3 tips for calculating your hourly rate

by Michele on March 24, 2011

Tips for Calculating Your Hourly Rate

Tips for Calculating Your Hourly Rate

If you’re a solopreneur who offers at least some services by the hour, you’ll need need to calculate what rate to charge.  This can be tough – aside from just figuring out the dollar amount it usually causes us to bump up against all sorts of mindset issues like “Would anyone pay that much?”  Mindset is a big topic all by itself, but here are 3 tips to help you with the math.

  • Your hourly rate may be a flat $x per hour, or you may have a sliding fee based on how much time they book.  If someone books you for a day or half-day, they might get you at a lower hourly rate.  This makes sense for the business owner because you aren’t spending any time selling that additional time, and it makes sense to the client as a volume discount.  It’s also cheaper for you to deliver a block of hours together instead of one hour at a time because you minimize your switching costs, i.e. time preparing and sending any follow up.
  • Don’t be intimidated by a number much larger than your comparable salary at a job.  As a business owner, you need that rate to cover many things it didn’t when you had a job.  Some examples include: overhead, business taxes, specific business expenses and all the time it takes to sign up new clients.  Your hourly rate also has to compensate you not only for the hour you work but for all the expertise you bring into the situation.  How many years have you been building your knowledge?  How many classes have you taken?  How many books have you read?  Your currently hourly rate should reflect how much expertise you bring to the client.
  • Post your rates.  Or don’t.  There’s loads of debate about this, and ultimately I suggest taking it all in and start by doing what feels best and then test, test, test.  See if posting or not posting helps you serve more people.  I’m on the side of posting my rates right now.  I almost never go any further with purchasing a product or service or even reading sales copy if I can’t see a price right away.  If my rate scares someone off, then we’re not a good fit and we shouldn’t go any further.

Do you sell services by the hour?  How did you calculate your rate?  Leave a comment and tell me about it.

Comments

  1. Don Talbert says:

    Hi Michele,
    I see both sides of publishing rates. What does bother me is when you have to go through endless text or video, explaining the merits the product or service. No matter how good it sounds or ultimately is, price is a consideration. I do lean toward publishing rates, so those who aren’t interested or can’t afford you, move on. It’s not time well spent on either part, to discuss something that isn’t affordable to the prospect.
    You post some real thought provoking content. Keep it up.
    Don

    1. Michele says:

      Hi Don,
      Thanks so much for your comment – it means a lot! I also lean toward publishing rates for the same reasons you mention.
      Michele

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