May 8, 2019

Hourly Rate Calculators

Have you ever seen one of those online hourly rate calculators? I have sort of a love/hate relationship with them.

On the one hand, they propagate the collective hallucination that billing by the hour is a reasonable way to charge for professional services. I hate this.

On the other hand, they do an amazing job revealing that hourly billing is nuts. I love this ;-)

Whatever I may think about them, these hourly rate calculators won’t go away any time soon because they make for great SEO. And I guess that’s fine, but the fundamental problem with them is that they all start with a false premise, which is to answer some form of this question:

“Name your desired annual salary”

This is asinine. You can’t start by picking your desired annual income. I hate to break it to you, but... the universe doesn’t owe you a high-paying salary for engaging in your favorite activities.

No, your prices should be based on the value of your contribution to your client’s desired business outcome. This allows you to unlock real profits because your income is disconnected from the finite number of hours in the day.

Value-based pricing is one very effective approach to increasing your profits, particularly if you are used to quoting custom projects for clients. But value-based pricing is not the ONLY way to increase profits. There are all sorts of ways to package your expertise so that you are not trading time for money.