How to Determine a Graphic Design Hourly Rate

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The Importance of a Graphic Design Hourly Rate

Setting a graphic design hourly rate is often considered a difficult process, but it must be done. Your hourly rate is important because it will position you in relation to your competitors, determine what your flat rates are for projects, and of course directly affect what you earn. Fortunately, there is a method to follow to figure out at least a ballpark for your rate, which may then need to be adjusted based on the market.

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Choose a Salary and Profit Goals for Yourself

While it may seem strange to “pick your own salary,” it is necessary to do so to determine your hourly rate. Figure out a realistic yearly salary for yourself, which may be based on several factors:

  • Your salaries at previous full-time jobs
  • The salary others are making in your field
  • A salary that is necessary to maintain your lifestyle, including non-business related expenses
  • The salary of available jobs in your area that you are qualified for

If you are freelancing on your own, your salary should include not just the amount you need to maintain your desired lifestyle, but also a reasonable amount of profit. This profit may be your savings or may go back into your business. Also remember to calculate your income after paying taxes, making sure you can live off of your “take-home” pay. After completing this research, take note of your yearly salary goal.

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Determine Your Yearly Expenses

Every business has expenses, and a graphic design business is no different. Calculate your business related expenses for an entire year, which include:

  • Hardware
  • Software
  • Education (such as design courses)
  • Cost of attending conferences
  • Advertising and marketing
  • Domain names
  • Office supplies
  • Insurance
  • Legal and accounting fees
  • Membership dues

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Adjust for Expenses Related to Working for Yourself

As you will be working for yourself, you will not have some of the benefits of working for a company, such as insurance, paid vacation, sick days, stock options, and contributions to a retirement plan. These expenses may affect your yearly overhead (expenses) or your salary. If you have not done so already, make adjustments as necessary.

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Determine Billable Hours

“Billable hours” are simply hours worked that you can bill your clients for, which is usually the time you spend working on their projects or in meetings. Your number of billable hours is much different from actual hours worked, which adds activities such as marketing, working on your portfolio, accounting, and seeking out new clients. Calculate your billable hours for a week, which can be done by averaging billable hours for several previous weeks and months or by estimating based on your average workload. Once you have this weekly figure, multiply it by 52 to determine your yearly billable hours.

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Calculate Your Hourly Rate

To calculate your hourly rate, first add your yearly salary to your expenses. This is the amount of money you need to make in a year to maintain your desired lifestyle. Then, divide this by your billable hours (not your total hours worked). The result is your hourly rate.

As an example, lets say you wanted to make $50,000 a year and you have $10,000 in expenses, both of which include adjustments for working as a freelancer. Lets also say you work a full 40-hour week, but only 25 of those hours are billable. That would leave you with 1,300 billable hours a year. Divide 1,300 into 60,000 (salary plus expenses) and your hourly rate would be approximately $46. You would probably adjust that to $45 or $50 to keep things simple.

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If Necessary, Adjust for the Market

Ideally, you would find that your clients could pay this $45 to $50 hourly rate and that it placed you in a competitive position with other designers in your area. However, this number may just be a starting point. Try to find our what other freelancers are charging in your area, especially those that do similar work. You may find you charge much higher or lower, and may need to adjust accordingly. It may also take some time to determine if your rate will work, after dealing with several clients and seeing their reaction (and most importantly, if you land the jobs or not!). Once you have done this research, you can set your final rate.

You may find there are times to adjust your rate on a project basis, such as if you are working for a non-profit with a lower budget but you want to take the job. This is your call to make, based on how much you want particular jobs, the benefit to your portfolio, and the potential for follow-up work or leads. You will also find that your rates will need to be increased over time to compensate for increased living costs and expenses. To do so, go through the process again, determine a new rate, and do the proper research to determine what the market will bear.