On pricing, or better yet, knowing your worth

Something you need to understand very well is what you can actually make in business (& what it costs you to be in business, but thats a different post.)

I learnt this way back when I started and it helps me make decisions every day.

Now, I will put an asterix on this, when you start out in business you do EVERYTHING because you don't know what you can afford to not DO or outsource. You aren't confident about your worth or where your next business is coming from. Thats ok, its normal, but as you grow start to think about what you're really worth.

• In my business its very easy to work out an average income per "deal", say $2400
• I know, because I have tracked it, that it takes 10 hours work per "deal" to complete
• I also know my costs very well, it costs me $4500/month to run my business.
• I know how many hours I work in an average month, and therefore its a simple matter to divide my costs per month by my hours worked and come at a "cost per hour", and, multiplying this by 10 hours gives me a "cost per deal"
• The difference is my profit.

And again, dividing this by the hours I work comes back to an hourly rate that I 'could' value myself by.


But I don't. I'm worth more than that. For clarity sake lets call this a "profit per hour" or a pay rate.


Another number I understand is my average monthly income, the revenue I generate every month in the hours I work.

I consider this my "worth", because thats exactly what I can generate per hour.

It gives me another perspective on my costs.

If I tell you my aim for this year is to generate $300 an hour (my aim for next year is to profit $300 an hour) and I am not too far off it, then you will understand how I value myself.

If I can generate $300 an hour, would I hesitate to outsource (or insource, I don't mind hiring permanent staff but for me outsourcing works best right now) a task that I don't love, that doesn't generate income, for, say $55 an hour?

What about something I need to pay $100 and hour for?

My accountant is $220 an hour, and although he has a skill set I don't have so I HAVE to pay him to do that work, I still would. It's still value. Because if I COULD muddle through it I am sure in the hour I could have paid him $220 I could have generated $300, and, bloody likely it would have taken me four to his one. So his $880 or my $1200?

The answer is obviously no, no I would not hesitate. Not when I am confident I could get the $300/hour work to do.

If you took the tasks you really excel at, that make you stand out, that make you money. If you focused on only these - what could you possibly generate?

If you had more hours free because you're no longer wasting time doing $25/hour tasks - how much more could you generate? How much could you raise your average monthly income? Or what could you do with your time that you would enjoy more?

If I asked you this question, would you tell me your hourly rate? Or would you understand you're worth so much more than that? Its funny how it changes your perspective. The $11 I pay to have my groceries delivered means to me it now feels ridiculous to even think about heading to a grocery store.