HOURLY PROFIT: How much to CHARGE CLIENTS HOURLY for your work to make PROFIT (FORMULA)

HOURLY PROFIT: How much to CHARGE CLIENTS HOURLY for your work to make PROFIT (FORMULA)


let me guess you clicked on this video
because you want to know how much money you can charge while working for clients
and I have a good message for you in this video I’m going to tell you how you
can calculate it dear ladies and gents case signing and welcome back to my
channel I’m so grateful that you’re back here again and today we’re going to talk
about how much you should charge your client for your work and that’s quite an
interesting question because it’s not that easy to answer to be honest there
are many different type of businesses and you have to know how much money is
one hour of your work worth but I have a good message for you in this video I’m
going to show you a simple calculation how you can have the first number from
which you can work on and show it on the screen I’m going to them left side and
now we can see what we need to know the hourly rate we can charge our clients at
the beginning we have to know how much money we have to spend in a year called
fixed costs so in this case let’s assume we need 5000 euros bucks Chinese yen
whatever you have Chinese yen would be a little bit less but let’s say Europe
because it’s from Austria so I know how much your is you need 5000 euros in a
year in this 5000 euros you have the costs maybe for an office or maybe for
things you know you have to pay like gas or electricity whatever like the
situation is you have to adapt it to yours and the second point that’s
important is how much money do you want to put into investments for your
business for your company let’s assume in this case that we also want to invest
five thousand euros in this year so to sum it up with five thousand euros of
fixed costs and five thousand euros of investments combined it makes 10
thousand euros we have to calculate that’s the first part coming up to the
second one now we have to know how much hours do we work in our business a year
and let’s assume that everything combined like working for clients doing
accountancy whatever sums up to 1500 hours but here is one important fact we
have to take into consideration just because you work one
500 hours in your business bid NIT business just because you work 1,500
hours upon your business in a year that doesn’t mean that you can sell all that
hours to your client for example you can sell them the work on the set or you can
sell them the work on the website you’re making for them but you cannot sell them
hours you’ve been working on your accountancy because in this case the
client doesn’t paid you have to do it to keep your business sustainable so in
this case we assume that from 1500 hours we are working in a business a year 40
percent are a gleeble eligible my god I’m sorry if this word is not pronounced
right it’s very hard for me as a non-native speaker to say some words
right I hope you understand me we have 40 percent there are 600 hours we can
use towards selling them to clients so the last number we need to set is the
hourly rate we want to earn before taxes in this case let’s say we want to earn
15 bucks an hour before taxes now we have to find all the important numbers
we need to finish the calculation in the first step we need to sum up all the
earnings we have to make to sustain our business to achieve the first step of
the calculation we have to add our fixed costs and our investments let’s call
them costs this out 10000 euro and then we add the hours we work times our
hourly rate to get the earnings some in this case we get the worth of thirty two
thousand five hundred euros and now to know how much we can charge a client for
one hour of our work we take all these earnings and divide them by the hours we
can sell to clients in that case that means thirty two thousand five hundred
euros divided by six hundred and we get an hourly rate of around fifty four
years congratulations now we have the rate we have to charge a client for one
hour of our work with this rate we know that we can pay all our fixed costs we
have enough money for our investments and we know that we will get fifteen
hours before taxes while working towards our business towards our clients
you may ask why should I use this kind of calculation to know the rate which I
should charge a client for and the answer is simple let’s look at an
example if you say that you don’t want to earn 15 euros an hour but 25 you can
simply look at all the factors we have in this calculation and adapt them to
your willings you say you don’t want to up your hourly rate for clients that’s
okay a possibility to achieve 25 euros an hour is to raise the sellable hours
to clients from 600 to 850 in that case we are still able to sell our for 55
euros to our clients but we are not earning 15 but 25 euros an hour before
taxes amazing right our in second example
would be if we know that our fixed costs will increase and we know we want to
invest more in our company but we want to have the same hourly rate for
ourselves we know which numbers we have to adapt to keep everything in place so
the one big thing why I like this calculation so much is because it’s
scalable you need a new employee done you need a new office easily done you
want to know to invest in new gear or new stuff easily done as well that means
you can calculate you can prepare for situations you know how much you have to
work how much you have to earn to keep things at a level a base level where you
know you can sustain with your business but you may ask okay where do I get the
numbers from to start calculating with I would recommend to you to look at your
old situation how much money you have to make to have enough money for the fixed
costs or how much do you want to invest to have enough gear or enough stuff to
keep your business working and then I would look at similar businesses in your
area how much do they charge for an hour of work how much knowledge do they have
how much people are working there and from this information you can make a
base assumption with which numbers you have to work and so quite easily this is
all you need to know but I’ll ask questions on the table and I don’t want
to leave it unspoken off and the question is how can we improve our rate
we charge our clients for our work while knowing that they still will pay it and
this is a topic for a whole another video I will get more
detail in the future but simply said improve your hours worth and you will
earn more or you can charge more for your work
that means learn a new skill or learn things that other competitors don’t know
and so you can charge more money for your work to sum it up this will help
you to keep everything on track if you for example work ten hours on a client’s
project you know that you have to make at least 540 euros while working on this
project to keep everything sustainable if you’re earning more that’s good for
you you’ve earned more than you calculated
but if you got less you know you have to change either the numbers or you have to
talk with the client that it worked more than your calculated for that’s it I
hope I could help you to set the hourly rate you want to charge your clients for
so that’s it I hope I could help you to set your
hourly rate for your clients if you didn’t like the video or you missed
something hit a dislike button tell me in the comments what I could improve to
provide you more information but if you liked the video hit subscribe hit the
like button because YouTube loves it if somebody likes my videos so I can
distribute them further to other people that are interested in these topics and
hit that notification bell so you will get informed when there will be a new
video up so I don’t have much to say besides thanks for your time Kay signing
out you

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About the Author: Oren Garnes

1 Comment

  1. I want to know: What was your way to set a rate you want to charge your clients for and what business type do you have? – Tell me in the comments!

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