Calculate Your Hourly Rate in Minutes with our 5-Step Formula
Wondering what your time is worth?
Self-employed and struggling to determine your hourly rate, how much is your time really worth? Not knowing the answer to this question can be problematic and cause you to under or overvalue your service.
Everyone wants to feel confident that they earn a fair and equal wage for the work and hours they provide, otherwise you run the risk of losing potential customers to cheaper competition or cutting yourself short when you could be earning more.
Whether it’s your first time determining your hourly rate or it’s time to recalculate, you’re not alone if you find yourself unsure of where to start. Luckily for you this daunting question can be converted into a simple calculation to give you an answer in minutes.
First, you need to establish your target annual earnings, after business costs and outgoings.
Then calculate how many yearly hours you want to do. To do this, think about how many hours you want to do a week and how many weeks you’d like to work out of the year, then times these numbers together.
You then want to find your productivity percentage. Productivity percentage is the amount of your working time that earns you money as often time spent on jobs such as admin don’t get paid for. To find this percentage you need to establish your total weekly or monthly hours and out of these how much are productive. You then divide your productive hours by your total hours and times that by 100 to get your productivity percentage.
Once you have your productivity percentage you then need to calculate how many work hours you’ll fulfil in a year will be productive.
Then divide your target annual earnings by your productive yearly working hours.
The answer to this will be how much your time is worth per hour. That may sound a little confusing so let’s see that in an example.
So, if you wanted an annual income of £100,000 and you wanted to work for 48 weeks out of the year, working 40 hours a week, then you would work a total of 1,920 hours a year.
Then, to calculate your productivity percentage, if your overall monthly hours are 160 and your monthly productivity time is 145, then your productivity percentage is 90.62%. So out of 1,920 hours you want to work a year only 1,740 of those will be productive. This means you’d only be earning £90,624.00 a year (100,000÷1,920×1,740).
Then divide your target annual earnings of 100,000 by your productive yearly hours 1,740. This gives you 57.
So your hourly rate would be £57.
That’s it! This quick and easy-to-use formula gives you your ideal hourly rate that lets you reach your income goals whilst also taking into account the time you spend working that you don’t always get paid for.
Calculate your hourly rate today in minutes and start earning what your work is worth!
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