What’s Your Hourly Rate?
Here are three bullshit phrases which employers use to politely diminish and disregard the value of your time:
“You’ll gain tons of experience.”
“But it will be great for your portfolio.”
“Sorry, we don’t have the budget for that.”
Especially when you’re starting out, these premises can obscure your market value and ultimately stifle wealth creation. Therefore it’s important to know what an hour of your time is worth – not what your employer says it’s worth, but what it’s actually worth. Depending on the service, I charge anywhere between $500-$1500 for an hour of my time. But in 2007, that number was $0. And I vividly recall the day when that changed. I was a naive 20 year-old sitting in the Tim Hortons at the corner of Bloor & St. George with my friend & mentor, Rumeet Billan (President, Jobs In Education). She asked me for a simple project estimate. “I don’t know,” I nervously chuckled. “You’re a friend – I’m happy to do it for free.” At that point in my career, I didn’t even have the vocabulary to articulate the concept of market value. I was slinging graphic design, web design, and creative multimedia services for little-to-no money; I felt grateful for the opportunity to do client work and stack my portfolio. I recall Rumeet smirking, clasping her tea with both hands, and looking me dead in the eye. She sternly uttered the words that inspired me to stop being your friendly neighbourhood designer:
“Hamza, you have to stop working for free.”
It’s Just Business
Rumeet outlined three reasons why I should be paid for my time and effort:
- Supply & Demand: Whether I chose to call myself one or not, I was a professional. And I was in demand – I had skills which the market needed as well as a body of work to justify that my time was worth paying a little extra for. With my capacity and process for producing work, I could meet market demand with my supply.
- Opportunity Cost: Rumeet wasn’t the only person asking me for my services back then. I had dozens of clients paying me different rates for my time. That’s when Rumeet introduced me to the concept of opportunity cost. “How much would it cost to jump ahead of the line of free clients, and become your priority?” Rumeet asked. And so I had to evaluate the cost of turning down other opportunities to take on Rumeet’s project.
- Compensation: At the end of the day, no matter how passionate you are about your work, it’s taxing. Work takes a physical, mental, emotional (and even financial) toll. I needed to get financially compensated for the stress that I was incurring on behalf of my clients.
Like I did back in 2007, many people have trouble asking for what they’re worth, let alone articulating the need for compensation in the first place. In my short career, I’ve learned that your hourly rate ultimately hinges on one thing: value. You are creating value for someone else. Your contributions to their endeavour will generate value above and beyond what they’re willing to compensate you for.
Affirm (And Re-Affirm) Your Hourly Rate
We all have the same 168 hours a week. How you use that 168 hours to generate capacity (education, skills, connections, insights, etc.) and contribute your time, energy and attention to a project to help it increase its value, is how you arrive at quotes for retainers, salaries, bonuses, etc. Here’s six ways to establish (and boost) your hourly rate:
- Determine Your Market Value. What was most recent high paying gig? Use that as your starting point.
- Be Upfront With Costs. Come out swinging. Use phrases such as “My speaking fee is…” or “I typically charge…” Hell, once I even used the phrase, “I gotta eat, bruh.”
- Build Your Portfolio. If you don’t tell your story, someone else will. If you don’t have the resources to create a personal site that can host your work, there are multiple portfolio sites to consider depending on which industry you’re in. I’ve used Dribbble, Krop, Behance, etc. Let your work do the talking.
- Get Endorsements. Jeff Bezos famously said, “A brand is what other people say about you when you’re not in the room.” Ask for recommendations and endorsements from people you’ve worked with to help validate what you bring to the table.
- Cash Favours. Think of all the pro bono work you’ve done in the past. It’s time to pay the piper. Somebody knows somebody that wants/needs what you have to offer. The least they can do is make a warm introduction.
- Test Your Price. If you’re working a day job, apply for other jobs to validate your current salary. If you’re freelancing, list your services on Elance, Upwork or Freelancer. See what the market is willing to pay for your time.
Increase Your Hourly Rate
Once you know your hourly rate, it’s time to start levelling up. One of my first posts for 99U was on how to raise your hourly rate (politely). I quoted Ramit Sethi’s three-step formula:
- Let the client know what you’ve already done for them.
- Let the client know you are going to be adding more value.
- Explain why the rate is going up.
Don’t Stop The Hustle
Things quickly changed after my meeting with Rumeet at Tim Hortons back 2007. I had to justify quitting my retail job and offsetting my income with freelance work. So I started at minimum wage and topped it off to $15/hour. At first, asking for money was a clumsy process. In fact, I lost $2500 with my first contract because of how little I asked for considering the scope of the project. But I learned quickly. I gradually scaled my hourly rate until I couldn’t go any further without the help of a team. Today, Splash Effect has its pricing down to a science. We know exactly how much an hour of our time is worth, and don’t charge anything below that. When it comes to the hustle, some things never change. Whether you’re debating the price of redesigning a simple WordPress blog in 2007 or overhauling an entire institution’s web presence in 2015, you’ve got to think in terms of value. If your employer or client truly values the work they’re doing, then they should be willing to pay you a fair price to help make their ideas a reality.
This post was originally published on LinkedIn.