How to determine your hourly rate & get paid what you're worth
Hi Warriors,
Have you been grappling with how much your time is really worth as an entrepreneur?
As an entrepreneur, it is often hard to come up with that figure. You work your own hours, you cover your own expenses and can cut back or scale up when you see fit, you assume the loses and write them off if and when you feel the need to, and you may be one of those who does not pay income tax as yet so no one is really breathing down your neck to tell them how much you make per month as an individual. Well, all that is about to change.
Here's a simple way (formula) for you to find out how much your time is worth right now so that whether you sell tangible or intangible goods, you can price yourself to profit rather than lose money when you make sales or worse chase of your ideal and targeted prospects with a price that is too high or too low.
It's a very simple formula and if you've never used it before you'll wonder why not. Here it is in plain geekless speak...
First off, determine exactly how much you are responsible for contributing to your monthly upkeep. By this I mean, if you pay rent and don't live alone, how much of the rent are you meant to come up with, if you split groceries with a room mate or your spouse, how much are you expected to deliver monthly?
Include in that all other expenses, personal and communal i.e. if you live with one or more people... We'll call this amount "TARGET INCOME"
Once you have that total amount, now you know how much your total Net Salary needs to be for you to be taken seriously come bill payment time.
Next step, find out how much someone in your income bracket and with your "job description" is charged every month as taxes, you will have to add this amount to your "TARGET INCOME" so that come tax time you will not have to dip into your TARGET INCOME to pay your taxes and thus fall short--this is often the case with the employed in the society, they get paid a good wage but get taxed down to their drawers and often end up poor as church mice.
You as an entrepreneur can somewhat control that since you write your own checks, all you do is find out what your "TARGET INCOME" needs to be for your stage in life, then find out what the government is taxing people who earn in that range and ADD on the tax rather than subtract it--you're cheating but you're not cheating anyone out of their rightful taxes you're simply making sure you still have enough to take care of your responsibilities.
We'll call this one "GROSS TARGET INCOME"
Next, once you have your "TARGET INCOME" and "TAX" sorted, you'll need to be honest and write down exactly how many hours a month you work. For now, you can give a rough estimate.. meaning... if you spend 2 hours one day and 10 hours on another day, simply find the average which comes to roughly 6 hours a day. Try to be as precise as you can so that you don't end up short changing yourself. We'll call this one "HOURS WORKED PER DAY".
Next step, multiply "HOURS WORKED PER DAY" by the no. of days you actually work (exclude days you don't work, e.g. weekends, holidays etc). We'll call this one "TOTAL HOURS WORKED" -- you need this to calculate your hourly rate.
Ok, the final step now...
Simply divide "TARGET INCOME" + "TAX" by "TOTAL HOURS WORKED" to get your current hourly rate and how much you're currently worth per hour.
This amount will go up the less no. of hours you work and the higher your financial responsibilities become, in other words as you get promoted, and work less, you still end up getting paid more... that's living the life.
So, let's take an example...
I work 10.5 hours a day, 30 days in the month, so my "TOTAL HOURS WORKED" is approx 315. My "TARGET INCOME" is $700 a month since I don't have to much in terms of financial responsibilities. Tax where I live is about 15% for that income range. So my TAX will be $105. Therefore my "GROSS TARGET INCOME" will be $805. My hourly rate equals...
my "GROSS TARGET INCOME" divided by my "TOTAL HOURS WORKED"...
Which is $805/315 = $2.50 an hour! Yuck... you can see how accurate that number is... I work slave hours breaking my back 10+ hours everyday of the month, I have little in terms of financial burden since I don't have a mortgage etc, so my hourly rate reflects my current status in life too...
What that tells me is not just how much I should charge but exactly what I'm worth, which at the moment is way below minimum wage!
So, you see why you need to know this figure, it will tell you what you need to cut back on and how high you need to aim in your personal life, goals and ambitions too. If for example I owned my own home, that hourly rate would be higher, even though I spend more, I will feel better as an entrepreneur since I don't get paid slave wages for all my hard work and input... you get the idea.
So, what's YOUR worth? Figure it out, in coming posts I will tell you how to use this to determine your best possible price point for virtually ANYTHING you're selling whether it's your own product or affiliate sites or adsense.
I know I said this was easy so I hope I didn't confuse you:confused:
Cheers,
Kunle Olomofe
PS: Attached to this post is a free Excel worksheet that will crunch those numbers for you automatically so all you do is simply punch them in
Have you been grappling with how much your time is really worth as an entrepreneur?
