Thinking of transitioning from a permanent marketing gig to the wild world of fractional or freelance work? This video script is like your GPS for navigating the invisible costs and setting your rates. It covers everything from battling imposter syndrome to calculating an hourly rate that doesn’t leave you munching ramen every night.
Rachel breaks down the crucial points of calculating health insurance costs or realizing why your rate should be 2.5x your salary. This guide will equip you to stride into freelance or fractional marketing with confidence and clarity.
00:00 Fractional: 5 Establish your pricing
00:52 Shove aside imposter syndrome
03:18 Start with your current hourly pay
04:08 That hourly pay isn’t all of your “pay”
04:36 List what your employer has been paying for you
05:54 List what you’ll need to pay going forward
08:05 Factor in self-employment taxes
09:05 Factor in your unpaid labor
09:57 No work means no billing means no pay
10:33 Multipliers of your hourly pay
11:42 Run the numbers for your pricing
13:04 Reality check your pricing against the market
15:46 Don’t underprice yourself
16:14 Lean on your network
16:31 Use my free Google worksheet
[00:00:00] Fractional: 5 Establish your pricing
[00:00:00] You’re doing the math. Points one through eight talked about the invisible costs of having you on as a permanent employee. Well, if you’re going and not being a permanent employee anymore, the company’s not paying that anymore, but you certainly are incurring those costs still as a human being who’s a professional.
[00:00:21] I’m going to give you some points on how to get to your pricing. This is going to come from the standpoint of you are already full-time employed, or at least working for a company as a permanent employee. And in the future, you will be a contractor, a freelancer, a fractional, however you want to [00:00:39] However you want to slice it or call it, but you’re no longer at that point a permanent employee of the company. Now you’re kind of an outsider who’s plugging in and supporting them through your work as said contractor or fractional person.
[00:00:52] Shove aside imposter syndrome
[00:00:52] Before we get started, we have to pause here and take a [00:01:02] Imposter syndrome is going to try to be the main character throughout this next journey of establishing our pricing as a fractional professional. It is going to try at every point to say, I don’t think you should charge that much. I don’t think you’re worth that much. That’s a really high rate. Nobody’s going to pay that.
[00:01:22] Yes, they will. They will if you do this correctly and thoughtfully. But the thing we have to remember in order for a client to pay what we want to charge them, what we need to charge them, we need to remember our value as professionals. I’m talking to you right now.
[00:01:39] This video is made for people who are currently permanent employees somewhere. You are being valued right now. Now, I’m not getting into like, do you feel valued by your manager, your coworkers? Are you being gaslit? You know, have you gone years without a bump in pay or a title or anything like that?
[00:01:56] Are you still waiting for that promotion? Not talking about that. I’m talking about you are currently being paid by a company who could have picked anyone, but they decided to pick you. And they’re choosing to pay you on a regular basis to do a job that they can’t do themselves. And they need a professional to do it.
[00:02:17] So you are being valued right now. You are valuable. You have expertise. You have years of expertise behind you. You know things that people at that company you currently work for don’t know. You know how to do things that people at potential clients don’t know how to do and don’t want to know how to do. They want to pay somebody to do those things because they don’t have the time. They don’t have the current resources to do it. And they’re going to find it appealing that there is a fractional person out there who is willing to plug and play to not be a permanent employee that they can bring on and say,
[00:02:53] I’m willing to pay your pricing in order for you to do the thing that I can’t do, that I don’t know how to do, and I don’t have the resources to do it. So shove imposter syndrome to the side. It has no place here. Cast it out.
We are now going to proceed with all of these points about establishing your pricing because we know we are a professional of value. Ready?
[00:03:18] Start with your current hourly pay
[00:03:18] Let’s go. All right. First things first, start with what you actually make right now. So here’s how you’re going to do that. You make an annual salary, or if you know you have an hourly rate, you might know what that is already based on your paycheck. And then you can divide that by the number of hours you work. But if you are salary, what you want to do is take your total annual salary and divide that by 2,080.
