Do you find yourself wondering “how the heck do I figure out my hourly rate?”
It’s a very common struggle, especially early on when you’re not sure of your value. I had ZERO idea how to accurately calculate my hourly rate when I got started and sure enough, undervalued myself tremendously.
But over the years, I realized that figuring out your perfect hourly rate can actually be super simple when you know your goal/what you want to make that year.
So, I crafted a SUPER SIMPLE 4-step formula to help you figure out your ideal hourly rate that we’ll cover in this episode.
Josh from 10 years ago sooooo wishes he heard this episode so if you’re early on in your journey, you’re welcome 😉 But even if you’re more established, it’s good to go through this just to be sure you’re not undervaluing your worth as well!
In this episode:
00:00 – Introduction
01:31 – Fear of “Formula”
02:40 – Steps to the formula
04:31 – Formula walk-through
06:54 – Things to consider
08:23 – Gross and net income
09:49 – Hourly rates
10:19 – Retainer pricing
11:43 – Formula recap
13:01 – A challenge to increase
15:07 – Help other freelancers
15:32 – Leave a podcast review
The formula: 👇
Step 1: Annual income goal / 12 months = $$$ per month
Step 2: Monthly income / 4 weeks = $$$ per week
Step 3: Weekly income / 5 days = $$$ per day
Step 4: Daily income / 7 hours = $$$ per hour
Example: (if you want to make $75,000)
75,000 / 12 = 6,250
6,250 / 4 = 1,562
1,562 / 5 = 312
312 / 7 = 45
$45 per hour
*** But add $10-$20 per hour to account for time off and expenses! ***
Episode #172 Full Transcription
Hey friends before we dive into this episode, I wanted to make sure you knew I just launched a brand new challenge on how to boost your web design revenue. This is a completely free 10 day challenge, you can get access to it right now at Joshhall.co/challenge. Every day, for 10 days, I’ll send you a quick video with an actionable tip that you can apply to your website in your business immediately. That’s going to help you boost your web design revenue. So if you would like that, get it right now at Joshhall.co/challenge.
Hello, friends, welcome into the Podcast, episode 172. This is a shorter episode. It’s just me with you in this one. But I want to answer a question that I get all the time, especially from newer web designers. And that is how the heck do you figure out your hourly rate. I know early on in my journey, I just had no idea how to go about this. But what I learned over the years is that you can actually really boiled down how to get to your perfect hourly rate with a pretty simple formula. And what I’m going to share with you in this episode is my proven formula for figuring this out.
Now there’s a ton of different ways to figure out your hourly rate. But this is what’s worked for me and what I recommend to my students. And it’s quite simply just a four step process. Now, first thing I want to say is that if you are terrified of numbers, and you hear the word formula, and it just makes you a little unsettled, join the club, because that is 100% me. In fact, I find it ironic and shocking that I’m able to be a successful web printer, because math and numbers, not my strong suit, and to be completely transparent with you and real to showcase this, when I was a senior in high school, I was in the same math class as my brother, who is a year and a half younger than I am.
So I say that to say if I can figure this out, you can too. Now this is going to be really beneficial for those of you who are brand new into web design. But for those of you who are even further in your journey and more established, this might be a really good opportunity to take this formula and measure where you’re at to make sure that you are charging enough for your hourly rate in your services more than likely you’re probably undervaluing yourself a little bit. So that’s what we’re going to cover here.
What we’re going to do is I’m going to share the formula. And then we’re going to plug in some numbers to actually help you decide what the perfectly hourly rate is for you the perfect hourly rate, excuse me.
So let’s start off with the formula for steps. It’s very simple. First off, you got to have an annual income goal. Now if you don’t know what you want to make this year, what do you want to make in a year, we’ll talk about that next. But it really needs to start with an annual income goal. That way you know what to shoot for every month, every week, and every day, and you guessed it every hour. So it starts with an annual income goal. And then we’re going to divide that by 12 12 months. Once we have what you want to make per month.
Step two is to divide that by, you guessed it four weeks. So you divide what you want to make per month divided by four. Once you have the number of what you want to shoot for every week, then you’re going to divide that by five days or however many days you’re going to work on average, in your work weeks.
And then step four, you’re going to take what you need to make per day divided by, you guessed it, the amount of hours that you’re going to work per day. So this will be generally seven or eight hours. And there, my friends, is your hourly rate.
Now for those of you who are a little more visual, and you want to see this formula, you can go to the post at Josh Hall co/172. That’s what I would do, I’m much more visual, you can actually look at that. And maybe that’ll help you visualize this. But now let’s plug in some numbers and actually talk about how to figure this out.
So again, if you’re not sure what you want to make this year, what whenever you’re listening to this, you’re not sure of your value. Just ideally, pick a number that would make you super excited to get to but is not, I guess unreasonable, which I definitely want to make. I want to challenge you to think bigger. And chances are again, you’re under under valuing yourself. But let’s keep it semi reasonable. And let’s say $75,000 You want to make 75 grand this year.
