How Calculating Hourly Rates Is Hurting You
Charging hourly rates is 100% hurting your business. Yep, it’s a bold statement but it is also a true one. When you’re first breaking out on your own, it is common to try and calculate your new rates by converting your former salary into hourly rates. It usually looks like:
Former salary / 40 hours per week = new hourly rate as an entrepreneur
However mathematically accurate that may be it is not serving you the way you think it may be. Let me give you a PERFECT case study example from my own business experience:
Channing’s Hourly Rate Mistakes
When I first took DCM from a side hustle to my main income stream, I followed the formula above, put together a rate card, emailed my entire network about my new venture and in flowed the leads! The immediate onslaught of requests to work together and projects dropped in my lap made feel 100% like a baller.
“Oh yeah, I can totally make this work as a business. See, everyone already wants to work with me! I’ve got this,” I thought.
Sweet sweet, ignorant and soon-to-be-taken-advantage of Channing. It didn’t take long for one client to show me the error of my ways with charging hourly.
After running into an issue with her website, she confirmed my hourly rate for website work ($95 at the time) and gave me the go-ahead to fix her problem. A whopping 15 minutes later I had it rectified and proudly emailed her back saying such, to then receive the following reply:
“Man that was fast! I worked on that for more than four hours couldn’t figure it out.”
[Insert my face sinking from triumph to the feeling of being had.]
Do you think I got paid for the next four hours she would have spent trying to figure it out had she not hired me? Ha! Of course not! I got paid for 15 minutes. While I should have set a minimum of a one hour charge on all contracts, I was naive and even the full $95 would not have compensated me adequately for the time I saved her, not to mention the ongoing frustration.
From that day on, DCM started charging for the value (i.e. skill, experience & results) we bring to the table rather than the time it takes us to do that. And I am here to encourage you to do the same.
And before you hop on a “That sounds nice Channing, but everyone in my industry does hourly rates so that won’t work for me” train, let me further explain why this CAN work for you whether you are an interior designer, lawyer, graphic designer, event planner or any other service provider.
Be the disruptor. Be the change. And be the one who’s more fiscally successful without slogging hours at the office/computer.