I posted this on another thread, but it was in the bookkeeper forum. So, I am re-posting it here for additional input and a larger audience, hopefully to help those who are struggling with how much to charge! I appreciate any input.
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Keep in mind, that on top of expenses, you can anticipate (depending on your state) 35-42% of your NET profit will be taken in Federal and State taxes annually.
So the best suggestion is to calc how much you need to live comfortably, then estimate your annual expenses (figure in utilities, marketing costs, supplies, etc.) and then add 42% on top of that. A 40 hr workweek is 2080 hours/year. So for example:
PERSONAL EXPENSES - annual
$14,400 rent/mortgage ($1200/mth)
$4,200 utilities ($350/mth - elec/gas, water, phone, cable/satellite
$10,400 groceries/gas ($200/wk)
$350 prescriptions/dr visit
$1,200 auto insurance/plates/repairs
BUSINESS EXPENSES - annual
$1,200 office supplies ($100/mth)
$900 cell phone ($75/mth)
$600 internet ($50/mth)
$100 bus/State filing fees (annual)
$120 post office box (annual)
$1,200 marketing ($100/mth)
= 31,550/yr gross personal expenses
= 4,120/yr gross business expenses
The example above requires that you gross AT LEAST $35,670 to make ends meet. Ideally, you would want at least a 30% profit (10% for savings, 10% tithe, 10% 'fun money') so you now need to gross at least $46,371/yr. But, oh wait! You have to pay TAXES on the profit! Your taxes are approx 42%, but of course the more you earn, the more your taxes! So now you need about 116% profit on top of your expenses ('cuz remember, you can't write off personal expenses) so you now need an income of $77,047/yr.
$77,047 gross profit
less 4,120 bus expenses
equals 72,927 net profit
less 30,629 federal/state taxes
less 31,550 personal expenses
equals 10,748 (a little over a 30% net profit)
To make the required gross of $77,047/year, at 2080 hours (40 hour workweek) you need to bill $37.04/hour.
*WHEW* Make sense? Obviously, this is a very simplified example and doesn't come close to figuring out accurate expenses. It's just a demonstration of all the financial considerations you need to make when setting rates.