However, a couple of days ago we noticed an excellent post by Xavier Coelho-Kostolny on that very topic, and he's generously allowed us to share it here. While he's coming at the from a 3D artist's perspective, I think the vast majority applies to us in freelance audio as well. Hope it comes in handy!
Written by Xavier Coelho-Kostolny and reprinted with his kind permission
O ver the past several years, I’ve noticed a trend of freelance artists massively undercharging for their work, so in this article I aim to help curb that.
Let’s start off simply, and branch out from there.
This is the basic formula for figuring out your day rate:
[expenses] / (231) = day rate
But this isn’t the whole story, because you also need revision, hourly, rush job, per asset, and a**hole rates. I’ll explain all these in detail, give some advice on how to approach your pricing, and also give some things to consider on taxes.
Figuring out your yearly expenses is the first step towards setting your rates.
Determine how much you need to make per year to pay your various bills and expenses just for living. This includes rent, utilities and internet, health care, car payments, student loans, groceries, etc. Include every single recurring expense that comes out of your pocket throughout the year. Add them all up, and tack on about 10–15% for unforeseen bills, up-charges, rent increases, etc.
If you’re unclear on certain things like how much overall you might end up paying for rent or groceries, I’d highly recommend doing a quick search for cost of living calculators. There are many available online, and some have incredibly granular results and inputs available.
Here are just a few cost of living calculators, each with different options:
I’d suggest using multiple calculators like the above to make sure you’re getting a good range of values.
Once you have the above figure, add about 25–50% to it.
This 24–50% is expenses for you; games, movies, leisure, clothes, whatever. (If you’re in entertainment, especially as an artist, you can often write off expenses for any entertainment as a business cost. More on that later.)
That number is the absolute minimum amount you need to make per year to simply survive. Games, movies, leisure, clothing, and all the rest are necessities to make sure you don’t burn out, you can leave your house, and you don’t starve. Those are very important, and not some sort of fluff expenses.
Now tack on another 25–40%.
This is important. Do not skip this!
This is roughly how much you are going to end up paying in taxes in many jurisdictions. In this US, this should account for federal and state taxes. Some municipalities also charge tax at the city level. Check your state and local websites or government tax agencies for more details; this can change on a city-by-city basis, and it’s important to know your local laws.
YOUR DAY RATE
Ok, time to get to back to the formula from the start:
[expenses] / 261 = day rate
261 is the approximate number of work days per year. But that’s way too simplistic. This doesn’t account for holidays, vacation, sick days, etc. Holidays, vacation days, and sick days aren’t just a luxury; you need them so that you don’t burn out.
Subtract at least 5–10 days for holidays
Subtract at least 10–20 days for vacation
Subtract at least another 5–10 days for sick time
Being fairly liberal with these numbers, call it roughly 30 days total that you’re subtracting from the 261 work days. Time to update the formula.
[expenses] / 231 = day rate
We can continue with hard numbers and make this a little easier to understand. Say the number you came up with is $60,000/year (which is low, but it’s a nice round number). That makes things look like this:
$60,000 / 231 = day rate
$60,000 / 231 = $259.74
If you want to make $60,000 per year, you need to charge a day rate of at least $259.74, and you can’t dip below that.
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Now that you have a hard number for your day rate, you need to come up with additional rates for:
- Rush jobs
- Per asset rate
- Hourly rate
…and finally, my favorite:
- A**hole rate
Each of the above should be different, and be exact. Don’t round these to the nearest 10, or nearest dollar, or anything along those lines. Give exact numbers to show you’ve actually calculated how much these things cost you and the client.
Some pointers for your rates:
- Revisions should be more than your base rate, and by a minimum of roughly 25%. Make sure the client knows it costs both you and them time and effort.
Many contracts will specify how many revisions are included in the contract. If it doesn’t include revisions? Probably a bad contract.
- Rush jobs should not be taken lightly. Don’t be afraid to charge an additional 50–100% for a rush job, and make sure the client knows the percentage is going to go up the faster they want something.
