What should I charge?

You've done the marketing, sent out the query, and now the editor's on the phone. S/he wants 1200 words on this subject, and the deadline is two weeks hence. And now - often - there's an awkward silence. Someone has to raise the subject of filthy lucre.

BC freelancer Tim Perrin insists that the editor's offer come first - and he doesn't listen to it. Instead, as soon as the editor has spoken, he said, "Is that all?" and then falls silent again. He says he makes more money in the next 60 seconds than he does at any point in his work.

But that's negotiation, not fee-setting. How do you decide what to charge? A writer - or anyone else who sells professional services - needs some rational basis for his or her proposed fees. The client may never ask how the fees are derived - but to negotiate effectively, the writer needs to feel confident that the proposed fees are rational, defensible and fair, and that s/he can explain them to the client if need be.

The late Howard L. Shenson, the "consultant to consultants" developed a formula for fee-setting. Most of us, Shenson said, know roughly what we are worth in the job market. We know what others with our level of training, experience and skill are earning in regular employment. Maybe we've recently been employed ourselves.

Start there. Let's say that you know your income in employment would be about $50,000 a year. There are 261 working days in the average year, so your earnings would be $50000/261, or $192 a day.

But your employer would be paying a whole range of overhead costs as well - providing you with a furnished office, a phone, a computer, a copier, business travel, internet access, parking for your car, and so on. In most cases, those costs will amount to somewhere between 80% and 150% of your salary. As a freelancer, you have to cover all those overheads yourself. For purposes of illustration, let's assume that those costs are about equal to your salary - another $50,000 a year, or another $192 per working day.

Do the overheads actually cost that much? Well, here are the actual overheads for my company, Paper Tiger Enterprises Ltd., for 1992.

PAPER TIGER ENTERPRISES LTD.
ACTUAL 1992 OVERHEAD

(for illustration)

Automobile and travel
Bank charges and interest
Computer supplies
Depreciation
Insurance
Legal and accounting
Library, books, periodicals
Membership dues and fees
Miscellaneous (incl fax,copier,etc.)
Office occupancy
Office repairs/maintenance
Office supplies, postage, stationery
Photographic and recording
Promotion and entertainment
Research and development
Telecommunications

$8,400
4,300
500
2,900
1,900
5,100
1,200
500
3,900
9,600
100
1,500
400
600
1,000
5,000


TOTAL OVERHEAD EXPENSE


$46,900

There's one further consideration: profit. If, as a freelancer, you could only earn an income equivalent to what you would earn in employment, why would you freelance? You're entitled to a fair profit for taking the risks and shouldering the burden of running your own business. Let's set the profit at 15%.

APPROPRIATE SALARY IN EMPLOYMENT
OVERHEADS
PROFIT (15%)
GROSS REVENUES REQUIRED

$50,000
50,000
15,000
115,000

192/day
192/day
58/day
442/day

For convenience, we'll round up the $442 daily rate to $450. That's your daily billing rate.

Your hourly rate should be about 20% higher, since a multitude of little jobs cost you more in overhead than a single large job. For each assignment, you'll have to prepare a proposal, send an invoice, collect and bank the money, and do the bookkeeping. It takes just as much of your time to do that for a $500 job as for a $5000 job.

So add 20% to your $450 daily rate, and divide the result by 8. Your hourly rate should be $67.50. Round it up to $70. That's your hourly billing rate. And remember that your benefits (retirement, dental, life, disability etc.) are not included in overheads, and are deducted from personal income.

Note that this calculation doesn't tell you what the market will pay. It tells you what you have to earn to stay in business at an income level that makes sense.

Now let's return to your conversation with the editor, who wanted 1200 words You need to do a quick analysis of the project. Let's say the subject is one you know well, and you won't need to research it extensively, nor will you have to travel. If the project does involve a lot of research or travel, add in the amount of time you think that will require, and adjust the fee accordingly.

But let's say it's a simple job, no research, no travel. Most writers can produce 500 finished words per day or thereabouts. So 1200 words represents 2.2 days of writing. At $450/day, that's $990. If the editor offers $1000 or better - or some by-the-word price which adds up to $1000 or more - you'll know the offer is fair. If it's much less than $1000, say, "I'm afraid I'll need $1000 for this job. Can you manage that?"

