Hourly Charge For Contract

Hi Experts,

I am self-employed, and mostly dealt with small clients, whom I charged around $35 per hour.

Now I am trying to break through Corporations, Municipalities (Toronto), provincial and federal contracts. What would be the normal hourly charge I should account for when pricing out projects?

The areas that I specialize in are PHP, MySQL, HTML5, CSS3, JS, jQuery, (Classic ASP, MSSQL, VB 6 and Access.) - those in brackets are just for legacy support.
APD TorontoSoftware DeveloperAsked:
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JohnBusiness Consultant (Owner)Commented:
Depending on your level of capability, I world start at about double that
Scott Fell, EE MVEDeveloper & EE ModeratorCommented:
$75 to $150/hr.

Think about how many billable hours you can average each month. Keep in mind there are things like drive time, phone, meetings, email, chat etc that may take up your time and you have to account for that.  Let's say you can bill 25 hours per week or 108 hours per month.  Let's also assume you want to take a total of a month off for vacation/family/holidays.  That's 108 * 11 months = 1188 hours for the year.  

Gross per year based on a given hourly rate

$35 = $41,580 /yr Gross
$50= $59,400 /yr Gross
$75 = $89,100 /yr Gross
$100= $118,800 /yr Gross
$150= $178,200/yr Gross

Subtract from the above your tax rate, insurance, yearly dues for any type of memberships, training, supplies, money set aside each year for new computers, office supplies, printing, bookkeeper etc.   All the sudden $100 does not seem like a lot of money anymore.

There is an old article from Lee on this subject. Note the age of the article and the rates. https://www.experts-exchange.com/articles/1905/How-Do-I-Know-What-to-Charge-as-an-IT-Consultant.html

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JohnBusiness Consultant (Owner)Commented:
I would have zero work at $150 per hour around here. And I have been working for myself for 15 years. Lots of hours at a modest rate brings in a lot more money than no hours at a high rate
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Miguel OzSoftware EngineerCommented:
Check your local market and check what is the hourly rate. This rate depends on the length of the contract and travelling expenses.
For example if this is a 1 month contract outside town then you need to charge accordingly.
but if you have a one year contract 20 minutes drive from home, I will consider charge less as well.
Dave BaldwinFixer of ProblemsCommented:
The biggest problem with large companies and government entities (and the reason I Won't work for them) is that they take their sweet time about paying.  You could do a years worth of work for them and have to wait another year to get paid.
Dave BaldwinFixer of ProblemsCommented:
The second biggest problem with those 'people' is often the legal requirements they put in their contracts.  Support and response time requirements are the two biggest things.
I'd suggest you use years of experience as a gauge. Looking back at my own development, I thought I knew quite a bit at the beginning and every year I would learn something critical that would have made a huge difference in the quality of my deliverables. Most notably, I didn't learn about proper security until years into my career, and I've left behind applications that are still in use today but are riddled with security vulnerabilities.

I'd say:
Major Skill - $25k for every 2 years of heavy experience, limited to $80k
Medium Skill - $15k for every 2 years of heavy experience, limited to $60k
Minor Skill - $10k for every 2 years of heavy experience, limited to $50k
Common skill - $5k for every 2 years of heavy experience, limited to $25k

PHP - Major skill
MySQL - Major skill
HTML5 - Common skill
CSS3 - Medium skill
JS - Major skill
jQuery - Common skill

So for example, if you had 10 years of heavy experience in every single one of those items, you might have a annual rate of

PHP - 80k
MySQL - 80k
HTML5 - 25k
CSS3 - 60k
JS - 80k
jQuery - 25k
TOTAL: 350k

That would come out to about $168/hr (based on a 2080-hour work year), and after taxes, it'd probably be a little over half that (self-employment taxes are a lot higher).

Now bear in mind the word "heavy" when I talk about experience. If you use MySQL for 5 years but you are using basic knowledge that you acquired back in your first year and you haven't grown significantly, then that's not a "heavy" experience year. If you really only learned all you know about MySQL in 1 year but have been doing web dev for 10 years, then you should only consider 1 year of MySQL experience.

