What’s Your Worth?
Making the transition from salaried employee to self-employed business owner keeps circling around one question: what do I charge for this?
“Tell me how you came up with your hourly rate.”
The question-statement brought my excited humble-bragging to a stop. It was my final session with my career coach and I had just updated her on my very busy and profitable summer. My news writing job was bringing in all kinds of overtime, and was finally showing signs of slowing down enough to let me work on my business. And I had secured my first client (ironically the same person who suggested I focus on media coaching).
I felt like I was on the brink of launching a successful and fulfilling second act of my career. It was all thanks to the advice of Katherine, the career coach whose services came as part of my severance package. I thought I was effortlessly applying her great advice, except for one key area.
How much are my services worth?
Before starting my business, this was the first question I asked all of my freelance and self-employed friends. They all reacted the same: “oh man, this is something I still struggle with”. But their approaches were all different.
One friend bills per project. He has an annual target for his business, which he divides by the number of projects he expects to work on. He divides the target by the number of projects and bills accordingly. He pays himself a modest salary, enough to cover his expenses, and then factors in other billing costs (ie the salaries of his employees).
Another friend took her salary from her last job, but calculated her real salary, including paid vacation, benefits, and plan pension plan. She offers her services for a year based on this dollar amount, and has alternative pricing based on months. You can use this to also calculate a day rate or hourly salary.
A third friend bases her hourly and day rate on what the competition is offering. She’s in a competitive business so she needs to know what others are offering when she’s negotiating terms with potential clients.
When I started lining up freelance work, I was still coming at it from a salary mindset. My lifestyle and monthly expenses are based on my last job. I was using this to judge what my take-home pay would be. And I thought I was being smart until I told Katherine what I was billing as my hourly rate.
She didn’t miss a beat.
“Oh that’s way too low, you can’t charge that anymore”.
Katherine explained that what I charge is a reflection of how I value myself. I’m a bridge between people who want to be on TV and those who put people on TV. I have the skills and experience to navigate this relationship. I can help people make stronger, more compelling presentations. All of this has value.
I was still trapped in the salary expectations of my last job. But now I’m in a position to set my own expectations. So why am I using someone else’s valuation of my work?
I’m still happy to give the ‘friends and family’ discount to my first client while my business is still in its infancy. But if this career 2.0 is going to stand a chance and take me to retirement, I need to start charging what I’m worth.
