What should my hourly rate be?
by Jonathan Stark
For this week’s installment of my series on value billing, I’d like to ask for your help answering a simple question:
What should my hourly rate be?
As regular readers of my blog know, I don’t actually charge by the hour for project work and I intend to keep it that way. However, I thought it would be interesting to discuss how people think a fair hourly rate should be determined. Rather than approach this in abstract terms, I figured I’d offer myself up as the lab rat. So, without further ado…
The Service
You’ll need some basic information in order to make your calculation. For example, you’ll certainly need to know what service I intend to provide. Here are some quick thoughts on that:
- I’m specifically trying to set an hourly rate for mobile and web application development. This includes all front-end design and development (HTML, CSS, and JavaScript), and back-end coding (Linux, Apache, PHP, MySQL, FileMaker).
- I want to keep things simple by offering a single hourly rate for all aspects of all project for all customers. Whether I’m designing a login screen for an international retailer, or setting up offsite database backups schedules for a “mom and pop” bookstore, my hour will be billed out at the same rate.
- Projects will begin with an estimate. Once approved, I’ll invoice clients every Monday for the hours worked in the preceding 7 days.
- I won’t offer “not to exceed” estimates, so projects could potentially go over budget.
Qualifications
Now that you know what service I’m providing, I think you’ll need to know my level of experience and/or qualifications in order to calculate an appropriate hourly rate. Here are some third-party indicators that I figure are relevant:
- Over the last decade, I have completed successful projects for (and enjoyed repeat business from) large and small organizations in the US and abroad. Recognizable names include Turner Broadcasting, Staples, Schawk, and Loblaws.
- I’m a certified PHP developer and certified FileMaker developer.
- I’ve written two books on mobile and web application development.
- I’m a tech editor for two industry publications.
- I’ve written 20+ magazine articles on web programming and related topics.
- I’ve been invited to speak at leading conferences in the US and abroad (SXSW, Where 2.0, WebDirections London, etc.).
- I’m often interviewed and quoted in the media about mobile and web topics.
Discuss!
On the surface, I’m asking for the answer to what seems like a simple question: How much should I charge for an hour of my time? As I said above, my hidden agenda is to discover how people think a fair hourly rate should be calculated. So, if you have time to share your answer, please explain how you arrived at it.
P.S. I expect that folks might need more information than I have provided here. Please feel free to A) ask for clarifications and additional info, and B) constructively critique the information that I’ve provided.
P.P.S. I realize that a blog post isn’t the greatest medium for a group discussion, but it’s a start. If there is interest, maybe we can get together on a conference call via Skype and post a recording of the conversation next week.
Comments
Well this is just odd and almost impossible for someone else to determine. Since you are asking the question to your readers then it assumes that we would be potential clients. If you were doing freelance work for a specific company full time then the client would probably set your hourly wage close to a hired salary broken into an hourly rate. However, if you are running your own business then you would most likely set the hourly rate.
One way for the client to determine an hourly rate would be to assume that if you were hired full time by the client then you would probably make around 6 figures, give or take 100k salary/year which would be about $50/hour. However, that x seems very low for the experience level you are offering.
Since I am an experienced client and have knowledge of current rates I would probably hire at around $100 to $200 per hour depending on what exactly needed to be done. Maybe, $100/hr for web design and $200/hr for any back end PHP or MySQL work. But web design and back end work could tie into the same production work, so where does it really differentiate? And then if I need a quick fix done right away are you going to be available and then how much would I charge you for that, $50? But your time is most likely very valuable to other clients so you would probably want to charge a little more than your highest hourly rate for urgent support/fixes/training…etc.
Also I have a budget. Maybe I could just divide that by how many hours you think it is going to take to finished the project and that will be your hourly wage? Hmmm….then how much do I set aside for support hours?
I could go on endlessly with how to charge hourly for different things but why? This is just tiring, I give up!!! Just tell me how much you want per hour!?
Thanks for the feedback! It’s nice to have a client point of view.
To summarize, it sounds like there are several factors that you take into consideration when deciding whether or not a consultant’s hourly rate is fair:
- The consultant’s level of experience
- Your knowledge of current rates
- The nature of the work
- Your budget
Did I miss anything?
If I told you how much I wanted per hour, you’d then be able to decide (perhaps based on the factors above) whether or not my rate was fair, right? I’m just asking you to do that calculation in advance of knowing the rate.
I guess we could come at it from the other direction. What would your reactions be if I told you my rate was:
- $9 per hour?
- $90 per hour?
- $900 per hour?
Cheers!
@Stark
- $9 per hour? Are you kidding, what’s the catch?
- $90 per hour? This seems more than reasonable with the experience you have!!!
- $900 per hour? This is outrageous, I think I’ll find someone else!
Your responses are typical of what I’ve experienced with clients. What is interesting about it is that you considered $900/hr to be outrageous without asking how many hours it would take. Why is that?
Sometimes (often) answer is included in the question.
My experience with clients shows a few things:
They do not usually think about this in advance. They just remember what different hourly rates they were charged by different suppliers in the past (i.e. what is usual) and then compare the provided hourly rate to it.
They always try to manage their assets well and they usually think that “well” means get the best possible work for the lowerst possible rate.
The key you are mentioning in all your interviews about value-based billing is that it always produces dissatisfaction, either on the client’s side, or the contractor’s side, or both. I never realized this before listening to the first podcast I heard about value billing. Now it seems so obvious to me that I cannot understand how I could be so blind.
The dissatisfaction essentially comes from the word “fair”. Clients are looking for a fair rate but they do not want just fair results. They want good results. Contractors are trying to offer fair rate but that’s not what they want. They want to do a good work for which they can be proud of and get a good reward, so that they do not have to be in stress whether they will be able to feed their families if they work a few hours less every week.
The best approach I have learned and used up to now (and still using as I cannot simply switch to value billing with all my present customer in one day) is this:
I [as a virtual client] want you to do the job well and I also want you to be here for me after 1, 2, or 5 years to do another job when I need it. So fair is something that’s sufficient for you to:
- survive
- feed your family
- keep learning and maintaining your degree of expertise
- keep liking your work and not havingt o look for a different (better paid) job
Assuming that you can potentially do up to 20 hours of billable work per week and to like your contractor work you need to be paid significantly more than an employee doing the same kind of work 8 hours a day, I would take a usual offered developer/consultant annual salary in your location, multiply it by 2 and divide by 1000 (50 weeks, 20 hours each). So for example, if the usual salary is 80,000, the resulting “fair” rate would be 160.
However, as I mentioned in the start, from my experience clients don’t go so far and deep and usually base their expectations on their previous experience, so anything that’s too far from their experience needs explanation for them to accept it.
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