For many trades business owners, the question of what they’re genuinely worth can often be overshadowed by the day-to-day demands of the job. However, regularly assessing your hourly rate is crucial to ensure you’re competitive in your market and fairly compensated for your expertise and labour. This blog aims to help you critically examine your hourly rates, posing essential questions about your earnings and work hours to uncover discrepancies and provide a foundation for strategic adjustments.
Why Assess Your Hourly Rate?
Assessing your hourly rate is more than understanding what you earn per hour. It’s about recognizing the value of your work and the skills you offer and ensuring that your business operations are sustainable and profitable. Many tradespeople undervalue their services due to a lack of market knowledge or fear of losing business to lower-priced competitors. Yet, charging too little can lead to work overload and business burnout, making it unsustainable in the long run.
Key Questions to Consider
To start evaluating your hourly rate, reflect on these critical questions:
What is my current hourly rate?
Determine how much you currently charge per hour and consider how this rate was established. Is it based on industry standards, competitor prices, or the quality and demand of your work?
How many billable hours do I work in a typical week?
Consider the number of hours you spend doing billable work versus administrative tasks or travel. This will help you understand if you’re efficiently converting your time into income.
What did I earn last month, and how many hours did I work (including non-billable)?
This calculation will give you a clearer picture of your effective hourly rate, helping you to see if there is a significant difference between your supposed rate and your actual earnings.
Are my skills and experience being adequately compensated?
Compare your rates and experience with others in the industry. Are you charging enough for your level of expertise?
Steps to Adjust Your Hourly Rate
Once you’ve deeply dived into these questions, adjustments are necessary. Here’s how you can strategically change your rates:
1. Calculate Your Desired Hourly Rate
Factor in all your operational costs, desired salary, and the quality of service you provide. Remember to include non-billable hours in your calculations to get a realistic rate that reflects all your work time.
2. Communicate Changes Effectively
If a rate increase is warranted, communicate this change to your clients well. Explain the reasons behind the rise, focusing on the quality and reliability of your service. This transparency helps maintain trust and understanding with your clients.
3. Regularly Review Your Pricing
The market changes, new skills are acquired, and your business grows. Regularly reviewing and adjusting your rates is necessary to keep up with these changes and ensure your compensation reflects your current value.
Conclusion
Determining and adjusting your hourly rate isn’t just about increasing your earnings—it’s about respecting your professional worth and ensuring the sustainability of your business. By assessing your rate thoroughly, you position your business for financial health and continued success in a competitive industry. Remember, you deserve to be compensated fairly for your skills, time, and effort.
