How To Charge For Your Time
If you want to start working for yourself and become financially independent, one of the first things you will want to do is figure out how to charge for your time.
There are a lot of talented, young Belizeans who have developed skills that they can use to make themselves a decent, if not great, living. However, after travelling all over Belize and talking to many young Belizeans, I found that many of them simply do not know how to charge for their time.
Here is the very easy formula to figure out how to charge for your time:
Monthly expenses / hours = break even rate X 3 = billable rate.
Let me elaborate.
Monthly expenses: you will want to figure out what is your monthly expenses.
Example: $100 phone bill, $150 electricity bill, $50 water bill, $200 loan payment, $400 food bill. Once you have these numbers, add them up.
Hours: you will then need to figure out how many hours per month you will want to work.
I break in down in weeks. For example, you may want to work only 30 hours per week, that comes up to 120 hours per month. Note: How many hours per month you decide to work is entirely up to you.
Break even rate: You will now divide your monthly total expenses by the amount of hours you want to work; in this case, $900 / 120 hours per month = $7.5 per hour is your break even rate. That means, you will have to work 120 hours each month and charge $7.50 per hour to break even, or in other words, make enough money to cover your monthly expenses, and left with zero dollars.
Billable rate: It is standard to multiply your break even rate by 3 to get your billable rate, or, a rate that you are actually paying your expenses and then left with a profit. So you will want multiply $7.50 X 3 = $22.50.
Now lets see the formula in action: $900 / 120 hours per month = $7.50 X 3 = $22.50 billable rate.
Now, imagine a client hires you to write a business plan; you can use this formula to come up with a project price. If you are skilled at writing business plans, and from your evaluation you conclude that a particular business plan will take you a total of 8 hours to draft, then you can send an estimate to the client for $180 for that project.
There are other factors that comes in to play for each project and type of business, however, this formula, on how to charge for your time, will give you a great idea on how to start using your unique skills, charging the right rate for your time, and start becoming financially independent.
Last but not least, make sure you study your market. If you are building websites and your billable rate comes up to significantly higher than what the market can support, then it is wise that you adjust your rate to match what the market can support. Example: if a 5 page website averages around $500, you do not want to charge $1,500 based on your calculations, you will want to charge around the same price as what other competitors are charging. Always focus on increasing the value of your service or product.
If you have any questions at all, or if you would like for me to help you grow your business, please contact me at email@example.com or call 501-610-1733.
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