What should you charge for your services? It's a question that many small business owners, artists, and social enterprises grapple with.

Charging too much can mean you're shutting yourself off from potential clients, while charging too little can lead to you working for very little money.  Is it based on how much experience you have, how long it will take you to do the job, or how big the project is?

How do you come up with a price that accurately reflects the time and value of your work.  Moreover one that will not see you broke!

Whatever the answer, it is important to have an hourly rate in mind.  You may not bill by the hour but having a floor and ceiling limit is a wonderful guide.

In this weeks I Hate Numbers podcast I look at how to calculate an hourly rate for your time.

Listen to find out more

Conclusion and good to know

There is no one-size-fits-all answer to the question of how much you should charge for your time. However, by using the information provided in this podcast and in the FREE online pricing calculator, you can work out a fair rate for your services that will help power your business forward. Thanks for listening

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I Hate Numbers is an easy, humorous but serious read about running a business. It also shows you how to have a financially rewarding relationship with your numbers. Furthermore, my book will help with that battle between the ears, that all business owners experience. If you feel like you could use some help in this area, buy my book and let me show you how to get on track for success.

Not only will you be able to understand your finances better, but you’ll also learn how to take the stress out of money management. Thanks for reading!

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How much should you charge for your time? That's not an unusual, and it's certainly not an uncommon question that I've been asked over the many years that I've been in business. In this week's podcast episode on I Hate Numbers. I'm gonna give you a guidance about how you figure out how much you should be charging for your time.

I'm gonna go through some numbers with you. Yep. Numbers. On a podcast, I'm also gonna share an online calculator, which will take the heavy lifting out of that, and then talk to you about how you use the numbers, the calculations, as a guide to figure out what you should charge your customer. As a brucey bonus,

by the way, this calculation methodology is also a great way for you to connect to your revenue and your costs as well.

You are listening to the I Hate Numbers podcast with Mahmoud Reza, the I Hate Numbers Podcast Mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now. Here's your host, Mahmood Reza.

Hi folks. Welcome to another weekly episode on the I Hate Numbers podcast channel. My name is Mahmood. I'm an accountant and also a business finance coach who's been helping thousands of businesses over the last 27 plus years make more money, save tax, and time, improve their money mindset and their financial awareness, and aspire to have the businesses they enjoy.

What's not to love about that? Let's crack on with a podcast. Now, the idea of how much you should charge your clients, how much you should be charging for your time is a very complex one. And there's a lot of depends in the conversation. There are about 20 plus different pricing methodologies, but for me, before you embark on value pricing, skimm, target pricing, skimming, all those weird and wonderful methodologies, you need to understand

two things. And the calculations we're gonna go through, the methodology we're gonna discuss gives you a good guidance and a good framework to make sure you don't become bankrupt, you don't become poor. It gives you a guidance of how you should go about, come up with a figure. Now this is not a discussion of saying this is the only way that you should approach this, but certainly,

it's a methodology that takes on board the cost of running your business, takes into account what you see as a reasonable level of profitability, a target if you wish, and it's a great guidance to actually, when you have a look at a project, you've got at least a fullback option as to what the minimum you can charge.

And potentially what the maximum can be. Let's crack on. But first of all, this is a pricing methodology that's aimed with three variables. Number one, the time that you have to work on a client's project, on a piece of work that you are delivering. It takes into account numbers i.e. that's costs, brackets, profits, and it also takes into account a framework that you can use to estimate the cost of doing a variety of projects,

however they vary in size and complexity. Now, what I wanted you to imagine, Is this idea, first of all, is that you have a fixed capacity of time. Now, in a typical working week, there are 168 hours. It's impossible for anybody to work those 168 hours unless they're gonna be taking substances, which we wouldn't recommend on the I Hate Numbers Podcast.

So our start point is how much capacity do you have as an individual? And that capacity, that time availability will be based on your personal circumstances, whether you've got a family, whether you've got other things you're doing outside of your business arena. So what is your time capacity? Let's say for an argument's sake, just to make it easier that you are somebody who has 50 hours available to you. Now, that working week could stretch for five days, seven days, two days, it doesn't matter.

You decide your time availability. Now, within that some time is also gonna be spent on doing those necessary support functions in your business. So for example, you will have to be doing marketing, you'll have to be doing client relationship building. You'll have to do that necessary task of administration sending out invoices,

you'll be doing things on your website, you'll be doing a whole host of activities which are not in themselves directly productive, not in themselves generating money, but without doing those tasks, it's gonna be difficult to build your business. So those first two elements of time. Time, capacity and availability, and also the time that you've got spending on backroom office and support functions.

Let's assume in a 50 hour week you have 10 hours that you are gonna be expending on those marketing, administration and support and client relationship building on. You got 40 hours spending delivery work and you've got 10 hours supporting that. Now your numbers may be different. And remember, don't worry too much about the numbers that we're gonna be discussing.

There is a link in the show notes to a powerful online calculator, which lets you punch in those numbers and let the calculator do the heavy work for you. Now the next thing we have to consider is what are the costs in running our business. Now, those costs could be stretching from marketing costs, professional fees.