Both PHP and MySQL are extremely large in terms of complexity and things to learn about. It's easy to assume you're better than you are and I constantly see developers who claim to be experts with MySQL with YEARS of experience on their resume but they don't know the difference between InnoDB and MyISAM (or have no idea what InnoDB even is). Or they're not familiar with database performance, indexing, normalization, benefits of NOT normalizing, etc... and they use a database like a glorified spreadsheet.

PHP tends to be something you're always learning more about, and I'd say Javascript and CSS probably are, too, so your experience with those will likely increase every year you use them at all.

Experience with jQuery is like experience driving only one specific kind of car. Sure, knowing how to drive at all is a good thing but if you're working with a lot of different clients, you'll likely run into Bootstrap, Angular, etc... There are dozens out there, and while it's good to get familiar with the most common ones, I wouldn't make it a central highlight of my experience, since it will more than likely draw attention to the frameworks that you DON'T know.

If you want to test yourself, start participating in development-help forums like Experts Exchange and see how many questions you can answer with little to no help. Look at about 10-20 questions and mark down how many you're skipping over because you don't know the answer, and that should give you a general idea that you can try to map back to years of experience.
Lee W, MVPTechnology and Business Process AdvisorCommented:
Indeed, my article is old at this point... but the concepts remain the same.  Determine what you would find to be a reasonable salary if you were working for someone as am employee.  Keep in mind, your opinion of your work (and more importantly, a reasonable customers opinion of the value of your work) - is it amateurish, professional, seasoned professional, top notch?  what?  Because the level of the work should adjust what your salary might be.  Then, add up your expenses.  Review my article - and talk to others to find out what their expenses actually are.  Add those up.  Etc. Etc.  Perform the calculations.  What I will say is that a programmer, instead of an IT consultant, will likely be able to get more work based on (relatively) lengthy projects which will mean you have the ability to work 40 hours a week instead of 20-25.  So your rate may be less than an IT consultant, but you're still covering your own expenses as both an employee and employer meaning you need to charge more than you would get as an employee.

Really, at the end of the day, it all comes down to 3 words: Do the math.
David FavorLinux/LXD/WordPress/Hosting SavantCommented:
I like the title of Lee's article "How Do I Know What to Charge as an IT Consultant?"

My first paid contract was in 1979, so I've experimented with many payment models.

Guess I should write an article about my experiences over the years.

A consideration about Corporations, Municipalities (Toronto), provincial and federal contracts. I personally avoid these type contracts because they usually have budget caps, there's no way to build in any continuity billing...

And worst of all, I have to commute to some Dilbert-esque cube farm to work with incompetent people. Maybe incompetent is to harsh + that's been my experience.

My suggestion is go one step up the tech ladder, so instead of prompting yourself as an expert in behind the scenes tech - PHP, MySQL, HTML5, CSS3, JS, jQuery - call yourself a WordPress developer, as WordPress uses all these technologies.

Usually clients pay for more for front facing tech work (like WordPress), where front facing means something they can see.

This type of client work provides all manner of continuity work also. For example, I only work on client sites I host, because wrestling with old code (which most hosting companies use) can add 10X+ to hours required to accomplish anything. So my continuity is hosting.

Also, maybe most important, think about what John Hurst said above, I would have zero work at $150 per hour around here.

He's right on. I live in Austin, Texas, US + if I had to go out + land a cube farm contract today, likely I'd get $25-$35/hour.

Or I can work from home + charge... well, let's just say much more...

I work from home. Just thinking about it, I realize I have no Austin clients or even Texas clients. My clients are scattered around various US states + overseas.

I'm realizing if I only stuck with Austin or Texas clients, I'd be dead broke.

Here's my advice. Start with your monthly profit target + weekly hours to work + design your business from there.

For me, my work target is 10 hours/week with truckloads of monthly profit, so my business design required a continuity heavy business model.

For you, your business/profit/lifestyle design may be very different. tart with monthly profit + hours/week you'll be working.

This will ensure you always enjoy the lifestyle (life quality) you desire.
APD TorontoSoftware DeveloperAuthor Commented:
Thank you!
JohnBusiness Consultant (Owner)Commented:
You are very welcome and good luck with larger clients. I hope it works well for you.
APD TorontoSoftware DeveloperAuthor Commented:
Thanks John
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