As an independent contractor, you get to set your billing policies.
You can bill by the project, hourly, or a variety of other ways. And how much you charge a client is entirely up to you, as long as they agree to the amount.
The key to turning the most profit, though, is to be sure you’re charging enough for your services.
When most freelancers and independent contractors start out, they’re okay with taking less than they should in order to build a clientele. Eventually, once you have a portfolio, you need to take a more formulaic approach.
From fixed fees to time budgeting, here are the top tips to follow if you want to make your contracting work profitable.
1. Check the Market Conditions
How much you charge for your work is partially determined by your experience and partly by the market at the time. To find the going rate, check out your competitors and see what their rates are for each service you both provide.
The amount you settle on doesn’t have to match, but it should be in the ballpark.
Break Down Your Rates With Math
Now that you have a target range, you can use a simple math formula to determine a fixed rate:
- Total up your expenses first.
- Add a minimum dollar amount per hour that you need to be earning to make the business worthwhile.
- Determine how long a project or task will take you (one hour, two, etc.)
- Plug it into the formula: Expenses + (hour ✕ minimum rate).
As an example, your expenses for a typical job are $25, and this project will take two hours. You want to make at least $30 per hour. The formula you’d use to come up with a rate would be $25 + (2 x $30), for a total of $85.
Then, compare that amount to the going market rate to see if you should adjust it up or down a little.
2. Increase Your Services
If you’re only offering one or two services, your target market is limited. To open your business up to a wider audience, try increasing what you currently offer.
It doesn’t have to be a gigantic change. What else can you do with the equipment and software you already have?
For instance, if you’re an independent contractor offering personal tax filing services, why not add businesses as your clients, too? You might need an extra certification, but the small investment would pay off quickly.
How can you bump up what you’re already doing and increase your market substantially?
3. Decrease Your Overhead
We all know the basic rule of finances. To increase income, you must decrease expenses. However, as an independent contractor, it can be hard to shop around for the best rates on loans and insurance. Many companies prefer customers with a steady employee paycheck.
You do have options. The gig work industry has millions of people in it, and they all need health insurance and other benefits.
Instead of going through traditional routes, like bank loans or direct healthcare companies, look for discounts for independent contractors and freelancers. You’ll be pleasantly surprised at how many ways you have to cut your overhead.
4. Use Your Time Wisely
For most of us, the most attractive perk of independent contracting is time freedom. You can set your hours or take a day off without getting permission from your boss.
The problem is that with this flexibility comes the temptation to slack. If you’re not using your time wisely, your profits will show it.
What does your schedule look like right now? Is every working minute accounted for? Are you getting up at the same time every morning and starting your day punctually?
By adding half an hour to your day, you can increase your profit margin significantly each year. Will losing that extra thirty minutes of social media scrolling or snooze button smacking really hurt?
If time management is an issue for you, there are many programs that can help. Check out the Pomodoro Technique, the Eisenhower Matrix, or the Eat That Frog method. Find one that works, and stick with it!
Conclusion
When you make your independent contracting goal one of working smarter, not harder, you naturally get more freedom in your life. Your profits will increase, and you’ll enjoy the benefits of working for yourself. Use these tips to get started!
