Why Your Rates Are Painfully Lower Than They Should Be
When you take on a new project, you take on a very specific per-hour rate - either an agreed upon rate ($40/hr, and I told the client it should take about 10 hours) or a per project rate ($400, but I think it will take 10 hours, so that’s $40/hr). But for far too many freelancers, that rate is never, ever achieved. In fact, most will face the reality that they make far less than their intended rate. Why so? Because a) they fail to estimate the scope of the project correctly, and b) they don’t get honest with how long things really take.
The Accidental Lies We Tell Ourselves
Take web design for an example.
- You think back to the last site you made and think, “Hell, I did that in 10 hours. Easy peasy!”
- You tell Mr. Client it’ll be $400.
- You get to work.
Then reality sets in.
- Mr. Client’s site was a little more complicated than yours was, so it takes longer to code.
- Mr. Client isn’t living in your head like you are, so you have a lot of back and forth email / phone calls / web conferences to get clarity on stuff.
- Your computer keeps crashing for no good reason. It didn’t do that last time.
Suddenly 10 hours comes and goes. So does 15. Soon, your rate-per-hour has taken a huge turn for the worse.
The Easy Way To Make Sure This Never Happens
You want an easy way? Get a magic wand. There is no easy way - delays, setbacks and unforeseen events are just a fact of life. But they don’t have to affect your profits if you learn to become a better estimator of how long things really take.
And the way to figure out how long things really take is to track how long things really take.
That means when you sit down to work on a project, keep a daily log and track how long you expect things to take and how long they really do take. Most people will never do this because it’s (gasp!) work. Then they moan and complain because they are working too hard to make a living. Don’t be one of these people.
Tracking Time Is Your Way To Stress-Free Profits
Keeping a daily log is a magically delicious way to make sure you don’t water down your rates on upcoming projects, because of the power of awareness:
- You promise a project for $400, thinking it should take 10 hours (yay, $40/hr!)
- Harsh reality comes a knockin’; the project takes 15 (and you track this)
- You smack yourself, realizing you only made $27/hr after all.
- Next project comes around - but this time your wiser, wants to make $40/hr self says “That’ll be $600,bub.”
- The project takes 15 hours, though you tried to do it in 10. But you still win!
It’s not always this cut and dry, but the more you track how long things really take, the more you realize that a certain amount of wiggle room has to be factored into all projects. And by tracking your results, that estimate becomes more accurate over time.
Which means you know to adjust your project details/rates so you’re getting the pay you want, and you win. Huzzah.
Now start trackin’, boss. Your rates depend on it.
Dave
(For more rockin’ good tips, head over to Dave’s productivity blog and enjoy.)
12 Rockin' Comments
April 14th, 2008 at 4:43 am
You are right,we should estimate the real working time. In my opinion,if you think a project will take you 3 hours,it will take at least 6 hours in fact. So be honest and smart .
April 14th, 2008 at 6:54 am
Anyone have recommendations of open source time tracking software they have used with good success?
April 14th, 2008 at 7:09 am
Have you checked out Klok? Just started using it last week to test it out.
http://klok.mcgraphix.com/klok/index.htm
April 14th, 2008 at 8:23 am
I’ll admit I’m not doing this on for all my projects, but truthfully I’m less worried about the smaller efforts - I seem to hit the mark for my estimating on those fairly well. But I’m a bit worried that for larger projects (those longer than a week) that my estimating skills may be less precise. Since I charge by the project, that could be dangerous!
So, I’m tracking my time on this one. So far so good. It is painful to do, but I agree that the results will be well worth it. Good tip!
April 14th, 2008 at 10:03 am
Great post, Dave! And couldn’t come at a better time. I’m doing this “keeping track of time” thing for a while now. I was wondering whether I’m the only time obsessed freelancer out there. It’s reassuring to know that keeping track of time is something other freelancers do as well. ;)
At first, I did it only on hourly rate kind of projects, but now I do it all the time and it helps a lot!
@JamieO: You might want to check this: http://rubiqube.com/paymo-free.....-tracking/. Like I said, I started using this app and it’s awesome. It has clients, projects, reports, etc.
April 14th, 2008 at 10:19 am
I’ve definitely been guilty of underpricing myself in the past, but it’s usually because the market “seems” to demand it. Maybe it doesn’t, but I guess you have to try to find out.
April 14th, 2008 at 3:32 pm
I see too many hourly rates set by “what I need to earn”. Tracking the time required to accomplish a project seems to be a better way of setting the rate. I need to be worth what I need to earn.
April 15th, 2008 at 12:32 am
As a consulting ecologist, my problem has always been trying to determine exactly how much time something will take, as most of my projects are completley different (surveys over different areas/terrain etc.
I’ve been using Paymo free for the past 2 months and cant believe its free. I’ve scared myself on how little I have made on some projects, but now, at least I know.
BTW, I asked paymo for some tech advice, not expecting a prompt answere being a freebe, but recieved a response within 12 hours (I live in Australia, hence way different time zones)- amazing.
my business costings and plannigs are now incorporating my new information and existing clients are not balking at the increase in quoting as I can now back up with data.
Cheers from sunny West Oz.
April 15th, 2008 at 10:44 pm
Here’s another drain on your time and which lowers your hourly or project rate: procrastination. The more you procrastinate on the next unpleasant task in a project, the longer it drags out. You’re preventing yourself from completing more projects in a year (to pick an arbitrary amount of time) which means you are earning less money.
Not good!
April 21st, 2008 at 2:52 am
Nice post Dave. I started to ensure that I keep track of all my work times now so that after a project is completed I can go back and look over it and make sure I charged the right amount.
I use http://www.slimtimer.com, which is a simple pop-up screen that requires you to start and stop time. Very easy to use.
Trackbacks
Share your thoughts, leave a comment!