Small business: Always set a good hourly rate

30-10-2013 | Dojo |

I was actually sure today I’ll have a relaxed day (and won’t bother you with an article), but I remembered something that’s been on my mind for quite a while: how do we know if we’re doing well in our business or freelancing career: does it matter how much we make each month or is our hourly rate relevant too?

Here are 2 examples:

As I already told you, my first career was as a radio DJ. I started out right after finishing high-school, worked through college and until 4 years ago, when the station closed. I had a pretty decent salary, even if, from time to time, I’d be inclined to envy some of my friends who had bigger wages.

That was until we discussed openly about our jobs, how much we earn and if we’re actually happy or miserable with our jobs. I wasn’t miserable, being a radio DJ and running your own show every day is a fantastic job, especially if you like this kind of work. I had to work for 4 hours/day from Monday to Friday, then 3 and 2 hours (as the show got smaller, so that we have more shows in the daily schedule). No, my pay WAS NOT affected, so I’d earn the same money for doing half the job.

Won’t go into the details of how cool this job is, let’s say it’s really something relaxing which doesn’t feel like a job anyway.


My friends earned more than I did. Some would earn double my salary, which kinda made me think they really had better jobs. Sure, some hated the corporate work, but let’s pretend their job was as stress-free and fascinating as mine and just talk numbers. So .. they earned double my salary and worked for 8-9 hours/day. While they were still working at their job, I was at home, or taking web design clients (was already running my small web design business). At the end of the month, ignoring my side jobs, they’d get double the money I made, but worked .. double the time I did.

At that moment, thinking about it, I realized that we do have THE SAME hourly rate, which didn’t make my job worse, it was as good as theirs, even if my pay, at the end of the month, wasn’t the same. I had enough time to earn some extra money, rest, enjoy spending time with my family etc.

In the final year of working at the radio station, my salary seemed even better, if we think that I’d work for 2 hours/day for the same pay. My hour was DOUBLE theirs. Who had a better pay now?

I never seriously thought about this, until I started my freelancing career and had to set my hourly rate. From the get go I wanted to earn MORE/hour than I did before (what’s the use of running a business, if you earn as much/little as an employee), so I charged accordingly. It’s the moment I thought even more about this, especially since my hourly rate for the first 2-3 months was small (just so that I could get some work to pay off my debt and bills). For 2-3 months I’d be working 14 hours/day, happy to be able to earn some money to get of the mess I dug myself into. But this wasn’t a viable lifetime plan, I’d be working myself into an early grave.

So, instead of celebrating the fact I was earning quite well (as much as my prior job at least), I started tweaking my hourly rate, since TIME IS LIMITED. I couldn’t work more hours, unless there was a miraculous way to stretch a day for 72 hours. Until I could find this, the next logical step was for me to increase my hourly rates (and the project rates based on how much I knew I’d work for a web design job), so that I can earn the same money for less work or, even better, more money for less work.

This is how I was able to make 4-5 times more than my previous salary and still have time for my family and myself.

Another example:

I was talking with some people from my webmaster forum about various ways they earn money online: click on banners, read emails, fill in surveys, do ‘microjobs’ etc. Some were very happy to report they made 50-100/month from this, which wasn’t bad in itself. I’ve always thought that the extra buck you earn is actually EXTRA, but the next step is to think: am I trading my time for a tiny pay?

Earning 100 bucks/month is very cool, but it’s a difference between earning it for 5-10 hours of work or 100 hours of work. If you almost work 2 weeks straight for the money (in my country at least the ‘regular’ workweek is 40 hours), maybe you need to consider a change of plan: even working on a low paying job in the city could get you 3-4 times his hourly rate (not to mention the benefits the employer will pay for you). At the end of the day, trading your time for money is good (and I applaud everyone who considers doing something extra), but make sure you’re not trading your LIMITED time for too little.

How come most people fail to see this?

Maybe it’s because many of us have worked ‘normal’ jobs at least a part of our lives or have families who haven’t done any freelancing work. Usually a normal job means having to work for a set number of hours each month (160 to be more exact in my country) for a salary. Since the majority of people are employed in a similar manner, the only thing that sets them apart is how much they earn. For many Romanians who work for 160 hours/month, a bigger salary is better than a smaller one.

As soon as we start working as freelancers, we’re not working for a set amount of time anymore, we’re working as long as we have work coming our way. So earning 100 dollars in 5 hours of work is a different situation from earning it in 50.

I’m not trying to make fun of the people who do such small jobs, am not trying to tell you it’s wrong. What I’m trying to do, is change your mind on how you see your extra-income. You have made the first step: got some ways to earn a buck, the next one is to MAXIMIZE how much you earn from the same amount of work.

There are people who’ll tell me ‘but, instead of watching TV, if you earn few bucks, it’s OK’. Sure it’s OK, but how about you skipped TV (you are already doing it, right) and got to earn more for your time? No matter how relaxing the job is, at the end of the day you’re ‘paying’ with the most expensive ‘currency’ there is: your time. There’s no do-over, there’s no extra-hours you gain each day just to replace the time you didn’t spend at a higher pay.

The best way to grow your home based business or your freelancing career is to make sure your hours are worth more. Who knows, with some good planning and gaining many clients/experience, you’ll be able to work less and still earn a decent income or even more. My earnings now are way bigger than before and, instead of working for 14 hours a day, I work for few hours, then enjoy time with my family. My lifelong dream is not to work 200 hour months, my dream is to earn a decent living while also having enough hours in a day to enjoy the life I’m creating for me and my loved ones.

So, how much emphasis do you put on the hourly rates? Do you care about how much your time costs or are you just pleased to earn some ‘dough’?

Recent Comments

  • October 31, 2013 at 7:07 am

    In Romania, people are not used with the hourly rate system and only see the paycheck at the end of the month. This naturally makes them be happy with a bigger salary, even though their hourly rate is lower than others that earn less but also work significantly less. In the end, it’s a matter of making enough to live and finding the perfect hourly rate for you. Because if you set it to $50, you might only get 1 hour per month. $30 would be a lot lower, but you could get 5 hours per month (I am using strange numbers for the sake of an example). In the end, the $30 per hour would be best for you.

    I got to a point where I agree that free time to spend with your family, relax and make sure you’re sane in this crazy world is priceless, but in the end we have to pay the bills too. So my idea is to have a realistic minimum rate set and find the perfect work time/free time balance.

  • November 1, 2013 at 2:27 am

    Great post Dojo. I always say that if I could work an unlimited number of hours I could charge next to nothing. Sadly (or happily), there is a limit to the number of hours I can work. This means charging a decent rate. Maybe this all starts with valuing our own work and time more.

    • http://Dojo

      November 2, 2013 at 12:31 pm

      This is probably one of the best things a freelancer / small business owner (and even someone who’s employed) can learn: VALUE your time. Sure, money is good to have, but you need to trade as little time as possible for the money and not waste weeks for something that should take you few hours.

  • November 1, 2013 at 10:59 am

    Before I went freelancing, I had a regular job hence I can relate to the part why most people fail to see the importance of setting an hourly rate accordingly. I didn’t know how to go about it but luckily, a friend, who was well into freelancing way ahead of me, mentored me.

    • http://Dojo

      November 2, 2013 at 12:33 pm

      You were lucky to have someone to guide you. I made a lot of mistakes in all these years of business and had to learn the stuff the ‘hard’ way 🙂

  • November 25, 2013 at 1:08 am

    […] being asked to put into (no one is giving free cash, right?). Study your duties and understand your hourly rate. If you’re getting a better deal taking on a part time job (even if not deliriously […]

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