Charging by the hour will destroy your business...but you still need an hourly rate. Here's why.
As you grow faster and more efficient in your work, you will need to book more and more clients to maintain the same level of revenue.
This is the road to burnout. But there's a solution.
One alternative is to begin charging flat fees for your services. I'm obviously no fan of charging by the hour, but this doesn't mean your prices should be pulled out of thin air. Knowing what you need to charge for your time will help you set rates that are fair to your clients – and to you.
As a solopreneur, you only have so many hours in your day. Unless you the power to bend space and time. (And if you do, let's talk!)
Assuming you need to sleep, eat and spend time with loved ones, you have about 8 to spend on work on any given day.
Your time is a finite resource.
As part of my custom pricing process, I come at it from two directions:
- The amount of time you invest in a service
- The value of the benefits that service offers the client (preferably in quantifiable terms)
To address the first point, you need to figure out what you should be charging for each hour of time you put into client work in order to make a sustainable income.
We start with this because at least 70% of people charging by the hour aren't billing for their actual time invested in delivering a service.
Let's look at how to do that.
Your Baseline Rate
Your Baseline Rate is your "secret" hourly rate. It's what you need to bring in to cover the basic financial needs for both you and your business. It's the rate you'll use to calculate your prices right now.
To find your Baseline Rate, enter these numbers in the calculator:
- A realistic monthly income
- # of work days per week you're willing to work
- # of hours per work day you're willing to work
- # of weeks off you’d be reasonably happy with
Your service has a very real cost to you. You are paying for it with your time, ideally for a rate that makes your business sustainable. (Remember, you can't serve clients if you have no business.)
This is the absolute lowest you should go when calculating a price for your service. To get to a flat price, you'll multiply this hourly rate by the amount of time you spend delivering a service. (For more on how to do that you can check out my free video training.)
Hint: Play with the "Weeks Off" section. It can have some surprising results!
Please enter only numbers into the fields (no commas or special characters)
1) How much do you want to bring home each month?
2) How many days per week will you perform client work?
3) How many hours per day will you perform client work?
4) How many weeks per year do you need for vacation, holidays, conferences, sick time, etc..?
For account for expenses such as business overhead, taxes, savings, retirement, US healthcare, etc., multiply your desired monthly income by 1.5