Dec. 15, 2020

How to Calculate Your Hourly Rate as an Entrepreneur

How to Calculate Your Hourly Rate as an Entrepreneur

Do you know how much an hour of your time is worth as an entrepreneur? Today on The Systems Made Simple™ Podcast, Courtney Elmer is going to show you a new strategy for time management.


Knowing how to calculate your hourly rate as an entrepreneur can feel tricky.

But knowing how to calculate your hourly rate as an entrepreneur is critical if you're looking to make more money with less effort.

Inside this episode, I'll walk you through a simple, step-by-step process so you can learn how to calculate your hourly rate and know where to spend time in your business to make more money (and kiss those useless strategies for time management goodbye!)

WHEN YOU FINISH LISTENING TO TODAY'S EPISODE, YOU'LL DISCOVER:

  • Why the strategies for time management you're currently using aren't working

  • What it's costing you in your business when you don't how to calculate your hourly rate

  • The simple two step process for learning how to calculate your hourly rate so you can understand the value of your time on a much deeper level

  • How to recognize what strategies for time management are a waste of your time, so you know exactly what activities to spend your time on and generate more revenue

If this episode inspires you, leave a review and share your biggest takeaway with me. And while you've got your phone out, make sure to follow me on Instagram @thecourtneyelmer for more quick tips on how to streamline your business systems and spend more time in your zone of genius.

 

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Transcript

You’re listening to the Systems Made Simple™ podcast, Episode #48! Today we’re talking about how to calculate your hourly rate so you can say goodbye to useless strategies for time management and know where to spend your time to make more money. That’s next, so stay tuned! 

[INTRO TRACK]

Today my goal is to help you learn how to calculate your hourly rate so you can understand the value of your time on a much deeper level. We're going way beyond strategies for time management; you’re going to walk away knowing exactly where to spend your time on in your business and recognize what activities are a waste of your time. 

The problem that I see many entrepreneurs experiencing is that they don't know where to spend their time. But the root of the problem is because you've never learned how to calculate your hourly rate. You might look to strategies for time management to solve this problem, and it's ironic, but part of the problem with implementing strategies for time management is because you can't find the time to implement them! 

You might think you need better strategies for time management to get more done, but what you need is to learn how to calculate hourly rate as an entrepreneur so you can figure out how much it's costing you to spend your time on tasks that don't make you any money. Most entrepreneurs don't value their time like they should. This is also why the strategies for time management they're using aren't working.

Heck, I was frustrated too that the strategies for time management I was using weren't working, until I learned first and foremost how to calculate my hourly rate and know what an hour of my time was worth. That's when I was able to stop undervaluing my time, and start owning my worth.

When you DON’T learn how to calculate your hourly rate, you'll continue feeling stuck and overwhelmed and the strategies for time management you try won't work. Part of becoming a Visionary Leader means knowing how to calculate your hourly rate so you know how much an hour of your time is worth, owning it, and value your time. No strategies for time management will help you learn how to do this. That's why today I’m going to show you how to calculate your hourly rate so that you know where to spend your time in your business. It's a counterintuitive strategy for time management that actually works. You'll see why in a second.

Grab a pen and a blank sheet of paper. If you’re driving, you can do this math in your head, or you can keep listening to learn what the exercise is and come back to this when you can jot down a few numbers. I'm about to teach you how to calculate your hourly rate. I want you to jot down or think about the first thing that pops into your head in answer to this question: How much is an hour of your time worth? If you don't know the answer, then how much would you like an hour of your time to be worth?

If you don't know how much an hour of your time is worth, chances are you're going to continue to struggle to have more time and make more money. You'll look to strategies for time management when really you need to look to how to calculate your hourly rate and stand by it. One of the biggest mistakes you can make as an entrepreneur is to spend your time on tasks worth LESS than your hourly rate, because that causes you to burn your energy and not make any money. If everything is urgent and important, nothing is. In the early years of my business, I had no clue how to calculate my hourly rate to know how much an hour of my time was worth. I thought I was doing a poor job implementing strategies for time management, when really I was giving my time away willy-nilly, thinking that the more time I spent growing my business the more my business would grow. But that's a backwards way of thinking! Those who make the mistake of thinking this way stay stuck, because if you're growing your business based on a limited resource — time — what do you think you're going to get in your business? Limited results.