[00:03:41] That’s the standard number of work hours in a year. So let’s say you’re making an $80,000 per year salary. That would be about $38.46 per hour. Write that number down or put it in an Excel spreadsheet. That might be where you’re doing this. But write this down. That is your baseline.
That is not your answer to this pricing question.
[00:04:08] That hourly pay isn’t all of your “pay”
[00:04:08] Because point number two, that number is a lie, sort of. Your employer isn’t just paying $38.46 per hour for you. They’re also covering a pile of costs that you never see on your paycheck, some stuff you might see, but your $38.46 per hour is not the only thing they pay to keep you as a permanent employee. This is going to matter as we calculate the costs of you being fractional. So point number three, you need to list out what your employer has been paying for, for you to be their permanent employee that would include health insurance if you’re completely paid for you might have full benefits covered by your employer they pay your full premium that’s great but you need to calculate that in because you’re no longer going to have them paying that for you it’s more accurate for you.
[00:04:59] To be able to say, well, how much has my health insurance coverage been costing, whether they paid it or not, payroll taxes, they match your contribution. They certainly paid for your laptop or your computer. They’ve been paying for the software on that, whether that’s Microsoft Office or some special software as a marketer, you know, [05:18] maybe that’s a social media platform or it’s design software like Adobe. All of that was being paid for by your employer, your desk, your internet, if you were remote, or think about it, if you’re going in and you’re showing up to an office, they’re paying for HVAC. They’re paying for you to have actual real estate space.
[00:05:36] You’ll see that this is all going to come into play now that you’re covering these costs, maybe even professional development. All of that was invisible income. OK, so you need to write all those things down. And it’s better to write down things that even you’re not sure of because you can check that with, say,
an accountant or even on the Internet.
[00:05:54] List what you’ll need to pay going forward
[00:05:54] Okay, point number four. Now list what you’ll be paying going forward in order to maintain kind of the standard of living and care that you were enjoying when you were a permanent employee. You’re going to be paying for your health insurance out of pocket, [00:06:10] or if you do have a significant other who you could be a dependent for on their health insurance, you may switch over to that. That’s ideal. That’s currently the situation I’m in now. We were going two years where we were purchasing our health insurance out of pocket on the exchange for Colorado.
So you’ve got a couple options there. You can talk to a broker for free. Health insurance brokers do not charge you. They get paid by the health insurance companies. But you can talk to a broker for free and ask them to price out what kind of care you have.
[00:06:38] If you have a copy of your benefits from your permanent employer, you can actually give that to them and say, how do I find comparable coverage, and how much will that cost me out of pocket? But you’re looking at it easily, $400 to $800 per month if you’re not on a partner or significant other’s plan. Also, [00:06:58] you’ll need to be looking at all your software subscriptions, which can run $100 to $300 monthly or more, depending on what kind of specialty work you plan to do. Your devices and their eventual replacements. Laptops die. They get old. Liability insurance if you plan to carry that. Accounting tools or an actual accountant. Home office costs.
[00:07:18] This is important. So I’m sitting in my home office right now. This is basically part of a glorified storage room we have in our very small house. And I take up a certain square footage of that. I’m working every day, and I’m using the bathroom in our house. That’s kind of part of my office.
[00:07:34] If I’m making my lunch in the kitchen, kind of part of my office. You want to talk to a tax accountant because a lot of this can be written off in your taxes. But I do speak to a tax professional that I am not.
OK, but home office costs, all of this stuff adds up faster than you’d think. But it does help you kind of frame saying, OK, I understand now I’m worth maybe a little bit more because my employer was starting paying more just to have me on the payroll and have me show up and do the work that they need me to do.
[00:08:05] Factor in self-employment taxes
[00:08:05] Point number five, don’t forget the self-employment tax hit. This one is something that a lot of people don’t realize. If you are self-employed, you have to at minimum pay taxes once a year. Usually, there’s a quarterly tax you need to pay.
