreadsheet in the textbook is written for Agency, you just need to make sure that if you’re going to pay yourself a six figure salary, and you plan to take the chunky profits too, that your hourly rate doesn’t end up too much higher than the comps you find online (Do not need to read this one).
Assignment Directions
This assignment has three steps:
1. Use the hourly rate spreadsheet found in the Hourly Rates section in the textbook to calculate your budgeted hourly rate. You must show your work:
a. You may copy the pages from the book and do the calculations by hand OR
b. Duplicate the spreadsheet using a program such as Excel
Comment: Please open another attachment that I provided for a reference. This is the images that I took from a textbook that help you to calculate my hourly rates.
2. Refer to the proposal you wrote for the Sun Devil Café Week 3. Review the prices you charged for the services you planned to provide. Calculate new prices based on your new hourly rate. How do these prices compare to the prices quoted in your proposal? Present this information in a table format, similar to the table below:
Service Provided Hours to Complete Your New Hourly Rate Revised Cost of Service Cost of Service in Week 3 Proposal
Logo 3 $85 $255 $500
Etc.

Comment: The following is the prices that I charged for the services that I wrote for the Sun Devil Café Week 3 proposal. At that time, I charged for a fixed price for each project/service.
Pricing Chart
Project Name Quantity Price
Logo and Identity Design
(with 3 change requests) 1 for each item
$300.00

Business Package (business cards, letterhead, envelope)
(with 2 change requests) 1 for each item $360.00
Printed Menu Design
(with 2 change requests)
1 $300.00

Subtotal $960.00
Tax 9.2%
Total 1,048.32

3. Perform research on the Internet and see what others are charging for similar projects. Analyze your findings. Would you be inclined to adjust your prices, either higher or lower, if you were to submit a new proposal? Write a two-page analysis summarizing your thoughts. Include the table you created in Step 2 in your paper.
Comment: Things that need to be consider while doing a research. I’m a student and do not have much experience in the graphic industry. My experience is less than 4 years in this field. I live in Arizona. I plan to charge the clients $30-40 per hour (can’t decide an appropriate price, please decide it for me once you finish doing a research. Please feel free to change into appropriate price.). I’ll adjust my prices if it’s too low. Also, if it is too high, I’ll lower my price as well as I want it to be fair to my clients. Please also do a research hourly that will complete each project too so that you can estimate the hours that need to complete each project correctly.
Grading:
• 50% of your grade is the spreadsheet, 50% is the analysis.
• To receive full credit, your work must be professional. If you copy the pages from the book and do the calculations by hand, your handwriting MUST BE LEGIBLE, and the scan must be of good enough quality to read. I need to be able to read your numbers.
• In the analysis, you must refer to the hourly rate/flat rate that you charged in the Week 3 Sun Devil Cafe assignment, and determine whether or not that was a realistic amount to charge, and if it was not, what you should have charged.
• Your analysis must be two pages long. One page and a sentence on the second page is not a two page analysis. I expect to read this and know that you’ve put some thought into how much you would charge for the work in Assignment 3 if you went into business today (as an agency, or as a freelancer) and Sun Devil Cafe was your first client.

***Please copy the following and start doing the assignment. This is what I got from a textbook to calculate the hourly rate. Please remember that I’m a college student and freelance designer who live in Arizona. Also, I have an experience in graphic industry less than 4 years. This will help you to do a research and estimation the rate correctly. Please feel free to cut the unnecessary things and add the necessary details if needed (please open another attachment to see more details)

Please fill in a blank to an appropriate number. (I estimated that this part will be less than 275 words which equal to 1 page. While the other 2 pages will cover on the analysis. That’s why I placed an order for 3 pages)

Hourly Rates
Total overhead: $_________ +
Total Studio Debt: $0 +
Total Taxes: $______ =

Total Cost: $_______ ×
Profit Margin: ________% =
Total Profit: $ _______

Total Cost + Profit: $ ______ ÷
Hours Per Year: _______ =

Based Hourly Rate: $______

Total Overhead (I only included the items that I find they are necessary for a freelance designer)
Supporting Myself
Health insurance: $_______
Dental insurance: $_______
Retirement (401k): $______
Running Physical Space
Software: $600/year (Creative Cloud)
Mobile phone: $1449/year
Internet: $1231/year
Office supplies: $_____
Postage: $______
Paying My Taxes
Local taxes: $______
State taxes: $______
Federal Taxes: $______
Traveling to and from Client Meetings
Transit & parking: $______
Car insurance: $1502/year
Gas: $_______
Upkeep: $_______
Pursuing Sales Opportunities
Travel: $_______
Meals with prospects: $________
Networking events: $________

Total overhead: $ _______

Total Studio Debt
Total Studio Debt: $0

Taxes on earnings and salaries (please refer to a textbook (another attachment) to calculate this)
Total taxes: $_______

The profit margin (year over year) (please refer to a textbook (another attachment) to calculate this)
Total overhead: $ ______ +
Total Studio Debt: $0 +
Total Taxes: $________ =

Total Cost: $_____________ ×
Profit margin: ____% =
Total Profit: $ _______

Total Cost + Profit: $ ________

Generating Utilization rates (please refer to a textbook (another attachment) to calculate this)
Weeks per year: 52 weeks –
Weeks of sick leave: 2 weeks –
Weeks of holiday: 4 weeks =
Weeks per year: ______ ×
Hours a week: 35 hours =
Hour/year: _________ ×
Utilization rate: _______ =
Hours Per Year: ________