Figuring your hourly rate is actually a simple process. Whether you are going to bill hourly, with a flat fee, or with a monthly retainer, you need to know what your time is worth. *Knowing how much to charge is mostly about understanding what your business goals are.
Step 1 – Business expenses are a part of life
Think it over and jot down your expenses. This may include software subscriptions, office equipment, furniture, utilities, professional memberships, postage and delivery fees, travel expenses, or marketing expenses.
Step 2 – Don’t forget your profit margin
While money earned is generally meant to go into your own pocket, set aside extra money for things like new equipment or professional opportunities. Profits can also help you get through slow billing periods or potential cash flow or collections issues. For our example today, let’s use a 30% profit margin.
Step 3 – How much do you want to make?
Let’s say you want to make $60,000 per year in salary and you’re expecting annual business expenses of $5,000. With a profit margin of 30%, you can bring in another $19,500 (($60,000 + $5,000) x 30% = $19,500).
To calculate your annual cost of doing business, add these numbers together: $60,000 + $5,000 + $19,500 = $84,500. There’s your number. Boom!
Step 4 – How many hours do you want to work?
A year has 260 weekdays. Subtract 10 national holidays in the United States, and the total number of regular workdays is now 250. If you plan to work eight-hour days, multiply 250 X 8. You now have 2,000 potential billable hours. You also need time for vacay and sick time of, for example, 15 working days (120 hours), bringing your total office hours down to 1,880 (2,000 – 120 = 1,880).
Step 5 – Now put it all together
Here’s what you’ve been waiting for! Divide your cost to do business by the number of billable hours you expect for the year. In this case, it will be: $84,500 ÷ 1,880 = $44.94/hour. Round up to the next dollar amount, $45.00/hour.
Remember to compare market rates. Why? Market rates can vary based on where you live and what you do. If your services become high demand, you may be able to bump your rates up. Always work on the value you bring to the table. Continue to educate yourself and learn new platforms and skills.
Once you know your hourly rate, you can present it with confidence.
If you’re a business owner who needs a virtual assistant and want to know what my hourly fee is, contact-me.