Leaving company but offered a contract role. How much to charge?

Question

I am looking to leave my current role to start my own business. I anticipate this taking a bit more time than my notice period, so I need to earn some extra money, and my current company have offered the ability to contract with them. No one has thrown around any numbers yet but I wanted to build an idea of what was good.I am currently the head of engineering for a small start up of about 25 people based in London. I joined a few years ago as the only backend developer and steadily built up the team, so I know the system inside out, especially from the backend side. I've got a lot of domain knowledge and specific company knowledge, and am probably one of the most key people in the technical team (for now at least). I'm still hands on and so am still a productive developer.I've been offered &pound;700/day a couple of years ago from other companies but because of the value I can add, I imagined it would be a lot more than a normal contract rate.Has anyone had any experience with this before? What would you suggest as a starting point for discussions?

genmud · Accepted Answer

Take your current yearly salary, add 10% for raise.

Take new salary and add business overhead costs of taxes, business insurance, benefits... add this to your salary, this is your yearly loaded costs.

Take your yearly loaded costs and divide by how many weeks you want to work... for example, you want to take 6 weeks off per year, then subtract that from the weeks in a year. This is your weeks worked.

For example(with made up numbers):

Let's say you make 100k/year, want to take 6 weeks off, local business taxes are 25% and insurance is 1k.

  ((yearly_salary * taxes) + fixed_costs) / weeks_worked / days_in_week = minimum_day_rate