A good tip for working out your hourly rate

Written by  //  January 20, 2015  //  Daily Juice  //  No comments

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If you sell stuff you make (like dresses, cakes or jewellery) or you sell your time (like a copywriter, music teacher or bookkeeper) you’ll probably want to use your ‘hourly rate’ as a starting point for pricing your product or service. But how do you work out what hourly rate to use?! Here’s a GOOD tip! Working out your hourly rate

Hourly rate to use to cost work

What’s my hourly rate?

Mostly, when we start the process of working out what price we should charge for our stuff, we begin with working out what it costs us to do it.  Let’s say I make jam. As a starting point for working out my price I’d probably work out my cost like this:

Cost = Material cost (sugar, berries etc) + Labour cost (the number of hours it takes to make the jam X my hourly rate).

The material cost and number of hours would be pretty easy to calculate, but what would I pick for my hourly rate?!

Mostly people pick for the hourly rate they’d like to earn as their “hourly rate”So if I wanted to earn $25 an hour I’d pick that.

But that’s really NOT the best thing to do. Here’s why! Working out your hourly rate

The story of Jane’s Jams!

Jane makes jams and she’d like to earn $25 an hour from her work.

Every week Jane spends 20 hours making jam so she includes 20X25=$500 a week for her labour in her pricing. Her customers are happy bunnies and they pay this so Jane earns $500 a week. Hurrah!

But Jane is always working SO hard on her business. She’s selling at fetes, selling to local shops, marketing on Facebook, doing her bookkeeping, chatting to customers, taking down order details, ordering fruit, designing labels, keeping her website up to date, researching new recipes. Oh My! She’s busy!

Because Jane is so busy she starts to keep a timesheet to see how many hours she’s working and what she’s working on . After a few weeks she looks at the results and is shocked to see that she’s actually working over 40 hours a week! Not 20 at all! Half her time is spent on making Jam but the other half is on everything else!

Jane wanted to earn $25 an hour for her work. But she’s NOT! She’s earning $500 a week for 40 hours work, not 20. So she’s not earning $25 an hour: she’s earning $12:50 an hour.

Gah! Not really what she wanted!

A GOOD tip!

We ALL spend a masses of time on stuff that’s not our core ‘thing’ so if we want to actually earn $x an hour for ALL the work we do – we need to make the hourly rate we use in the costing of our ‘core thing’ higher. YES?!

Here’s how it works for Jane:

As Jane wants to earn $25 an hour for ALL the hours she works she’ll want to earn $25×40=$1000 a week. As she only spends 20 hours jam making she’ll need to use an hourly rate of 1000/20= $50 per hour in her cost calculation. In other words she’ll need to double her Jam hourly rate!

Are you still with me?!

Most of us spend only about half our time actually making/doing our product – the rest of our time is marketing, selling and admin! Crackers but TRUE! So if we want to earn $x an hour for ALL the work we do we’ll need to double the hourly rate we use in our cost calculations! Right?!

If you want to get a bit more precise with how many hours YOU are actually spending on marketing, selling and admin you could keep a timesheet to work it out properly. Then you’ll know REALLY how much you need to change the hourly rate in your cost calculation to cover all your other work! (Keeping a timesheet is covered in the Warm Up work for the Healthy Income Program – it’s open now so if you want to use the proper “Timesheet” recipe you can, just reserve your spot HERE and you’ll get access to it!)

But I can’t include an hourly rate that HIGH!

Oh but you CAN! You CAN!

Pricing is totally more complicated than just working out what it costs you to MAKE or DO your stuff. And it involves things like looking at what your customer is prepared to pay and what competitors are charging. But you DO want to start by looking at what it costs YOU to make/do so you can be sure that you’re at least covering your costs.

And you need to value your time. All of it!

YOU valuing what YOU do is the first step in helping customers to value what you do! Don’t sell yourself short!

hourly rate


We cover LOTS of pricing stuff in the Healthy Income Program, and tips to help YOU value what you do (which I know is tricky!) PLUS -if you think you can’t price any higher listen to the pricing stories in this video I did recently. Forward to about 18:30 mins and the pricing tips and stories are there!


If you don’t want to be disappointed with your earnings this year – think carefully about the hourly rate you use in your costing calculation. And if in doubt, DOUBLE it!

PS If you are serious about making a Healthy Income from your solo, boutique, homebased, homemade or other small business you might like ourHealthy Income Program! We start it again on 7 September. That’s next MONDAY! You can join us HERE!♥


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