Understanding Your Money
Let’s look at a very difficult item – making money. You may not think this is difficult, but to many women the whole idea of really making money may be lost in the end.
Deciding How Much to Charge for Services
I’ve heard women say, “I make money, but why is it that I still can’t pay myself a decent salary?” At one time, I said it too. I knew that my rates were not right, but I didn’t know what to do to fix them. I also had to get past the negative idea that I was not worth my hourly rate. I doubted that people would pay me the price that I knew I deserved.
What Are You Selling?
The first thing is to determine that you have something of real value to offer.
- Are you an expert?
- Are you professionally trained?
- Are you producing a quality product?
- Are your services of significant quality?
If you answer “yes” to these questions, then your business has value, and you should be paid accordingly.
Are You A Workaholic?
The second thing is to determine how many hours you want to work. Many of us put in 50 – 70 hours a week. Most of us can’t do this for long before we are burnt out and start delivering lower quality goods. For this exercise, we will use a 40 hour work week and 50 weeks a year (you need a vacation). When you do the math, that makes 2,000 hours of workable time. Reality says that only about 60% of our time is in the production of real work, so this lowers our hours to 1,200. This will be the number that is realistic and will be used in determining our hourly rate.
How Much For Overhead and Profit?
The third thing is to determine all of your Administration time & dollars, Business Development time & dollars, all Overhead costs, and then the amount of profit you want to make. What many business owners do is look at their budget and make sure that they can pay their bills with their income. How about money for a pension? Are you willing to gamble that the business will be your pension? How about a profit for expanding the business? How about bonuses? Have you set aside a fixed salary for you and the other principals in your business? I once worked for a business owner of 18 years that made less per year than I did. We simply did not have enough to pay him. This is a serious red flag in your business and needs immediate attention.
Getting The Number
The last step is to take the total amount that you will need to run your business for one year (a good average for a one-person business with reasonable expenses and a 60K owner salary would be $90,000) and divide it by 1200 hours. This will generate your hourly rate. This is a good estimate, but not a guarantee! If you cannot sell your service for this amount, then your salary will be much less. You must also take into account the going rate in your area for your service. Also consider that a home-based business will cost less in overhead. Taking everything into account, you may have to change your marketing plan to reach those that can afford your service.