By October 13, 2011 16 Comments Read More →

Think In Terms of an Hourly Rate

How To Make More Money

“Money often costs too much.” — Ralph Waldo Emerson

You can make more money, flow more value, and expand yourself.  It all starts with a simple question:

How much is an hour of your time worth?

One of the best ways to change your game is to change the value you put on an hour of your time. Why? Because it helps you focus and make trade-offs in how you spend your time. If you make $5 an hour, chances are that the activities that would make you $50 an hour are very different. In fact, it might not just be a different skill set … it’s a different mindset, and a different set of expectations. It’s also a different set of jobs and experiences, and a different life style. If you want to make $50 an hour, then you do less of the $5 an hour things, and start doing more of the $50 an hour things.

Don’t get hung up on the money part.  Instead, use your hourly rate as a gauge and a yardstick to grow your capabilities and prioritize your time.  Also, use it to improve your efficiency and effectiveness, while driving from your life style, and finding creative ways to spend more time doing what you love.  And, always remember that you climb better ladders if you stay true to you.

How Much is Your Hour Worth?

How much are you selling your time for?  If you’re paid by the hour, you already know how much you are selling your time for. But that doesn’t mean that’s how much your time is worth. My first surprise was many moons ago during my early consulting days, when I found out I was being billed out at $100 an hour. I remember I wasn’t being paid that, but I was surprised that somebody thought my time was worth $100. Then I found out others were earning more, but working less … Hmmm, I thought to myself, “I’m doing something wrong.”

A friend of mine taught me a quick trick for figuring out how much your hourly rate is. He said, if you’re on salary, simply chop off the thousands and divide it in half. For example, if you make $20,000 per year, then, take 20 and divide it in half, so you are paid $10 per hour. If you make $40,000 per year, then take $40 and divide it in half, so you are paid, $20 an hour. If you make $100,000 per year, then take $100 and divide it in half, so you are paid $50 an hour. It’s not an exact science, but it gives you a working ballpark.

Is Your Time Worth More

I remember one of my friends asking the question, should Bill Gates pick up a penny? … or a dime? The default response is, “Of course” or “Why not?” Aside from the philosophical perspective, the point behind the question was that Bill Gates’ time is worth so much, that it costs him more to pick up a penny then spend that same time thinking up the next best thing. In other words, it’s a distraction, and it undermines spending his time on more valuable things.

How many metaphorical pennies do you pick up each day?

Asking the Question, Starts the Process

Simply by asking the question, what are $50 an hour activities? What are $100 an hour activities? What are $10,000 an hour activities, you start to see patterns and opportunities. For example, some coaches like Tony Robbins have charged $10,000 an hour. You can ask yourself, what sort of problems did he help solve that were worth that much?

If you start looking around, you can find models and examples of people that make more per hour. You can look at career paths and possibilities and you can see how much different types of jobs make per hour. More importantly, you can see the limits and limitations. For example, would it be realistic to expect to make $10,000 an hour waiting tables? If so, then where? If not, then what are some other paths, if making $10,000 an hour is an important benchmark for you.

The point is to cast a wide net and explore the paths, know the baseline, and know the ceilings of what’s possible. This will help you adjust your own expectations, as well as pick better paths.

It’s a Minimum, Not a Maximum

The point is to expand yourself and put more value on your time. After all, some say, time is all we’ve got. Just because you set your eyes on $100 per hour, means you should limit yourself to $100 per hour. In fact, you may find it easier to make $100 per hour, by going for $10,000 per hour. In the words of Bruce Lee, “Aim past your target.”

To do this, it means getting clarity on a few things. What is the market value of XYZ? For example, how much are people paying to do XYZ today? It means figuring out what skills you already have are undervalued, or you are not making the most from them. It also means getting clarity on what skills or experience you need to grow to move up the stack. The beauty is that models are everywhere, once you start looking for them.

In order to play this game though, it does mean you have to experiment and it does mean you have to play in arenas where you aren’t limited in what you can make. For example, as an entrepreneur or an Infopreneur in today’s world, you can test creating amazing products that change the world, while you’re changing your game. As a consultant or freelancer, you can test upping the ante on people paying a premium for your service or time. You can test splitting your offerings, by having a lower priced offer for one market, and a premium offer for another. Regardless, the point is to make it possible to explore what’s possible.

The Difference that Makes the Difference

The difference between the $10 an hour or the $100 an hour or the $10,000 an hour, might not be what you expect. While part of it might be skills and experience, a bigger part of it may in fact be how you build perception. At the end of the day, it’s not the intrinsic value, but the “perceived value” that people will pay for. And perception is reality. That’s why brand is such an extreme way to change the game. If two things are created equal, the better brand wins.

If you keep brand simple and think in terms of the three, five, or seven attributes that you want to be about (quality, value, beauty, etc.) then you can bake those into what you do. The other key is to make sure these align with your own values so that you can be authentic and play to your natural strengths. This is a more sustainable way, and by aligning your values, you gain advantage in terms of energy, passion, and ultimately personal power.

