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Pricing in Your Time

Don't Forget the Most Important Factor in Your Craft's Price - Your Time

Pricing: What’s Your Time Worth?

By: Barbara Brabec Few people seem willing to set a price on the worth of their own time, yet everyone in business must do this, and soon. Most people who work at home don't have enough time to begin with. As their home business workload increases, each hour seems more precious and fleeting.

The decision as to what one's time is worth is quite personal. It is influenced by many factors, including one's education or degree of skill, age, professional reputation (if any), amount of salaried job experience, level of confidence, and degree of boldness or nerve. Where a person lives also has much to do with the pricing of a product or service, as does a person's need for money or lack of need for it.

Homemakers-turned-business-owners often feel as though their time has no real value, particularly if they lack salaried job experience. But it is not job experience that determines the worth of one's time in a business, it is what one does with the time that counts. It's what you know, and what you know you are capable of doing.

Don't sell yourself short. Your time is worth as much as anyone else's.

People with full time jobs naturally equate the value of their time to their present salary, while others may decide on an hourly rate by asking themselves what they could earn if they went out and got a job.

This is a good place to start, but Kate Kelly, author of How to Set Your Fees and Get Them, (KateKelly.com) reminds us that self-employed people should multiply the hourly rate they receive in a salaried job by at least 2.5. In her book, she explains:

"Let's suppose that you're making $16,000 per year on staff. That means you earn approximately $308 per week; $62 per day, and $8 per hour. To arrive at a starting figure for your hourly rate once you are self-employed, multiply $8 by 2.5 (some even say by 2.8 or 3). This means that you would use $20 an hour for your initial estimate as to what you might charge. The true reason for the multiple figure is overhead."

I can just hear some product makers complaining, "But I can't charge $20/hour for my time. That would put the price of my products totally out of reason."

If you're making all the products you sell, you may be right. But this only emphasizes the fact that it is difficult, if not impossible, to make a large amount of money when you--the business owner--are also the entire labor force.

In that case, maybe what you ought to do is set several different hourly rates for the various jobs you do; perhaps $20/hour for design time or marketing, and a lower rate for labor (based on whatever you would have to pay to hire a production worker).

Remember that while owners of product businesses can make a profit from the individual items they sell, owners of service businesses must include in their hourly price whatever profit they hope to realize at year's end. In truth, the only product they have to sell is their time and expertise, and it must be valued accordingly.

In this light, then, $20/hour isn't much money at all, especially when one considers what professionals in many fields currently receive.

I think one problem here is that many of us are still living in the past (particularly if we have been out of the job market for some time), before inflation took its toll and dramatically increased the price of everything.

Many professionals who work at home command and get $50-$100 an hour and more for their services, but hourly rates like these are generally based on special skills, knowledge, or years of experience in a particular field.

You may have a long way to go before you reach this point, or you may be there now and just don't know it. One thing is sure: No matter how much an hour we are finally able to get, there will always be someone else who can get more, and all we can do is shake our heads in wonder.

I felt terrific when I was finally able to get $1,000 a day as a speaker . . . until I met a fellow who said he charged $1,000 an hour for his business advice. But as my husband has so often said, "Charging that much--and getting it--are two different things entirely."

Excerpted from HOMEMADE MONEY: Bringing in the Bucks! - A Business Management and Marketing Bible for Home-Business Owners, Self-Employed Individuals, and Web Entrepreneurs Working from Home Base ©2003 by Barbara Brabec.

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