Often the editor will agree. If not, you'll have to decide whether to do this job at a loss. There are lots of reasons to do the occasional job at a loss. Maybe the client is a charity you want to support, or a political party. Maybe you're breaking into a new market. Maybe you can use the published article as part of a book proposal or a film outline or a marketing piece for some speaking engagements.

But if you use the Shenson approach, you'll know what you need to charge over the long term, and you'll have some fair and logical explanation for the rates you charge. Armed with that knowledge, you're much more likely to get what you're worth.

*************************

Shenson's approach to fee-setting led me to get out of the periodical writing business almost entirely. If that story interests you, read on.

But before that, a note on sources. I picked up Shenson's approach from Geoffrey Bailey's Maverick: Succeeding as a Freelance Entrepreneur (Lester and Orpen Dennys, 1983). I subsequently read Shenson himself with great profit, particularly Shenson on Consulting (Wiley, 1990).

 

Why I Quit Writing for Magazines

I love magazines - love reading them, love writing for them. I particularly loved writing for them 30 years ago, when there were plenty of magazines publishing hefty, well-researched articles each month. In recent years, most magazines have gone over to highly-visual formats and very short articles, and the rates have not risen substantially for 25 years. I don't love that. By the 1990s, I was finding magazine work less and less satisfying.

At that point, I went through the publication Who Pays What, published by the Periodical Writers Association of Canada (now the Professional Writers Association of Canada). I looked for Canadian magazines which paid $3000 or more for a feature article. I found eight such markets. There may have been more; not all magazines are forthright about what they pay. But I only found eight whose published schedule of fees ran to $3000 or better.

I also looked at another PWAC publication, Words for Sale, edited by Lynn Cunningham. Cunningham had polled a number of well-established writers, and had determined that, on the average, a major feature article took 17.5 days to research and write.

Following Shenson, I had established my daily rate at $450. An economic fee for 17.5 days of work was thus 17.5 x $450 = $7,875. So far as I could tell, no magazine in Canada paid a rate that high. If I did such a piece for a $3000 fee, I would lose $4,875 on every piece I wrote.

I turned it around. If the fee was $3000, how much time could I afford to spend on the article? Dividing $3000 by my daily rate of $450 told me that I could spend 6.6 days on the project. For a $1000 fee, I could spend two days.

Could I do a good job in that length of time? Once in a while, maybe - but not consistently.

Just out of curiosity, I then asked myself, How many freelance magazine journalists can Canada support? If we have eight magazines paying $3000 for two feature articles in each issue, and publishing 12 issues a year, then the Canadian market for features requires 192 such articles annually, with a value of $576,000. If a leading freelancer requires $115,000 a year, how many such freelancer writers can Canada support? The answer: five - and each of those five would have to produce 38 articles a year, pumping them out at a rate of one every 6.8 days.

It's obviously impossible, I concluded. One can't make a decent living writing exclusively for Canadian magazines. As if to prove my point, I then got a letter from the editor of one of Canada's finest magazines, inquiring whether I'd be interested in an assignment. The proposed article would require:

* a plain-language description of sophisticated new technology - which was the subject of the piece
* a brief background history of a complex and unfamiliar intellectual discipline
* a review of the many benefits of the new technology
* a description of the various users of the new systems, and some consideration of what the new technology would mean to each of them
* a discussion of possible techno-dependency in future users
* some note of the relevant achievements of Canadian companies
* "plentiful anecdotes and quotes" from users.

The article was to be written in a very personal voice, with lots of colour - and delivered in 35 days, which happened to fall over the Christmas holidays. The maximum length of the proposed piece was 2500 words. The editor's letter which simply listed these ingredients ran to 420 words - nearly 20% of the length of the proposed article itself. And the pay would be $3000.

Much as I love magazines, it was clearly time to abandon the field. In recent years, I have never written for periodicals except with a view to further uses of the material. Other clients will pay writers what they're worth. Magazines and newspapers are wonderful vehicles for promoting writers - but not for supporting them.

 

Return to For Writers