This is why knowing how to calculate your hourly rate is key to understanding the value of your time. Once you understand the value of your time, you'll be so crystal clear on where to spend it, you won't have a need for useless strategies for time management. Knowing how to calculate your hourly rate is key to knowing exactly where to invest your time in order to reap the most benefit in terms of revenue and profit in your business.

Now that you've got a number in mind, I want you to calculate that number out by the average number of hours in a work-week. For most people that's around 40 hours, which would equal the number 2080 (40 week x 52 weeks = 2080). Visionary Leaders work less than that, but let’s do the math based on averages here. So go ahead and multiply the number that you wrote down by the number 2080. What answer do you get? This is step one of knowing how to calculate your hourly rate and learning why the strategies for time management you're using aren't working.

Let's say by means of an example you wrote down $50 dollars an hour and you multiply that by 2080, the number you'll get is $104,000. For most the math doesn't add up. When you calculate that out by the number of hours you're able to work in a year without overworking and exhausting yourself, at an average of 40 hours a week, the answer is $104,000. When you sit down and you run these numbers, maybe it'll finally click and you’ll recognize, “Wait a second. I've been trying to generate a quarter of a million dollars in revenue in my business, (or more!) but I'm only valuing my time at $50 an hour.”

The question isn’t how much is your time worth? It's, how do you expect to grow a multiple six-figure, much less a seven-figure business if you're only valuing your time at that low rate? This is part of the reason why knowing how to calculate your hourly rate is so key, and why the strategies for time management you're using haven't been effective!

Now let's reverse-engineer this process. What would you like your annual revenue to be for your business by the end of next year? Pick a number. This is step two in knowing how to calculate your hourly rate and understanding what strategies for time management are actually worth your time.

Let's say by means of an example that you chose $250,000. I want you to divide that number by 2080. You're going to come up with a number that's right around $240 dollars an hour. Which means that in order to generate that goal in revenue saying that your goal is $250,000, and it might be more in which case your hourly rate will be more, then you have to be committed to spending your time on tasks worth $240 an hour or more in your business.

Yet how much of your time day to day is spent on tasks that someone on Fiverr can help you do for $10 an hour, $20 an hour? The math just doesn't add up. You've got to know how to calculate your hourly rate. Maybe you want that hourly rate to be higher, by all means! It should be at a minimum — minimum! — for entrepreneurs, especially Visionary Leaders , minimum $250 an hour. Then commit to only spending your time on tasks worth that amount or more. This might sound like a backwards strategy for time management, but think about it: if you know how to calculate your hourly rate, and start valuing your time at that rate, how much more time will that give you simply by focusing your time and attention on tasks only worth that amount or more?

Here's where people tell me, “But Courtney, I'm worried if I start outsourcing more, it won't get done right." Or, "I don't have time to train somebody, it's faster/cheaper to do it myself." Or, "I don’t have the money to outsource as much as I want to.”

All of those excuses and reasons for why you wouldn't want to outsource are going to come up. Of course you don’t have money to outsource, if you’re undervaluing your time. Is not outsourcing a viable strategy for time management in the long run?

When you get what I'm teaching you here about how to calculate your hourly rate and why most strategies for time management don't work, you'll discover it’s not cheaper to do it yourself, because it's costing you more time. It's costing you time that you could be out there in front of your audience making sales, speaking from stage, connecting with potential customers on sales calls, launching your programs, and bringing in income. This is also why the strategies for time management you're currently using aren't working, because your focus is on the wrong things. 

Where are you choosing to spend the majority of your time in your business right now? Is it on tasks that make you money? If you continue to undervalue your time, you're going to have a very hard time hitting those revenue goals in your business that you want to hit. This is why knowing how to calculate your hourly rate is so important. Plus when you know the value of an hour of your time, you'll naturally find more effective strategies for time management, because you will see your time differently.

I’m shooting straight with you here, because this is a cold hard truth that many entrepreneurs fail to realize before it's too late. Best case scenario they either stay stuck, burning themselves out. Worst case scenario, they close the door to their dream altogether and go back and get a job. As the CEO of your business, you've got to know how to calculate your hourly rate. It's a mindset shift more than anything. It’s about looking at your business from a new lens, one where you budget your time, not your money.