As an entrepreneur, it is often hard to come up with that figure. You work your own hours, you cover your own expenses and can cut back or scale up when you see fit, you assume the loses and write them off if and when you feel the need to, and you may be one of those who does not pay income tax as yet so no one is really breathing down your neck to tell them how much you make per month as an individual. Well, all that is about to change.
Here's a simple way (formula) for you to find out how much your time is worth right now so that whether you sell tangible or intangible goods, you can price yourself to profit rather than lose money when you make sales or worse chase of your ideal and targeted prospects with a price that is too high or too low.
It's a very simple formula and if you've never used it before you'll wonder why not. Here it is in plain geekless speak...
First off, determine exactly how much you are responsible for contributing to your monthly upkeep. By this I mean, if you pay rent and don't live alone, how much of the rent are you meant to come up with, if you split groceries with a room mate or your spouse, how much are you expected to deliver monthly?
Include in that all other expenses, personal and communal i.e. if you live with one or more people... We'll call this amount "TARGET INCOME"
Once you have that total amount, now you know how much your total Net Salary needs to be for you to be taken seriously come bill payment time.
Next step, find out how much someone in your income bracket and with your "job description" is charged every month as taxes, you will have to add this amount to your "TARGET INCOME" so that come tax time you will not have to dip into your TARGET INCOME to pay your taxes and thus fall short--this is often the case with the employed in the society, they get paid a good wage but get taxed down to their drawers and often end up poor as church mice.
You as an entrepreneur can somewhat control that since you write your own checks, all you do is find out what your "TARGET INCOME" needs to be for your stage in life, then find out what the government is taxing people who earn in that range and ADD on the tax rather than subtract it--you're cheating but you're not cheating anyone out of their rightful taxes you're simply making sure you still have enough to take care of your responsibilities.
We'll call this one "GROSS TARGET INCOME"
Next, once you have your "TARGET INCOME" and "TAX" sorted, you'll need to be honest and write down exactly how many hours a month you work. For now, you can give a rough estimate.. meaning... if you spend 2 hours one day and 10 hours on another day, simply find the average which comes to roughly 6 hours a day. Try to be as precise as you can so that you don't end up short changing yourself. We'll call this one "HOURS WORKED PER DAY".
Next step, multiply "HOURS WORKED PER DAY" by the no. of days you actually work (exclude days you don't work, e.g. weekends, holidays etc). We'll call this one "TOTAL HOURS WORKED" -- you need this to calculate your hourly rate.
Ok, the final step now...
Simply divide "TARGET INCOME" + "TAX" by "TOTAL HOURS WORKED" to get your current hourly rate and how much you're currently worth per hour.
This amount will go up the less no. of hours you work and the higher your financial responsibilities become, in other words as you get promoted, and work less, you still end up getting paid more... that's living the life.
So, let's take an example...
I work 10.5 hours a day, 30 days in the month, so my "TOTAL HOURS WORKED" is approx 315. My "TARGET INCOME" is $700 a month since I don't have to much in terms of financial responsibilities. Tax where I live is about 15% for that income range. So my TAX will be $105. Therefore my "GROSS TARGET INCOME" will be $805. My hourly rate equals...
my "GROSS TARGET INCOME" divided by my "TOTAL HOURS WORKED"...
Which is $805/315 = $2.50 an hour! Yuck... you can see how accurate that number is... I work slave hours breaking my back 10+ hours everyday of the month, I have little in terms of financial burden since I don't have a mortgage etc, so my hourly rate reflects my current status in life too...
What that tells me is not just how much I should charge but exactly what I'm worth, which at the moment is way below minimum wage!
So, you see why you need to know this figure, it will tell you what you need to cut back on and how high you need to aim in your personal life, goals and ambitions too. If for example I owned my own home, that hourly rate would be higher, even though I spend more, I will feel better as an entrepreneur since I don't get paid slave wages for all my hard work and input... you get the idea.
So, what's YOUR worth? Figure it out, in coming posts I will tell you how to use this to determine your best possible price point for virtually ANYTHING you're selling whether it's your own product or affiliate sites or adsense.
I know I said this was easy so I hope I didn't confuse you:confused:
Cheers,
Kunle Olomofe
PS: Attached to this post is a free Excel worksheet that will crunch those numbers for you automatically so all you do is simply punch them in