Don’t be surprised if when you start looking through this lens that you see many people working less, but making more. All your preconceptions about how much something should be worth, may be vastly different than what the market pays, or the perceptions that people have built. Don’t be blinded by your own assumptions, and don’t be blind-sided by how the market works. Especially don’t be surprised that by simply changing your arena or your container can suddenly boost your hourly rate. For example, your skill might be worth $10 in one part of the country, but $100 in another. The reverse is also true. In fact, the Web makes this especially interesting because it’s a world wide market. What you do for $100 an hour, somebody in the world might do for $10. But remember too, it’s not just the intrinsic value, it’s the market value, the perception, and the brand.

So the keys that make the difference, aside from changing your own mindset, beliefs, and assumptions, and expanding your skills and experience, is testing arenas, and testing possibilities, and exploring the models that are already out there, while coming up with some models of your own.

Getting Started with Your New Hourly Rate

A great place to start is to start from where you already are. To do so, try this …

  1. Figure out your current hourly rate. If you’re already paid by the hour, then good, you already know this number. If you’re paid by salary, then chop off the thousands, and divide it in two. For example, $60,000 is $30 an hour.
  2. Identify what you want your hourly rate to be.
  3. Explore the options and possibilities of how you can pull that off. Find some examples to model from and test. When you get stuck find mentors and people in your life that can help you see what you don’t see.

Good luck and may your skills be with you.

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Photo by TheRitters.

16 Comments on "Think In Terms of an Hourly Rate"

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  1. Curiosity – patriciaswisdom.com | October 17, 2011
  1. Dia says:

    Hi JD,

    I like this article and thinking of an hourly rate. One of my favorite ways which I learned from my friend Rob (mind adventure) is to think of each dollar as 10,000 dollars. Once we change our perception and change the way we view money, then money will follow. I’m still not a master at this, but with constant practice, I will get there. ;) Thanks for sharing

  2. JD says:

    @ Dia — Thank you. I’m a believer that you get what you expect, and the first trick is always to change your expectations.

  3. Like you said JD, it takes a big shift in our mindset to be able to earn more than what are currently getting paid.

    Most jobs not only take our time but our energy as well. Its almost impossible to really determine what our time and energy is really worth.

    For me I would place it $10,000 an hour,I just need to be able to find people or organizations that are willing to fork over that kind of dough. :)

  4. Patricia says:

    I believe I am worth $1,000 an hour for my skill, wisdom, expertise.

    I chose to stop doing jobs for pennies when I saw that I needed to work full time on rearing my children and keeping everyone healthy and strong.

    Yes, I still continued to clean houses, do parttime teaching gigs, and counseling; selling vitamins and green products…because my children needed music and art lessons and singing in Japan experiences besides just love, health, and security. I taught them how to communicate and think.

    I still own $250K for my youngest child’s surgeries, have been dropped from health ins. and Will receive a whooping $235 a month for SS when I retire.

    So I am still out there working, whatever I can get…at 4 years of blogging I started out making hundreds of dollars a month reviewing books – now I make about $15 because so many will do it for free.

    I am finding it hard to re-invent myself…I just keep at it…this feels like wishful thinking and a healthier persons(male?)game plan?

    I enjoyed reading it…still feels a bit discouraging.

  5. Hi J.D.,

    You are so right that mindset is everything, not only for our incomes but what’s even valuable in the first place. Collectively, we get trained to value some things that seem to have little value and then devalue other things that have lots of value.

    For example, why do farmers growing pesticide-free food have to work so hard just to get by? I’d much rather see them get paid more than someone hawking pills that most folks really don’t even need.

    So many ills are caused by unsafe food. Kinda like investing in yourself earlier on to avoid the later on disaster.

    I’m a graphic designer in addition to my writing classes/life shops. What I found was that the more I got clear on my own Fearless Why (what I call our life themes), the more folks wanted to work with me.

    G.

  6. JD says:

    @ Justin — Interestingly, I think I saw Tony Robbins bill himselt out at $10,000 an hour a while back. I learned from a friend behind the scenes the types and scope of problems that Tony was able to address and it was absolutely amazing.

    Scope and impact are a big deal. I find that’s true at work too. As I’ve moved up the food chain, I’ve had to consistently expand my scope and impact.

    I think one of the best ways to amplify is to productize yourself. It’s how you find the economies of scale.

    @ Patricia — I think some lawyers that make partner bill themselves for $1,000+ an hour, and I heard the trade-offs to get their are painful.

    The beauty is that to make $1,000 an hour, rather than selling our time, we can productize it.

    The gap between what we think we are worth, and what the market will pay, is usually addressable. I find one of the best ways to address the gap is to find a few examples of people doing what you want to be doing, and making what you want to be making. It then becomes either an example to model from, or, the flip side, an example of what not to do, if you want to change the game.

    @ Giulietta — When you really, really know your “why”, you are unstoppable. It’s so powerful when we put our time, energy, and resources to make our mission happen. It’s amazing what we can do, when no matter how we get knocked down, we get back up and fight or find our way forward. That’s the power of the human spirit, and the magic of our creativity. So few problems really withstand that kind of sustained dedication.

    The light side of the force is a very powerful one, and nothing moves mountains like mindsets and action.

