What’s your day rate?

Poor quality, low priceIf you’ve ever spent any time as a freelancer recently, you’ll be familiar with this question. It’s usually the first one asked. I guess it’s quite reflective of the commoditised market we now live in.

Rather than any number of other fitting questions, like: ‘Do you have experience with <insert target market>?’ or ‘Do you have experience with <insert brand category>?’ or ‘Do you have experience with <insert media channel>?’ or ‘Can I see your portfolio?’, the very first question is cost. And many people see cost and value as the same thing. They’re not.

However, the bigger problem here is the whole ‘time for money’ conundrum. Are we really selling ‘time’? If so, where can I buy some? (as I never seem to have enough of it)
I thought we were selling solutions – creative answers to communication or business problems.
That said, we’ve never really worked out how to charge for that. The value of an idea is so subjective. But is it any more subjective than the value of someone’s time?

I was once at an agency and heard the traffic person negotiating over the phone with a freelancer. He was looking at it through the wrong lens.
In his negotiations, I could see him quickly doing the calculations:

day rate
X
5 days per week
X
52 weeks per year
=
Wrong, wrong, wrong.

Even if you were working on that very ill-fitting equation, he needed to consider the following:
annual leave (take 20 days off in Australia)
public holidays (take another 10 days off in Australia)
sick days (another 10 days of allowance in Australia)
time spent invoicing and doing book work (all non bill-able)
superannuation contributions (this is actually a grey area that the Australian Tax Office is trying to tighten up)
down-time (no freelancer is booked 100% of the time. Sometimes the time between paying jobs can be considerable)

However, going back to the original question, what was the traffic person really buying? What was the value of the idea or piece of work they required?

A friend was recently contacted by a prospective client who said they didn’t have a very big budget and could only afford to pay $X per day. I asked him, ‘how does she know how long it will take you?’ My friend responded with the proposal of a project fee.

Another thing some agencies try and use as a bargaining chip is GST (Goods & Services Tax – you English readers will know it as VAT). In Australia, you must register for GST if you run a business or enterprise and your turnover is $75,000 or more ($150,000 or more for non-profit organisations).

In laymen’s terms, you simply add 10% to your invoice amount. You collect that on behalf of the tax office and pay it to them quarterly. Then, provided the client was a GST-registered business, they simply claim it back.

However, some clients try and use it as a bargaining tool, as if it’s actually costing them something. It isn’t. They claim it back. Don’t let them include the GST within your fee – it’s kept strictly separate.

When did the industry become about ensuring nobody else actually turns a profit? Was it the rise of the procurement department that gave birth to this behaviour? Was it the death of media commissions? Who knows?
But putting all that aside, we just need to remember that, as with most things in life, you ultimately get what you pay for.

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