One of the toughest questions faced by small business owners is, “how much should I charge?” or “What should my hourly rate be?” Whether you’re offering consulting, construction or really any business that renders a service for a fee, this calculator should help you to get started with determining your hourly rate.
Thereafter, you will need to determine if your rate is market related by investigating what your competitors are charging. If you’re lucky, you might even need to consider bumping your rates up a bit. Alternatively, you may find that your hourly rate is out of sync with what others are offering. In that case, you need to work on cutting your expenses to make your business more competitive.
We took the following factors into consideration in our costing:
- Slow Months – Every industry will have months where your business is bursting at the seams with work and other months that are quiet. These months vary so we added a section for you to select the slow months. The system then considers the worst case scenario for these months ie. You have no work at all. It adds the cost to stay in business per month and divides it to determine how much should be put away each month to cover these shortfalls. This is your retained earnings. Personally we’ve found that retained earnings reduces stress dramatically. There’s no scrambling at the end of the month or fighting with customers for payment. You have money kept aside to cover you in these situations.
- Bonuses – Many companies offer a 13th cheque to their employees at the end of the year. We’ve added this feature because many startups forget to factor it in which leaves them scrambling at the end of the year to make up this bonus. Just as we worked with slow months, we divide and add this value per month. This in turn factors into your hourly rate.
- Salaries & Overhead – As far as possible, we included as many salary and overhead options that we could think of. If you have any ideas, please fee free to leave a comment below.
Keep in mind that this costing is only meant to work out your hourly rate and any materials that are needed should be costed separately. We hope that you find this form useful and look forward to your feedback.