  7. Jimmy says:

    Hi JD,

    Very thought provoking post that question how we view and value ourselves.

    One of my biggest problem is undervaluing myself. I believe I am worth more out there then many others earning more than me. Just an example, i have been lecturing part time with this school who always try to pay me peanuts. Yet, I get the best pass rates, best feedback and provide the most interesting lessons compared to other associate lecturers in the school. Sometimes, I do not know why I have to take their jobs. But I think the problems are two fold. I have shown myself to be desperate and that I have not made myself known beyond them. Got to work on these two aspects.

    If they think they can get better outcomes from others, so be it. I will be glad to make way. I think I will just go knocking on more doors and present my portfolio and wait for the deals to come. My mindset is good but exposure takes time.

  8. JD says:

    @ Jimmy — Your reflection and self-awareness will serve you well.

    What I found to be incredibly helpful is to know the average pay based on jobs. (Glassdoor.com helps with this.) I also find it helpful to know the market and what’s really in demand.

    Some jobs have a way higher intrinsic value than market value, and vice-versa.

  9. HI Jd,

    Some years ago I have been experimenting with this idea of hourly Rate idea, based on what I have read in a personal development book. I had calculated my net daily rate and I did put the double of that in my wallet. I did not touch it, or use it and kept it there all the time, just to get used to the idea of having that kind of money on daily basis.

    After a year I did not see any difference, so I stopped the experiment.

    What I learnt was that the increasing my hourly rate would mean a drastic change of looking the way of making money and that mind set is only a part of it.

    Your suggestion to find a role model with the same hourly rate sounds a great idea. But how can I find anybody with the hourly rate I desire? Not many people are open with their real hour rates.

    Thanks for sharing this suggestion!

  10. JD says:

    @ Marc — You’re right, it’s more than mindset. I find that it’s strategies and tactics, as well as experimenting and testing.

    I’m glad you asked about how to figure out the hourly rates. You actually have access to this, but indirectly:
    1. Glassdoor.com — People share salaries and roles.
    2. Monster.com or any career site — You can see the ranges of salaries by industry, discipline, role, and location.
    3. Pay a popular accountant for an hour of their time. Ask them to map out for you the types of ranges by profession.

    That third option is amazing because you get the knowledge from somebody who does many people’s taxes, and gets the balcony view. The other advantage is you can have them make it relevant to you, by focusing on people with similar skills or passion or values.

    It’s obvious once you think about it, but accountants are gate-keepers to some of the most revealing information about how to make a living, and what the true trade-offs are.

  11. riza says:

    I love this post. It throws the important questions (most often overlooked). It also makes one re-think of the actual value we put on ourselves and the activities we do on routine.

    I particularly like the portion about “The Difference that makes the difference”… Perception is reality – at least for the people concerned who are viewing/seeing YOU or what you represent. Such is the nature of things, I guess. Before others know how good one thing really is, their perception affects the decision if they will even try that thing out or not.

    I feel i have undervalued myself for the most part and have picked up metaphorical pennies along the way. I have always wondered how to bridge what i’m truly worth and what am actually doing and getting paid for.

    The above points have given me an alternative way of perceiving the equation. Looking forward to putting this in practice successfully.
    Thanks JD!

  12. I remember during my first year as a self-employed person, my take-home was sad. If I recall correctly, I actually paid money out of my own pocket. The work cost me (time, especially). But then something happened. My partner and I got a wonderful client. We took a risk and asked for more than we ever thought they would pay. And they didn’t blink. Later, I did it again with some personal freelance work. Same thing happened.

    That experience taught me an amazing lesson about my own value. Even when the economy dipped, I still had a baseline… sometimes I adjusted my rates, but I factored in things like, will I enjoy this work? Will it energize or drain me?

    Amazing stuff… when we value our work and command more.

  13. JD says:

    @ Riza — Lately, I’ve been paying a lot more attention to just how much perception is a reflection of how we think, act, and feel, and we really do get to set the pace.

    The thing that really stands out for me is how Tony Robbins says his defining moment in life was when he decided to raise his standards … he just was not going to live his life the way he had been living. With that single decision and relentless focus, he shaped his destiny and the rest is history … in the making.

    @ Angie — I’ve seen so many people sell themselves short. I think part of what makes putting a value on our time so tough is the strange gap between intrinsic value and market value. Sometimes it’s just outright shocking.

    It’s also a reminder that value is in the eye of the beholder, and that we can really influence the beholder by our own sense of self-worth, even if that means “fake it until we make it” (which is a powerful, self-fulfilling prophecy.)

    Great move putting more value on your work, and commanding more.

  14. Hilary says:

    Hi JD .. the thing is to do our best + a little more and always give more than others expect .. the challenge as Jimmy shows is that move to earn and be valued for that learnt expertise .. where we’re not just doing sufficient to get by … as Angie learnt.

    Cheers Hilary

  15. Jeremy says:

    Thanks for the article JD. Looking through the lens of what the value of activities that we do is such a game changer. Spending time where it matters and letting other things fall away is key to making significant change. I am going to share this with my team today so that we can focus on the items that have the most value.

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