How to charge for your time
“I feel guilty when I charge people for my time.”
A woman said this to me recently… I can relate – It’s this little voice inside us that says ‘you’re charging HOW much?’ this is the same voice that is quick to chastise when it becomes obvious that we haven’t charged enough. So what is enough, what is too much?
When you first start out it can be difficult to find the right balance. There are no rule books, no obvious solutions – it can feel like a pure guessing game.
I read an article where the speaker asked his audience to picture themselves standing in a room for an hour. Doing nothing. If you could, how much would you charge? The answers ranged from $40 to $800. Most people landed around $100. The idea was to get people thinking about their own time – not related to any other expense.
There is a standard costing practice when dealing with products or workshops, to work out your expenses and then add a bit on top for your time. This revolves around the idea that labour (your time) is defined by a salary and probably not your biggest cost. In this age of consulting and person driven services, time is by far the biggest expense and the scarcest resource we have. So back to the question what is enough and what is too much?
- Research- what are other people getting for similar services, what are your competitors charging. Often this is the best way to work out what your potential customers are willing to pay.
- Where are you? – Where do you fit in on the ladder with your competitors? Often when we are starting out, we need to make tough decisions to ‘go in cheap’ as we gain experience and exposure. However, this is an interim thing – make sure you are not feeding your guilt.
- Ideal Salary – What would like to earn? This varies for each individual, however, let’s assume you want to earn €100,000 pa –
In the above example – if you only want to work 20 hours a week, to earn €100,000 you
will need to charge €104 per hour
- Pricing Strategy – When looking at your time, the two main options:
- Project based
- Hourly rate
- Project based – this is where you are being asked to complete a specific task over a specific number of hours. Normally you will offer an overall discount on your normal hourly rate because your customer is ‘buying in bulk’
- Hourly rate – as worked out above is what you want to charge for the smaller jobs – customers are prepared to pay a premium to dip in and out of your services. Often you will need to use a mixture of both – the important thing is to have a plan in place when your customers ask you for a price.
- Get comfortable talking about money – This is something that we can all benefit from. When talking to your customers about your rates, you need to believe in your own strategy and be open and up front about what you are charging for and why. This transparency will allow for re-negotiation if a project goes over the planned hours. Don’t be afraid to negotiate for what you want, have confidence in your abilities and how much you are worth.
Remember the right customer for you will be happy to pay your rate.
Let me know what you think about the items above, or if you have any specific questions.
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