May 10, 2019

Hourly Rate Calculators - part 3

Sent by Jonathan Stark on May 10th, 2019

In addition to your desired annual income, some of the more advanced hourly rate calculators ask you to input your expenses. Here’s one that describes itself thusly:

What is the Hourly Rate calculator?—It’s a simple tool that will help you calculate how much you need to charge per hour based on the lifestyle you plan to have and expenses associated with your web design freelancing work.

Let’s ignore the implicit assumption that the universe owes you a salary large enough to support “the lifestyle you plan to have”.

What I want to focus on today is that the “expenses associated with your freelancing work” are included in the rate calculation.

Here’s the thing…

Your expenses have no place in calculating what you’ll charge your clients.

Consider this:

If you moved from NYC to Morehead, Kentucky, your costs would decrease dramatically. Would you cut your hourly rate in half? I don’t think so.

Conversely, would you expect your existing customers to pay you double your hourly rate just because you decided to move from Kentucky to New York? I doubt it.

Including your expenses in any kind of pricing calculation is nonsense. If hourly billers REALLY based their rates on their costs, they would raise and lower their rates every time their rent or taxes or insurance changed.

News flash:

Your clients don’t care what your rent is or how much your laptop cost or what AT&T is charging you every month.

What they do care about is results. If you can deliver big results, they’ll happily write you big checks - no matter where you live.