It’s not about looking at the money in your business right now and saying you can’t afford to hire someone because you don’t have $20 an hour to pay. It’s about recognizing how much an hour of your time is worth and how much it's costing you not to hire someone.

Let's look at what it's costing you to waste your time on ineffective strategies for time management because you aren't valuing your time like you should be. Let's say an hour of your time is worth $250 as you just calculated using that example and if you choose to spend your time doing a task that you can hire someone to do for $10 an hour. In that time you choose to do it yourself, that task just cost you $240. Is the lightbulb going off in your brain right now? I hope so. Knowing how to calculate your hourly rate is so important if you want to scale your business.

If we can agree, let’s continue. It's one thing to know how to calculate your hourly rate. It's another thing to own it, protect it, honor it, and be committed to it. It’s about making the conscious choice not to do $10 - $20 hr tasks in your business out of habit, or fear. It's about choosing to value your time, every time. Learning how to value your time IS the ultimate strategy for time management, and it starts with learning how to calculate your hourly rate.

My hourly rate is well above $250/hr. I know how much it's costing me to spend my time sitting on Canva putting together a PDF or a lead magnet. I know that time blocking or the Pomodoro Technique or other strategies for time management aren't going to be effective, because they won't help me get more done and make more money, if it's costing me money to spend that time doing XYZ.

When you value your time more than you value money you will find yourself having plenty of both. Learning how to value your time is one of the most fundamental strategies for time management — and no one is teaching you this. When you know how to calculate your hourly rate, you can start to practice time budgeting in your business over money budgeting. Successful entrepreneurs don't look at how much a project will cost them. They look at how much it will cost them based on their time if they choose to do that project themselves. This is another reason why knowing how to calculate your hourly rate is so critical to your success.

If you walk away with nothing else, I want you to start recognizing how much it's costing you to do things yourself. Don't expect to build a six or seven-figure business if you spend the majority of your day focusing on $10 an hour tasks that you can outsource. That, my friend, is not a good strategy for time management.

There are lots of resources where you can find people who do excellent work at a fair rate. If you're still saying I can't afford to hire someone, and you’re hearing my voice right now, the reason is because you're choosing to spend your time right now on tasks that are less than what your hourly rate should be, so it’s costing you both time and money. 

It's a tough pill for some people to swallow. I get that. My hope is that by knowing how to calculate your hourly rate, you'll start to see your time differently and value it more, and that you'll realize that strategies for time management will only go so far when the problem is that you don't value your time to begin with.

Everything you look at from here forward is through that lens: “My time is worth this much, and in order to make the revenue that I want to make in my business, I need to protect my time as if I was paying someone else that rate.” 

Think about if you were paying someone else $250 an hour or more to do a project for you. Would you want them to be wasting that time doing busywork or multitasking? That puts things into perspective quickly, doesn't it? So now that you know how to calculate your hourly rate, and you're committed to taking ownership of your time, I have a challenge for you. But most people will listen to this, intend to do it, and then put it on the back burner and forget about it. Don’t be like most people. Intending to do things isn’t the same as doing them. If you want to finally experience what it’s like to notice a change for the better, you have to do the work. 

Now that you learned how to calculate your hourly rate, I want you to identify three tasks that you can outsource to someone today. Just three things. Believe it or not, outsourcing is a pretty darn effective strategy for time management. Whether that's an assistant, a VA, or someone on Fiverr.com or Upwork.com. (Those are two great resources, you can use to find someone to do those tasks for you so that you can protect and value your time.)

If you enjoyed what we talked about on the show today, make sure you’re subscribed on Apple so you can be first to listen to more episodes like these that are designed to help you become the Visionary leader your business needs to succeed.

If you’ve been listening for a while, you know that here at the EffortLESS Life®, we believe that you don't have to work as hard as you think you do in order to succeed as an entrepreneur. If you’re ready to learn how to simplify your workflows and get the right systems and support in place so you can spend more time in your zone of genius and be seen as the true Visionary Leader that you are, make sure you follow us on Instagram @theeffortlesslife.co to get free, easy-to-implement tools to do exactly that. 

Next week’s episode is about helping you increase your energy as an entrepreneur and take better care of the human behind your business, so stay tuned! Until then, go YOUR EffortLESS Life®.