Don't forget your wonderful accountants. They could be including the cost of website hosting. There could be the cost of you drawing down, paying your staff. And all the rest of it. So what are the annual running costs in your business? Now if we just start with those figures. So we've got 40 hours available to deliver work, to work on client projects, to work on delivering the work to our end client.

Let's assume our anticipated costs for the next 12 months is a core 20,000 pounds. Now, what that gives us over the working year of 50 weeks of working 40 hours per week, that's 2000 hours that we have available. Now, within that timeframe, we've got 20,000 pounds worth of overheads, support costs to consider.

So if we manage to work those 40 hours per week over the next 50 weeks of the year, that's 2000 hours. We've got 20,000 pounds that we've got to recoup as a bare minimum just to keep our head above water, and that's 10 pounds per hour as a bare minimum that we need to charge. Obviously, we want to build a business that's gonna generate profit,

gonna generate value. Otherwise, you're just gonna be forever chasing your tail and you're never gonna reward yourself. You're never gonna generate profit to be able to deliver your why consistently. Let's assume we anticipate, we project, we want a target profit of 20,000 pounds. So that means now we've got to

make sure that for what we are charging out, we're looking to charging out 40,000 pounds. We've got 2000 hours in which to do that, and that means it's 20 pounds an hour is the figure that we're charging for each hour. Now, how do we use this practically? So we've talked about, firstly, how we do the base calculation.

We've got a 20 pound an hour figure. And that means if we see a piece of work and we say to ourselves, this is gonna take us about five hours of time, then we charge a hundred pounds for that. If you want to literally bill your client on an hourly basis, then that 20 pounds an hour is your charge out rate.

Now remember, any additional cost that you might have in terms of finding any materials, any travel costs, charge on top, those figures are not difficult to calculate. Now remember, this is a guide, so that 20 pounds an hour, you may consider that actually that puts you quite low amongst your competitors. You may consider that for where you are in your business cycle, where you are in your level of experience and expertise,

that 20 pounds an hour is just about right, or you may consider that quite high. You are the one who make that decision. And remember, there are other ways to look at pricing in terms of value, but this is not the purpose of this particular podcast. This is saying let's do some basic numbers. So we've got here ourselves a figure that we can use as a guidance to figure out how much to charge.

Now, the beauty of this calculations as follows, if you find that you have less hours, you've got available to work consciously or otherwise. You decide that you've got less working weeks in a year. So I've said 50. You might decide you only wanna work 40 weeks in a year. Your business, your choice, your decision.

Now, if you've only got 40 weeks in a year, 12 weeks is spent on doing other things, maybe with a family taking time out, recharging, regeneration, and you have got 40 hours available. Of which 30 hours is gonna be spent delivering, 10 hours is gonna be spent on support functions, then that gives you 1200 hours worth of time and you've got to recoup that figure.

Again, if we said it was 40,000, that's 40,000 pounds and you've got 1200 hours in which to get that max, that gives you a different hourly rate. Now the beauty about this target figure is, is that we know that if we manage to spend less time on admin, support functions, et cetera, that gives us more times available to charge the client.

And remember, ultimately, the client is the one who's going to be compensating us, paying towards our running costs and giving us profit on top of that. So if we manage to improve the efficiency, we spend less on administration support tasks, whether it's by being more efficient, whether it's by investing in technology more than that in another podcast episode, then we know more time available, which means that we will make more money as a result.

If we know that we can reduce our level of overhead costs or we will increase our profit vigor, then the hourly rate will change. Now, if your head is spring scratching, you're thinking lots of numbers, lots of permutations. Well, that's the beauty of the online calculator. Putting those scenarios in gives us a range and a parameter of hourly rates.

Now, the use of those figures, whether you decide to go and build your client on an hourly basis, is one consideration. There are merits, there are strengths, and there are weaknesses in that as well. Whether you use that as a guidance, when you look at a project, you do an estimation of a piece of work to be done.

Time will come into it. Now, there is a school of thought that says, ignore that reference and you price based on value, the transformation that you'll make in the client's life, the problem that you'll solve. And that's certainly a thing to consider. As a bare reference point, you need to know your minimum figure that you can quote. If you don't have a great deal of work on, your pricing structure may be to go.

You can afford to utilize that unspent capacity. Or you may decide to keep your price buoyant. Whichever way you work it, this hourly rate approach, how much you should charge, makes it more focused and firms up the way you're gonna go about doing this thing. And if you don't factor in making profit into that calculation, then you're just gonna have a time consuming hobby on your hands.

Folks, I hope you found this useful. Let's just round up what we have. Time, availability. Time in terms of supporting the business. The cost and the profit are the four key numbers. Check the show notes, plug 'em into the calculator and see the results that you have in front of you. If you feel you need more support, you like more assistance, then check out the link and the show notes.

Book a time, book a slot. If you found some value from this podcast, I'd love it if you could comment, give it a thumbs up and subscribe, share with those who you feel will benefit. And until next week, folks, happy calculating. We hope you enjoyed this episode and appreciate you taking the time to listen to the show.

We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.