Walkaway Pricing: The Cost of Doing Business
Part three: Calculating how much money it takes to run your creative business
This is part three of my guide to working out the minimum you should charge as a freelancer or content creator. Please see my introductory post for more information and links to others in this series.
As a content creator, you need to spend money to make money. While the costs of doing business are probably low compared to your living expenses, it's still important to take them into account. These charges can come from several areas, including business software, payment processing, platform fees, marketing, tax filing, and more.
When you're figuring out your minimum rates, you'll need to add in these costs so you have enough to pay your business bills. In this guide, we'll figure out exactly how much you're paying to run your business. We'll add this amount to your essential expenses when we're calculating your content creation prices.
Being able to cover your admin expenses through your content pricing means you can afford to keep your business afloat. This allows you to build out your business as you take on new clients and improve your rates. You'll also be able to stay compliant with areas like tax filings, licensing, and similar.
Some business notes before we begin
The aim of this guide is to help you understand what your current business costs are so you can build them into your pricing—so I don't cover reducing your business costs. But, bringing your business costs down is also a great idea, and these websites provide some starting points.
Your business costs will change from month to month and will likely increase from year to year. It's worth checking your admin costs on a regular basis, so that you can stay up-to-date with your walkaway price. I recommend recalculating costs and rates every six months or every year.
You may be able to deduct many of these costs as expenses when figuring out your taxes for the year. But, this guide is not intended to provide advice on expenses, which can have various rules around them. For more information on expenses, talk to your accountant.
None of the sections below will contain every single business cost you have, so see them as starting points. Check your transactions and ensure you're capturing all of the money you spend on your business.
I've used US Dollar amounts, assumptions, and examples throughout these guides. That's because I live in the US, and understand that financial system the best. Don't let the $USD put you off. These guides should work fine in your own currency, just substitute in as required.
I know there's a lot here! It does take a while to figure out your business costs, but it will be worth it. You'll be more confident of your spending, and you'll be able to set content creation rates to meet all of your needs.
How to figure out your business costs to calculate your content rates
Here's how to use this guide:
Go through all of the sections below and figure out your average monthly costs for each.
Look back over your business bank and card statements to confirm the amounts. If the amounts vary significantly from month to month, you'll want to average over a longer period.
Write down the monthly amount you spend on each area.
Once you've covered all of these areas, add everything together to get the total amount you spend on business costs each month.
You do not need to include any costs here that you've already included in your household costs calculations.
Why your business costs matter for your content creation rates
Once we have your business costs, we’re going to add them to two other areas: your essential living costs and your optional costs. This will help us understand your total spending over a month.
Then, we’ll divide that amount by the number of hours you can bill in a month to figure out where your rates should start. We’ll complete those steps in a future guide.
Computer hardware, software, and services costs
Computer systems: Desktop PCs, laptops, tablets, Chromebooks, monitors, mice, keyboards
Computer accessories: Headsets, printers, scanners, speakers, webcams, cables, chargers, etc.
Computer software: One-off and subscription software that you need to create content or run your business
Hosting and services: Website hosting and building, domain registration, etc.
Home office costs
Office furniture and furnishings: Desks, filing cabinets, storage units, bookshelves, chairs, rugs, drapes, blinds, and other soft furnishings
Home office sundries: Printer ink and paper, stationery, consumables, postage, etc.
Platform and payment costs
Platform costs: Freelance platforms like Upwork and Fiverr will take a percentage of your rates as their platform fee, capture this as a cost of doing business
Card processing costs: Credit and debit card companies will charge you a fee of around 3% to process payments
Currency exchange fees: Losses for converting from a foreign currency
Bank account and wire fees: Fees for taking payment into your bank account
Business finance costs
Business credit card and loan repayments: Repayments of credit that you've taken out specifically for your business
Business insurance: General liability, professional indemnity, or other insurance costs
Professional fees
Bookkeeping and accounting fees: Money that you pay to your accountant or bookkeeper for tax filing and other services
Attorney fees: Legal expenses for contacts or legal documents
Permits and licenses: Membership costs, licenses, business permits, annual report fees, etc.
Money paid to other professionals: Any other money you pay out for other professional services for your business
Marketing and advertising: costs to promote your freelance or creative business
Professional training and education costs
Training: Purchase of books, offline and online courses, coaching, classes, and examinations.
Conferences: Attending seminars, webinars, and workshops
Journals: Trade publication and other memberships
Freelance equipment costs
Photographers: Still or video cameras and accessories for freelance photographers and videographers
Designers and artists: Drafting tables, art materials, and design tools for freelance designers, artists, and illustrators
Musicians: Musical instruments, recording equipment, and similar for freelance musicians and sound designers
Other: Other specialist equipment depending on your freelance and creative services
Other essential costs
Once you've been through each of the sections above, take another look through your business bank and credit card statements. See if there are any other costs on there that you've not captured, and add them into the relevant section or a new section.
Bringing it all together
Now that you have average monthly costs for all of your business costs, write that figure down. We'll be using this number later in these guides to help you work out your minimum rates.
That's it for this guide. Next time, we'll explore the costs of your discretionary income and luxury spending. See you then!
Please note that I am not a qualified professional and I do not provide tax, legal, accounting, or similar advice. These guides are provided for informational purposes only. Always consult with a qualified professional on your unique circumstances.