How Do I Set My Rate: The Age Old Question Answered

From the Mediation Matters Blog of Steve Mehta.

Due to the terrible economy that has affected every industry, lawyers and mediators are now forced to go on their own or to develop their own business.  One question that everyone asks is how much do I bill?  Well now instead of floundering in the dark and aiming darts at balloons identifying billing hours, there is a nice program that helps to address what you need to make and how much you need to work to break even and make a profit.

As I was surfing the web, I found a website called Freelance Switch.  The site is primarily designed for freelance artists or designers.  However, it has created an hourly rate calculator that is very helpful to planning your billing rate and much more.

The site allows you to input most of the variables that could occur in your practice and then determines what your hourly rate should be to make a profit and to break even. What is also interesting is that it also allows you to change the number of days that you work and how many hours you work.

As such, it provides several types of information:

  • Knowing how much you have to make at the end of the day to break even;
  • Knowing how many hours you need to bill to break even;
  • What if information changing if you work only 2 days a week instead of 5

By changing the variables, you can find out different ways to figure out your hourly rate but also how much is the minimum amount of time you need to work to break even.  For example, I assumed a starting business with a $1,000 a month in rent, some office supplies, computers, travel, advertising, etc.  I also assumed that the person had $84000 a year in living expenses, including mortgage, etc, and that the person will only get 2 days a week of work in the first year.  With those assumptions, the program told me that this hypothetical person needs to bill $349.08 an hour to break even.  But if I changed the number of days to 4, that same person only needs to bill $148 an hour.

This type of planning is valuable to mediators and attorneys alike in helping them determine how much they want to work, and how much they need to work.

Due to the terrible economy that has affected every industry, lawyers and mediators are now forced to go on their own or to develop their own business.  One question that everyone asks is how much do I bill?  Well now instead of floundering in the dark and aiming darts at balloons identifying billing hours, there is a nice program that helps to address what you need to make and how much you need to work to break even and make a profit.

As I was surfing the web, I found a website called Freelance Switch.  The site is primarily designed for freelance artists or designers.  However, it has created an hourly rate calculator that is very helpful to planning your billing rate and much more.

The site allows you to input most of the variables that could occur in your practice and then determines what your hourly rate should be to make a profit and to break even. What is also interesting is that it also allows you to change the number of days that you work and how many hours you work.

As such, it provides several types of information:

  • Knowing how much you have to make at the end of the day to break even;
  • Knowing how many hours you need to bill to break even;
  • What if information changing if you work only 2 days a week instead of 5

By changing the variables, you can find out different ways to figure out your hourly rate but also how much is the minimum amount of time you need to work to break even.  For example, I assumed a starting business with a $1,000 a month in rent, some office supplies, computers, travel, advertising, etc.  I also assumed that the person had $84000 a year in living expenses, including mortgage, etc, and that the person will only get 2 days a week of work in the first year.  With those assumptions, the program told me that this hypothetical person needs to bill $349.08 an hour to break even.  But if I changed the number of days to 4, that same person only needs to bill $148 an hour.

This type of planning is valuable to mediators and attorneys alike in helping them determine how much they want to work, and how much they need to work.

                        author

Steve Mehta

Steven G. Mehta is an attorney and mediator providing unique mediation services in a variety of types of civil litigation. His ability to understand the human process and complex emotional issues involved in legal negotiations enables him to effectively assist the parties in obtaining the best possible results during mediation.… MORE >

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