The way I’ve always done it is this:
Start with the annual salary you want (for example $100k/yr)
Now figure what your non billable material costs are going to be per month (Desktop Computer, Laptop Computer, Books, accountants fees, taxes, insurances, professional association dues, software, lets just say $20k/yr for simplicity’s sake).
So your desired Gross Income is $120k/yr.
Now decide how many hours you want to work per week for clients (lets say 20, the other 40-50 hours a week that you work will be hours that you spend doing administrative tasks of running your business, which is essentially what you are doing).
20hrs/wk = 1040hrs/yr
Figure in two weeks of vacation/sick time so your yearly billable hours = 1000/yr
Your hourly rate = desired salary / billable hours
So using the example numbers your hourly rate is $120/hr.
Just remember that actually hitting the desired salary requires that you actually work 20 billable hours a week (you probably won’t), and that your clients pay on time (not all of them will). So I usually figure out what my annual living expenses are, and then pad the shit out of that figure, and that is my desired salary.
Doesn’t mean you’ll get it, and you can always decide to do projects ala carte (one lump sum for a project), or give “good” customers a discount.
The key thing here is to know your value. If you are very good at what you do, and there are not a lot of others in your area that are even competent in that area, you can get away with charging much more than if you lived in Silicon Valley.
I would say that your company has made a very big mistake. Most SMB’s that do this don’t really understand the value of having a competent in house IT person, and see only the tangible costs.
I wouldn’t necessarily hold their feet to the fire, but they already know you can perform the duties they have at a level they are comfortable with. If they balk at your “exorbitant rates” all it takes is one bad experience with another contractor, and they would gladly pay you more than you are asking for.
I’ve seen it happen many times, and I’ve always felt it was a stupid problem to have ( In every instance that I know of, if the company had really known what they were getting into they would never have gotten rid of their internal IT people, it ended up costing them far more than the salary and benefits they thought they were saving).