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Typical Freelance Utilisation Rates

What's your utilisation rate?Utilisation rates have to do with how much you expect to work as a freelancer. A typical year is 365 days - but freelancers won't work all of these days. In fact, freelancers won't work every one of the 250 or so working days in a year. But, in calculating your rates, and whether you are making any money, you will want to figure out your utilisation rate.  The utilisation rate is the percentage of time, against the working days in a year, when you can expect to work.

 
For the most part, consultants can expect to have between 50% and 80% utilisation over the course of a year. 50% utilisation means that the freelancer is working only 125 days out of the year.  You can see, now, why it is so important to take this rate into account when you are setting your rates.  
 
You should aim, in your first year for at least 50% utilisation. anything below that starts to get into the unprofitable realm. You need to take into account, when estimating utilisation time, not just time when you don't have a client, but time spent working where you are not actively billing a client.  Things like phone calls, meetings, training, marketing, etc. are things that you cannot bill for. 
 
To figure out your rates, take the minimum amount you must make in a year and divide that by 125. This is your "day rate" It's the amount you must make in one day working at a 50% utilisation rate to make your minimum amount needed for the year.  Naturally, you will want to make more than what you need in order to get by, and the recession may have you at only 30% or 40% utilisation. Should you plan for this?  Maybe, but keep in mind if you raise your rates too high, no matter what your expertise, you may price yourself out of work.  Instead, you should focus energy on marketing, business development, and marketing in order to get the utilisation rate back up to where you need it.  If you do account for a potential of 30% utilisation, and you exceed your estimate, you will have a fine year - even if you do not work at 100% utilisation.
 
By considering utilisation rates when you are freelancing, you can earn a healthy freelance income - even when you are just starting out and working at only 30% utilisation.
 


 
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