Determining the Daily Average Rate (TJM) is an essential step for any freelancer looking to optimize their income, manage their working time effectively, and build a trusting relationship with their clients. The TJM represents the valuation of your expertise, skills, and experience in the market. To establish a relevant TJM, several criteria must be considered, such as your industry, competition, and fixed costs.
This calculation will not only allow you to set a fair price for your services but also to ensure the sustainability of your business.
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Understanding the concept of TJM
Before you start calculating, it is crucial to clearly understand what the TJM entails and its importance for your business.
The TJM, or Daily Average Rate, is a pricing unit primarily used by freelancers and consultants to bill for their services. It represents the average price at which a provider charges for a day of work. Knowing your TJM not only allows you to negotiate better with your clients but also to position yourself correctly in the market against your competitors.
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This concept is essential for anyone looking to make their business profitable while remaining competitive.
By clearly defining your TJM, you lay the groundwork for a solid pricing strategy tailored to your professional aspirations.
Analyzing fixed and variable costs
The first step in establishing your TJM is to accurately analyze your fixed and variable costs.
- Identify your fixed costs: These are expenses you must pay regularly, regardless of your level of activity, such as your rent, professional insurance, or internet subscription.
- Evaluate variable costs: These expenses fluctuate based on your activity, such as purchasing specific materials for a project or travel expenses.
- Calculate your break-even point: Add your fixed and variable costs to determine the minimum amount you need to charge to cover your expenses and generate a profit.
Once these elements are taken into account, you will have a better idea of how your TJM should be established to ensure the viability of your business.
Assessing competition and the market
A competitive analysis provides you with relevant insights into the prices practiced and client expectations in your sector.
To stand out, it is essential to know the rates of your direct competitors. Conduct a market study to identify the TJMs commonly practiced in your field. This will not only allow you to position yourself effectively but also to justify your rates to your clients.
Also, pay attention to market trends, as they can influence your potential clients.
Understanding these dynamics will give you a strategic advantage, helping you adjust your TJM to be both attractive and profitable.
Calculating your Final TJM
By combining your cost and market analyses, you can now proceed to calculate your TJM.
- Determine the number of billable days in the year: Take into account holidays, non-working days, and those dedicated to prospecting.
- Calculate your desired revenue: Set a realistic annual goal based on your financial needs and professional ambitions.
- Divide your revenue by the number of billable days: This gives you your TJM, which will allow you to cover your expenses and achieve your financial goals.
Consider using a salary portage simulator to refine your calculation and explore different remuneration scenarios. This method provides you with a clear and structured view of your pricing strategy.