You’re now going to pay both employer and employee side of payroll taxes roughly. That’s roughly 15.3% off the top before you even touch income tax. Your salaried self never felt that because your permanent employer was paying that. Do again, speak to a tax accountant, CPA, whatever.
[00:08:40] They can help you calculate based on what income you plan to bring in as a fractional person, how to calculate that out. It’s way better to set aside more than you’re going to need. And I’ll tell you straight up, we set aside 20% of every single payment I receive from a client that immediately gets set aside for taxes, just in case, okay?
[00:09:05] Factor in your unpaid labor
[00:09:05] Point number six, you need to factor in your unpaid labor. You’re going to be handling the invoicing, chasing payments in case your client isn’t paying on time or thinks they paid you and they didn’t, writing proposals or pitches to new clients, negotiating those contracts.
[00:09:22] Maybe you’re a year or two in, and you’re like, okay, we need to readjust and look at this and maybe change our contract, which means changing the paperwork. Doing your own administrative tasks. Where are you storing things, and are you sharing files, sharing folders with the client? Maybe you’re managing a contractor for yourself or your own employee.
None of that is billable, but all of it takes your time, and your time is money. Every single second is money. So your rate is. Your price needs to account for those hours that you’re working but not billing for. That’s part of your value. That is part of your price as a fractional person.
[00:09:57] No work means no billing means no pay
[00:09:57] Point number seven, you also need to remember that no work means no pay. You might have had PTO or sick days, vacations, anything like that. As a permanent employee, you won’t have that anymore. You’re technically like, if you want to go take a week off, that’s a week that you’re not working and not billing.
[00:10:12] OK, so you’re not going to be earning. Your rate needs to build in that cushion so you’re not panicking every time you decide to take a Tuesday off or a client ghosts you. You need to plan that in. You want to have some savings, and you want to have that baked in where you’re like, [10:26] I am able to go take a day off or take a week off planned ahead, but it’s not going to kill me.
[00:10:33] Multipliers of your hourly pay
[00:10:33] Then we get to point number eight. By the way, my lucky number is eight. So I love that this landed on number eight. The multiplier rule of thumb.
So most fractional marketers need to charge one and a half to two and a half their salaried hourly rate to actually stay afloat and build profit. I want to be clear here. You’re not being greedy by doing that. You’re doing the math. Points one through eight talked about invisible costs of having you on as a permanent employee.
[00:11:05] Well, if you’re going and not being a permanent employee anymore, the company’s not paying that anymore, but you certainly are incurring those costs still as a human being who’s a professional. So you have to factor all that in. And I’m going to emphasize what I said at the top of the video. Before we start any of this, [00:11:24] everyone needs to take a deep breath and realize you have value as a professional. That value does not leave just because you’re not working for a company as a permanent employee anymore. The value goes with you and continues to build. Actually, even more so if you’re being your own company and your own boss.
[00:11:42] Run the numbers for your pricing
[00:11:42] Point number nine. Now that we know the multiplier and all those different hidden costs and apparent costs of having you as a permanent employee, let’s run the numbers back on that $80,000 per year salary. So if we go by that 1.5x, that one and a half multiplier rule, the $38.46 baseline per hour becomes about $58 per hour for pricing.
[00:12:07] That would cover taxes, insurance, and software, the basics, okay? Please don’t go lower than that. You need at minimum 1.5x of what your hourly rate was. at 2x or two times your hourly rate, you’re at roughly $77 per hour. That will build in buffer for slow months, allow you to take some time off.
In case a client goes to or is late on a payment, you’ve got some buffer there. But then we’re getting into the 2.5x or two and a half times your hourly rate as a permanent employee. Now you’re getting up to $96 per hour. That is when you’re building real profit and your expertise is commanding those premium rates.
[00:12:50] So I would say go anywhere between 1.5x and 2.5x based on your expertise, your years of experience, the value you’re bringing to potential new clients.
