[icon icon=icon-dollar size=14px color=#000 ] Everyone has a price, what is yours?
When Service professionals set a price they are also capping their income. There are only so many hours in the day that you can charge for. Plus, you need to pay taxes, office expenses and so and so forth.
Are you destined to be making less as a consultant, than as an employee? If you don’t do adequate planning, that is very possible.
Here are some things that you need to think about:
- If you don’t have an established client base, you may spend up to 20% to 30% of your time marketing. That’s not billable time.
- You will need to pay taxes on your net income. That exact number can vary quite a bit from person to person. I consider 30% to be a safe harbor.
- 30%???? What?
- Self Employment tax, which replaces FICA and Medicare taxes, is 15.1% and then you have your normal tax rate on top of that. It can add up to more than 30% depending on your tax bracket.
- Okay, that’s a lot of my hard earned money. I need to think about this.
Sounds good! Next week I will post more on this subject and how to pick an hourly rate that will ensure profitability.