Freelance and financial projections

Hi,

So I am starting out as a freelance developer. I have been working a few months now and doing fairly well but there seems to be little structure around finance and income. I just happen to be earning a living now.

If I am to continue this next year I want to have something in place.

I suppose simply put, I want to know how much I need to bill out every month and have a set goal.

Having spoken to an account recently he mentioned 46 weeks as ballpark billable weeks. Leaving the remaining 6 for holidays, sick project gaps etc.

How should I go about this? Should I take my daily rate and calculate gross earning for the 46 week period. Then aim to bill a pro rata on a monthly basis.

I guess this ties in tightly with marketing yourself and lining up projects to start after each other.

Cheers

You also have to take account of when will this money come in. Are there busy periods and quiet periods.

Start backwards with the amount of money you want to earn in a year. Then you can see what you need to charge on an hourly basis to reach your goal, whether that be working a 46 week year or even a 40 week year.


Steven
www.bluewaterfp.ie

46 billable weeks is what I would consider a best case scenario.

If you have one long running contract then this is easily achievable. However if you have many short term contracts with different clients there is a good chance of there being weeks or months between contracts. Also sometimes it can be difficult to know when an existing contract will end, leaving little time to line up a new contract.

There are inherent risks with being freelance. You may work for 48 weeks a year for the next 5 years and then have nothing for 12 months. Ultimately you need to comfortable about these risks and but do put some money aside for the rainy day.

As Steven says:

Here is how I used to calculate target revenue back in the day:

- Required gross salary
- Employer's social security contributions
- Employer's pension contributions
- Accounting & Tax fees
- Loss of income insurance
- Travel & subsistence
- Phone, Data, Post etc
- Training allowance
- Sundry

I calculated billable hours as 52 weeks per year less:
- Holiday leave 6 weeks
- Training allowance 2 weeks
- Public holidays 1 week
- Down time between assignments 2 weeks
- Sick 2 weeks

Leaving billable time of 39 weeks @ 43 hours per week

Once you have established a cash reserve of say six months revenue you can probably adjust the number of weeks up a bit to eliminate the sick and down time allowances.