Determining rates: local vs. remote?

Subject: Determining rates: local vs. remote?
From: Geoff Hart <ghart -at- videotron -dot- ca>
To: TECHWR-L Writing <techwr-l -at- lists -dot- techwr-l -dot- com>, Dave C <davec2468 -at- aim -dot- com>
Date: Mon, 24 Aug 2009 07:29:01 -0400

Dave C wondered: <<I currently live in SillyCon valley, California
where I was working as a tech writer for many years (but not the
immediate past). I'm moving to a small town in the US midwest where
I'll be working with people (remotely via the 'net) I've networked
with -- but have not yet written for -- in the green power industry
(solar, geothermal, etc.). I am not sure how to set my rate. Local
(midwest) rates are really low when writing work can be found.>>

You're failing to make a crucial distinction here: between your rate
and your profit margin. Rule number 1 of self-employment is to charge
what you're worth, which translates into "every penny the market will
bear". Rule number 2 is that not every market can afford the same
rate. With those rules in mind:

First, consider your rate. An hour of your time is still worth the
cost of that hour, which is to say, your standard billing rate. People
accustomed to paying that rate don't know where you live and won't ask
you to reduce your cost just because you've moved to a new place. The
kind of people who do that are more likely to outsource your work to
somewhere in the developing world. (They may, however, ask you to
reduce your rate because of the economy. See my next point.) You
shouldn't cut that rate unless you are competing with colleagues who
charge less but can deliver equally good work, and you want to take
work away from those colleagues. However, if you're working directly
with locals, they'll expect to pay the local rate. That may not be a
problem, because your costs should be lower. For example, I charge my
Chinese clients half what I charge my other clients simply because
that's all they can afford. (I'm willing to treat this as pro bono
work for various reasons.) Which leads to:

Second, consider your margin. Let's say you need to earn $50 per hour
just to buy ramen noodles in Silicon Valley after you've paid your
rent and taxes. That's your cost of living, and if you actually want
to upgrade [sic] to Kraft dinner, you'll need to increase your cost
above that cost of living -- say to $51 per hour. Now let's say you've
moved somewhere you can survive on ramen for only $25 per hour. Should
you drop your rate to $26 per hour? Nope. Keep it at $51 per hour and
start banking the difference, or eating an occasional vegetable. The
exception is if a client is having trouble surviving the current
economy and you want to retain them as a client. In that case, you
might want to offer them a 10 or 20% discount "only until the end of
the year, because I'm being hurt by the economy too" just to secure
their business and earn a bit of goodwill you can draw on later.

How do you combine the two factors? Well, let's say you've been
competing with someone in Silicon Valley who has been living on $50
per hour because they love ramen, are willing to forego the Kraft
dinner, and don't want to live past the age of 40. You can now drop
your price to $49 per hour to underbid them, and bank your profits
(the amount you earn over and above your $25 cost of living).

See how it works? Substitute real numbers, of course, and (really!)
eat an occasional vegetable you couldn't previously afford.

Of course, you have to throw your expenses into the equation too. If
you have to fly back to California every month to meet with the
clients, and have ot phone them daily to plan your day's work, add
those estimated costs into your rate.

------------------------------------------------------------------------
Geoff Hart (www.geoff-hart.com)
ghart -at- videotron -dot- ca / geoffhart -at- mac -dot- com
------------------------------------------------------------------------
Effective Onscreen Editing:
http://www.geoff-hart.com/books/eoe/onscreen-book.htm
------------------------------------------------------------------------

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References:
Determining rates: local vs. remote: From: Dave C

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