Everyone wants to make more money, right?
The reasons people want to make more money are as diverse as the number of people on the planet.
The challenge is … How do you make sure you’re getting what you’re worth?
And the sub-question is … How do you correctly estimate your time so that you get what you are worth?
This is especially true for freelancers and people who work and the gig economy.
This post is designed to help you understand how to value your time.
As my friend Maria Duron pointed out in this article How to Increase Your Freelancer Rates You should look for ways to steadily increase your wage rate. As the author noted, in order to secure the work, you usually start at a lower price. Once you’ve secured the job, it becomes a challenge to make sure the people who are paying for your product or service realize that you are worth more AND are willing to pay more. This is not an easy task and quite a balancing act.
What is your time worth?
This is an age-old question that is always asked of you and the people you pay for. You may not say it quite as explicitly. But the fact is, you need to provide value greater than what you paid for.
Only in rare cases is this not true. Think about celebrity endorsements.
Obviously, celebrity endorsements work. However, they are not always easy to measure and for this reason alone they are questionable in terms of their effectiveness. Regardless, it is up to the person funding the effort to decide if that person / brand is worth the money they are spending on them. That is your verdict, your decision, and ultimately your money.
But back in the real world … unless you happen to be a celebrity … we need to figure out how to cherish our time the old-fashioned way.
The rule of 10X
A simple rule of thumb is to use the 10X rule. That said, every product or service you offer should be worth ten times the price of your services. Does this work in all situations? Absolutely not. There are scenarios where luxury goods, celebrities, and lifestyle brands can charge significantly more than the cost of the product or service. If your product or service fits into this category … good for you.
For the rest of us with more traditional products and services … How do you decide what to charge?
There are so many ways to determine what to charge, how many days there are in the week (and maybe a few more). But let’s start with a few simple examples:
- Check with others
- Do a calculation
The simplest model in two questions
- What is your biggest pain today
- What would it be worth to you if I could solve this?
Let’s expand on the points above:
- Check with others – Ask your co-workers, ask others in business or social groups you belong to, and catch up on industry trends. Some providers pay more / others less, depending on many factors: where in the world you are; what level of experience you have; and sometimes based on the time of year (seasonality, criticality, etc.). Ask targeted but open-ended questions to ensure you get the breadth and depth of the areas available.
- Ask the seller / ask the person who pays – They often have price lists and payment guidelines. This is great and a good place to start if they share it with you. You will often be surprised at the value that companies place on certain service offerings. So much so that you can tweak your listings to align your skills with specific pricing / valuation models. But the most important point here is … ASK! Just ask them what they would normally pay for a service like yours.
reservation: Be ready for a shrug … this is especially true when you have a new or unique service. Then you have to rely on the other facts and your gut instinct (see the 2 simple questions)
- Critical – How important and / or how critical is the need? When there is a dire need to contain a public relations fiasco or other burning issue, you may want to increase your rate. Realize that this could be a short-lived review and be open about your expectations and schedules.
reservation: This shouldn’t apply to life or death, but we’ve all seen scenarios where money was made from tragedy.
- Do a calculation – this is a little more complex, but it shows you where you really stand at the end of each payment period. This is comparable to traditional cost accounting. Where to calculate the real cost. This is where you roll up all of your real costs and then put a multiplier on it to adjust to your needs. You can work this forward or backward. I think going backwards is a good way to start.
For example, knowing your cost is $ 2000 a month, you can work backwards to determine how many hours or projects (if you place a firm bid) it will take you to make your nut. Where is your $ 2000 nut. Then you can add a multiplier to determine the price you want to get in the end. Notice that I said “end up” … you may need to increase that number to get discounts.
These are pretty common and simple examples. When you have a preferred method of determining your cost base.
That’s it. You can apply these techniques to your own business or to your role in a larger company. When you better understand the cost model for getting projects done on time and on budget, you will become more valuable and stand out in your career. Whether you are using this on a large scale for large construction projects or for a local PR campaign, the model works the same way you scale it up or down.
Try it. Let me know in the comments how these work for you. Please also share your ideas here so that we can all learn.