Contractor day rate

Q: I have an offer to go on contract for the first time but I am not sure how to come up with a day rate. What should I consider?

15th July 2016

The number one mistake first time contractors often make is that they under price their own time when charging their customers.

If there are materials to be supplied in a job that you are undertaking then these should be priced separately.

In order to come up with an appropriate charge out rate you should start with the profit you would expect to make when operating at full capacity. Then you would add your annual overheads/expenses to this figure i.e. accountants fees, solicitors fees, insurance, etc.

This will give you a figure which you would expect to generate from selling your time for the year. You would then simply divide this by the number of weeks you plan to work in the year (allowing for holidays/bank holidays) and then divide this figure by the number of days in your working week (usually 5) and you have your daily charge out rate.

You should then compare this rate to your competitors to see if it corresponds to the market rate.

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