Hourly Rate

silver-and-gold-coins-128867The common advice about your hourly rate is right: don’t sell yourself short.

First, the labor of your hourly rate is one of your chief sources of revenue. By cutting down your hourly rate, you’re hitting yourself where it hurts.

Second, there’s a lot of truth to “value-based pricing” by which a price revolves around what a customer thinks the product is worth. You don’t have to price that way entirely: you can factor in what you think is reasonable for someone of your abilities with your level of experience relative to your competition, for a particular client. Realize, though, that there’s a point at which you’re priced so low that you appear to be low quality instead of high value at a great price. Right or wrong, people assume high price indicates high value.

Third, you have overhead. It’s easy to put yourself too much into the position of your client, imagining how much they’re paying for a project, and forget that a lot of your hourly rate is going toward taxes, rent, subscription fees, etc.

That said, you can’t just start your business and charge hundreds of dollars an hour. Whatever skills you bring, you need to build your business’ reputation. You can price yourself above your competition, but you probably can’t throw up tent with double your established competitor’s prices.

You’re of course also limited by what people will actually pay. In a big city, demand is high and big businesses may pay top dollar if your skills and services can put them ahead of their competition. In small towns, that’s not often the case.

So don’t sell yourself short, but don’t be blind to your position and what your clients expect of IT services in general.

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