One of the things I think most people offering a service find really difficult, is deciding how much to charge. What are we worth?
I am told to charge on value given rather than time spent, but that’s difficult because isn’t that subjective?
Whether you’re charging for time or for value, one thing’s for sure, knowing how much your hourly rate needs to be is a good starting point. Whichever way you’re charging it needs to be at least this much, and it also helps to put things into perspective when considering paying other people to do something for you. People often think it’s cheaper to do something themselves rather than outsourcing it, but if you do it yourself it’s costing you your hourly rate, because that’s how much you could be earning if you weren’t doing your work but doing some paid work. Therefore, as long as your outsourced supplier is charging you less per hour than you can earn, you are still in pocket because you can be out earning enough to pay them and a little bit more!
So, here’s a quick calculation to work out your minimum hourly rate required:
1) How much do you need/want to earn in a year?
2) How many hours do you want to work in a week?
3) Divide the number of hours by 3 – you will not be doing paid work for all of the time you are working as there is so much more to be done to run the business, I have been told to expect to only earn for a third of the hours I work.
4) Multiply the answer to question 3 by the number of weeks you want to work in a year.
5) Divide the amount you want to earn in a year (answer to question 1) by the answer to question 4 – this will give you your hourly rate.
You might be surprised (in a good or a bad way) about how much this figure is, and it may give you some food for thought about your pricing structure.