June 11, 2014 by b2bwest
Charging and Collecting for Services
Clients pay for value, not for time, so it is essential to understand your costs, overheads likely billable hours in order to establish a sustainable charge-out rate.
It is easy to get work if you charge below cost, but the reality is that you need to make a profit in order to develop and sustain your service business. The best way to arrive at a billing rate is to collect all of the costs of running the business such as travel, insurance, rent rates, fuel, salaries, repairs and maintenance. The total cost of these items should represent the total annual outlay including a profit margin. For simplicity, this figure might be €120,000.
The next step is to determine how many hours will be spent actually working on client billable hours. This can be as low as 20 hours per week after excluding background research, administration and travel hours. After eliminating holidays and other time off the client billable time might be 800 hours per year.
The hourly charge out rate therefore is 120,000 divided by 800, which is €150 per hour. Remembering that not all hours that are worked are billable, this is the minimum you can charge to sustain your business.
Good Luck with your endevours!