- Per asset rate is based on how long you know certain tasks take. If a specific task will take only 2 hours, divide your day rate by 4, and then tack on a percentage to make it worth your time.
For large orders of small assets, lower the % so your client has an incentive to give you more work. People love discounts!
- Hourly rate is generally only for things like consultation, appointments, etc. It’s also good for getting an annoying client off your ass.
Divide your day rate by 8 and then crank up an additional percentage based on how much you hate the client.
- A**hole rate is what you charge for jobs you simply do not want to do. Make it at least twice your usual rate, and itemize any costs for additional time, materials, research, etc. required to get the job done. Use your hourly rate for any itemized additions.
Based on the previous $60,000 figure (which, again, is pretty low), here are some VERY ROUGH numbers for the above:
- Revisions = $324.68 / day
- Rush jobs = $519.48 / day
- Per asset = $40.58 / hour
- Hourly = $40.58 / hour (and gradually increasing)
- A**hole rate = $519.48 AND UP per day + hourly
PROFITS AND SPORADIC WORK
There are two more points to consider after you’ve calculated the above numbers:
- Are you profiting from your work?
- Are you getting consistent work?
Calculating rates isn’t just about figuring out how much you need to survive — it’s also about planning for your future! Making money without getting some sort of profit means that you’re only going to be able to survive paycheck-to-paycheck. If those paychecks are sporadic (a common occurrence for freelancers!), then you’re going to need a little padding to account for dry spells.
To make sure you’re actually able to put something into savings, a retirement account, or a simple rainy day jar under your bed, make sure to add on a percentage to any of your rates.
I’d recommend adding at least 15%–25% to each of your rates if you find yourself with very sporadic work, or rates that aren’t paying the bills.
Now, think about the taxes you’re going to need to pay. Every month, you should put away some money to pay taxes since freelance clients won’t withhold taxes for your paychecks. If you’re in the US, you’re probably going to be paying 25–40% taxes on all freelance income, and additional for any residuals or royalties.
One great thing about figuring out your taxes is figuring out the costs you can deduct from them. In the US, this is probably going to be a maximum of around $12,000. That means you can spend $12,000 on job-related expenses and then have that amount eliminated from tax you pay.
If you’re a freelance artist, that money could be for anything from art supplies to toys. You can write off entertainment, books, games, movies, etc. as reference and research material. If you go to a con, see if you can write off your travel and tabling expenses.
Write off any mileage you put on your car. This often ends up being more effective than writing off the gas and repair costs, and insurance is usually a separate write off. Write off other equipment, including your computer, and do that yearly if you continue using it. Most equipment will have a yearly depreciation value, and the amount you can write off per year decreases as the equipment ages.
If you work from home and have a work space, you can deduct a percentage of your rent and utilities from your taxes. If you use your phone, computer, iPad, or other electronics for work, the costs associated with those can usually be deducted as well.
Basically, anything work related can end up saving money on your taxes. Milk the hell out of that.
Finally, I highly recommend spending the money to see a tax professional. They’re expensive, but they can account for things about which you’re unaware, and the cost of hiring a tax pro often saves more money than you will spend on having them do your taxes for you. They’ll also be able to give much more detailed and specific advice on the types of write offs you can make, and give you some strategies you can use to save money or use your income in a smart way.
As a working artist who’s lucky enough to do this as a full time job, I’m begging you to not undercharge. People who charge lower than a standard rate end up lowering the expected rates for every other person in their industry, and that creates a race to the bottom as more and more people charge less and less.
Charge what you’re worth, charge enough to live, and charge enough to make sure people know you’re serious.
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Xavier has been a 3D character artist in the game industry for nine years, having shipped multiple titles from PC indies like Rust, to AAA console blockbusters like Marvel’s Spider-Man. He now works as the lead character artist at Magnopus on VR and AR experiences that merge research and development, games, education, and simulation. Learn more about his work here.
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