[00:13:04] Reality check your pricing against the market
[00:13:04] And then we’re going to go to number 10. And this can help you decide where you might land in that spectrum. You have to reality check your number against the market.
Can clients in your space pay $58 to $96 per hour for your work. If not, you either need to find higher value clients, you need to niche down harder to justify your premium pricing, or get honest about whether fractional is viable for your situation yet. I have a great example of this.
[00:13:34] I am in my third bout of trying my own business, and this is the first time out of those three tries that I am profitable. My first try was as a videographer. It sucked. My second foray was as a social media consultant or expert.
Videography is a very specialized area, but I was very much an amateur still at that specialty. So I didn’t feel comfortable charging a whole lot because the quality of that work was probably not at what would be more of an expensive rate, just being honest. But then my second foray of business was as a social media consultant.
[00:14:08] I very much knew what I was doing, but here’s the problem with social media consulting. Everyone thinks they know how to do it. You have an education gap there. You really at that point need to trust that you need to find clients who already know your value because they understand to a degree how much goes into that kind of specialty. And they are thankful that you know it and they don’t, and they’re willing to pay for it. So that’s been my experience from that standpoint. My third foray, though, has worked splendidly. I’m a fabulous podcast host.
[00:14:39] It doesn’t matter if I don’t specifically know the very niche content of what my guest is bringing into the episode, but I know how to get it out of them. I know how to make them feel comfortable. I know how to make them feel natural.
[00:14:52] I know how to lead that and guide the discussion so that their expertise is highlighted and so is their personality, even if they’re very nervous. I’m very good at that, and not a lot of people are. So it’s pretty niche. I’m also very good at producing those podcasts and giving them back to the client so that now they’ve got that high-level quality content that they can use in their content marketing strategy. So those are strength areas I’ve capitalized upon that I offer, and I can price accordingly to my clients. That can be the most difficult part of this.
[00:15:25] You may know what your value is and hey, here’s my pricing. And if you keep running into a wall, you might have to start tweaking that a bit to say, OK, I need to go more niche. I need to find higher value clients, people that trust and know what I do, without having to do backflips to convince them every time I send them an invoice, or whether fractional is viable for your situation yet.
[15:46] Don’t underprice yourself
[00:15:46] Finally, I want to emphasize this last point. Number 11, underpricing doesn’t make you more hireable. It makes you broke. I have been here and learned this. Don’t charge too little because that’s more appealing.
[00:16:01] You’re automatically going to get people who want to hire you. Those can be the most insufferable clients of all because they will nitpick every decision, and they will suck up all your time. They will go out of scope. Know your number and stand on it.
[00:16:14] Lean on your network
[00:16:14] And lean on your network always.
The secret 12th point: lean on your network and ask them. You can ask people saying, would you balk at this hourly rate considering what I’m bringing to the table? And in a future video, we’re gonna talk about how to pitch yourself so that your value is evident.
[00:16:31] Use my free Google worksheet
[00:16:31] So, I hope you found this helpful.
[00:16:33] I’m going to include in the show notes on Substack and on YouTube, a blank Google Sheet that you can download as an Excel as well. That will help you figure out, OK, based on what I am used to making as a permanent employee, and then factoring in all the costs, those hidden costs that we now need to take account of. How much do I need to make from clients in order to make equal to or more than what I made as a permanent employee? So it’ll factor that in for you and do the math. It was immensely helpful to me.
[00:17:05] It’s what I used, and I filled out before I knew I could make the jump and quit my full-time permanent job in order to go full-on fractional. So I hope it’s helpful to you. Check the show notes for that. And of course, I want to hear how your journey is going.
[00:17:18] And I’m happy to take any questions if you want to bounce any ideas off about how you’re arriving at your pricing as a fractional professional. You’re still here. It’s over. But you should hit like on this video before you head out and subscribe if you want to get more videos that’ll help you realize how much more there is to marketing.
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