My coaching clients often ask me for advice and help with setting an hourly rate. While I encourage them to use per-project rather than hourly pricing when talking about budgets with their clients, it’s helpful to have some hourly rate in mind on which to base that project price.
Here is my calculator, in all its math-nerd glory. And remember, this is your minimum hourly rate; your actual rate will be increased based on the value that you provide and the difference you make to your client.
Here’s what it looks like:
Minimum Hourly Rate Calculator
|Non-reimbursable expenses & overhead||NOTES|
|Association membership||$||Association membership: AIIP and your clients’ key association|
|Conferences||$||Conferences: cost to attend two professional conferences – AIIP and your clients’ key event (registration, travel, hotel, meals)|
|Insurance||$||Insurance: health, general liability, disability|
|Magazine subs, books||$||Magazine subscriptions, books: 1 business paper and your clients’ key sources|
|Office equipment||$||Office equipment: assume new laptop every 3-4 years, plus ~$500/year for software|
|Office supplies/expenses||$||Office supplies/expenses: telephone, ISP, web hosting, email list hosting, premium social media accounts, etc.|
|Online subscriptions||$||Online subscriptions: annual fees, any non-transactional expenses you can’t bill back|
|Professional fees||$||Professional fees: CPA, bookkeeper, attorney, coaching, etc.|
|Rent||$||Rent: Can base it on % of floor space if you work from home|
|Retirement fund contributions||$||Retirement fund contributions|
|Salary||$||Salary: what you want to pay yourself|
|Profit||$||Profit: 10% of your salary (this is what funds growth and risk-taking!)|
|Taxes||$||Taxes: set aside at least 35% of anticipated salary|
|Other expenses||$||Other expenses specific to your situation|
|Total expenses, salary, overhead||$|
|# of hours/week you work|
|# of billable hours/year||(half your working hours/week multiplied by 45 weeks)|
|Total expenses / # of billable hours/year||$||Your MINIMUM hourly rate, before value-pricing|
I’m often asked by people who are just starting their business whether they need to specialize and how they can differentiate themselves. I recently had a great opportunity to see from the buyer’s point of view what really matters when buying a professional service.
I am in the process of developing a fabulous course to help reluctant entrepreneurs figure out how to best price their services and I realized that I need a customized PowerPoint template. There are tons of graphic designers out there – how was I going to choose someone who could capture my essence, create something I will like, and be fun to work with? I went to the discussion list of a local group of women writers, knowing that they have similar needs for high quality, professional service and reasonable cost.
After looking at the portfolios of a number of designers, I had narrowed my choice down to a couple of people who sounded good, so I had short conversations with both of them. One of the designers sounded fine; she listened to my description of what I was looking for, she tossed a few ideas my way, and said she would send me a proposal. Ho hum. The other designer got my business, though. Why? In a word, passion.
As we were chatting about the font I was currently using for my template, the second designer commented that she had seen that font around town. “Whole Foods used it in one of their in-store banners, and you know that coffee shop at Main Street and Walnut? They have that font on their storefront. I like how it conveys a mix of informality and excitement.” I was entranced; I had found someone who loves her job so much that she can’t help herself from noticing graphic design as she makes her way in the world. This is someone who isn’t just doing graphic design because it’s a way to make a living; she is doing this because she can’t help herself. She is, among other things, a font nerd.
I want to hire people who are passionate about what they do… whatever it is that they do. My chimney sweep loves what he does and we often wind up chatting about stoves and firewood after he finishes his annual cleaning. My therapist is one of those people whom even the grocery clerks confide in. My housekeeper reorganizes my linen closet just because tidy linen closets make the world a slightly better place.
The professionals I hire all get nerdy about what they do, and they love their work. They are solopreneurs who all have strong client bases and lots of word-of-mouth referrals. They may not be the only person in their field, but they are the ones who get real satisfaction from their work, who care about their clients, and who bring inspiration to their job.
When prospective clients call you, do they come away with a sense that you are a passionate nerd about what you do, too? How effectively do you convey the joy you bring to every client’s project? How else can you show that you are in business because you love what you do?