One of the most dramatic changes that you’ll need to make in your life (and your mindset) as you transition from a more conventional job to growing your own online business is that you need to stop trading hours for dollars. It was true when John first wrote those words way back in 2006, just as much as it is true today. When you trade hours for dollars, as is the case with a typical job, you are taxed the most, you have the fewest tax breaks, and you are inherently limited by the number of hours in the day.
That is absolutely true. This lends itself to a discussion of individual potential and scaling your online business. Just because you could work more hours to earn more dollars doesn’t necessarily mean that you should. You may be better off working fewer hours if this provides for a better overall lifestyle. Even so, your hourly rate still matters… even if no one knows about it but you.
Let me explain.
The Project Rate
When it comes to my freelance writing business, I have several options for how I want to charge for my services. I could charge by the hour, I could charge by the word, I could charge by the article, or I could charge a bundle or project rate. There are options. But when you boil down any of the other alternatives, they all come down to an hourly rate, even if the client never sees it.
If I’m tasked with writing a 100-page ebook, and they’d like to get a rate quote for the whole project, I break it down by how long I think it will take for me to complete it. And, life being what it is, my overly optimistic estimate is not going to be completely accurate — everything always takes longer than you think it will — so you need to factor that into your calculation too. How long will it take for me to conduct the necessary research? How long does it take to write each page? How long will the editing process take?
With my standard hourly rate in mind, complemented by other relevant factors, I can come up with an estimate for the total cost of the ebook. The client may never see the hourly rate or the estimated number of hours; they just see the final number. The same is true for just about anything, from sponsored blog posts to video projects, and anything in between. The hourly rate matters, because I use it as a benchmark for how much my time is worth.
If the potential client is unwilling to pay that amount, or if their budget is substantially different, then we can both choose to go on our separate ways. If I don’t take on this project, I can take on another that does pay at my prescribed rate.
Spend Money to Make Money
This works the other way around too.
There are innumerable tasks that I probably could do myself, but it usually makes better sense to pay someone else to do them. Many beginning entrepreneurs may look at these tasks and say that I could save a lot of money if I just did these things myself. Maybe that’s true. But it’s also true that spending money saves more time, time that I could then utilize to earn even more money.
If I value my professional time at $50 an hour, and I can outsource a task that is repetitive (or one that I’m not very good at doing) at $20 an hour, then on balance, I’m “making” $30 an hour by taking that route instead.
If I didn’t have an hourly rate in mind, I wouldn’t be able to make these sorts of decisions so easily. You have to decide for yourself how much your time is worth to you, whether that’s time spent earning more money or that’s invaluable time spent with loved ones.
Pennies Saved, Hours Spent
Time is something that you’ll never get back, so you may as well spend it in the smartest way you can. And that comes down to knowing your hourly rate.