So we’re going to start as our annual income goal of 75k. And you can’t see me right now, but I’ve got my calculator out. We’re gonna run this equation, and again, terrible math, but I can do it so can you so $75,000 divided by 1212 months in a year. That is on average $6,250 per month. Now that may sound like a lot but if you’re selling websites for two or $3,000 You only need a couple Couple of those a month. And if you’re building your hosting and recurring income, like I’m teaching you, and hopefully you’ve gone through my maintenance plan course, if you’re doing that suddenly $6,000 A month a little plus doesn’t seem so shocking doesn’t seem so wild, you can very practically get there.
So the goal is $6,250 per month. Now, we’re gonna divide that by how many weeks are in a month, which are four weeks, you guessed it. So every week, the ideal goal is to hit now, what was it $6,250 per month divided by four, four weeks in a month is now $1,500.62 bucks per week. So that’s our weekly goal. Now, if we divide that by however many days, we want to work per week, let’s divide that by five days in a week. Now, our daily goal is $312. And there are some cents in here, but I’m just rounding.
So $312 per day is our goal. Now if we go one step further to figure out our hourly rate, let’s divide that by how many hours we’re going to work per day, I don’t want you working eight hours a day, because that’s for the nine to fivers, we’re going to work seven hours a day. So I’m going to take 312 divided by seven, and that my friends, is $45 per hour. So there you go, in order to hit $75,000 per year, we took 75,000 divided by 12, that gave us our monthly goal of 6250, we divided that by four, four weeks in the month, that took us to 1500 62. We divided that by however many days we’re gonna work, which are five, which brought us to 312 per day, and then we divided $312 per day, by seven hours on average. And that took us to 45.
Now, you might say, Okay, I’ve got my hourly rate, it’s $45 an hour. But there’s a couple things really important things to remember. First off, that is assuming you’re working every week of the year, which you don’t want to we need to account for holidays, vacations, downtime, etc. So what I would do, if I were you, in this equation is remove five days and cut it to four days. So let’s go back.
I know you can’t see me doing this, but we’re going to go back to what we want to make ideally in a week, which was 5000, or $1,562. Instead of dividing that by five for extra, you divide that by four, which is ideal. Now that brings us to $390 per day. And if we divide that by seven, which is seven hours a day, that’s going to bring us 2 $55 an hour. So just remember that generally, when you run this equation, if you do it by 12 months, four weeks, five days and seven or eight hours, you’re generally going to need to bump up your hourly rate, I’d say probably by at least 10 to $20 to account for the time that you are going to be missing during the year.
But the cool thing about this equation is you can flip flop anything, let’s say you just want to work 11 months out of the year, then you can take this equation and just do annual income divided by 11 instead of 12. And that’s what you need to make per month, then you can run the rest of the equation to figure out what you want to make per week, per day. And per hour.
Now, just remember this too. This is a really important note, this is gross income. And if you’re new to business, the reason it’s called gross is because it’s not what you take home, you this is money that you’re going to have to pay taxes with expenses, subscriptions, I’m fairly sure that’s why it’s called gross income. I don’t know this for sure, but it would make sense to me. So that’s your gross income. Just remember, what you take home is called net.
So that’s why there’s a big difference between gross income and net income net is what you take home. So I say that to say, if you’re charging 55 bucks an hour, just remember, you’re not actually taking home 55 bucks an hour, you’re gonna have to pay taxes, expenses, subscriptions, etc. Out of that. So my recommendation is to figure out what you want to make per hour. And then tack on maybe another 10 to 15% of that to cover those expenses, if in fact, you want to take home $75,000 per year in this example. So if this were me, if I want to make $75,000 If I want to take that home, we figured out that if I’m going to work on average four days a week, my hourly rate should be about working seven hours a day for four days a week is going to be about 55 What I would actually do is make that more like 65 or even 75 If I’m more established in order to get to that $75,000 take home pay.
So it’s really really important. And the cool thing about hourly rates is you can always adjust it and you can always tweak it. And the extra cool thing about this formula and the the use figuring out your perfect hourly rate is that this can help you decide what to bid out and estimate all of your other projects out at. So you could you could use this hourly rate for fixed projects, like if a website’s going to take me on average 30 hours, you can use this hourly rate to figure out how much you should charge for that.
If you’re doing retainer pricing, like if you’re going to work, let’s say you get an offer from a client, and you put a retainer out there for 10 hours. Well, if you figured out that your hourly rate is 55 bucks an hour, then just times that by 10, and 550 bucks, there you go, maybe cut it down to 500, since their current client 500 bucks for a 10 hour retainer, there you go. This can also be really useful for those of you who are doing like day rates or VIP days, I know this is really common in popular with a lot of my students now, particularly for those of you who have clients with how do we say this nicely, high touch or high knee like needy clients, if they need you week in and week out, then you can create a VIP day for them. And then once you figure out your hourly rate, you can figure out the perfect package for them without undervaluing yourself.
So I hope this formula has helped you out because it really does again, start out with your income goal, your annual income goal. When I started with this, when I was early on in my web design journey, I just felt like I was worth like 20 bucks an hour. And then I just felt like I was worth 35 bucks an hour. And then I just felt like I was worth 55 bucks an hour. I never did this equation. If I could go back in time, future jobs to pass jobs, I would say, Josh, pass Josh, your hair’s looking pretty good, you’re going to lose a little bit of it in a few years. So just heads up.
But also use this formula, figure out what you want to make this year, divide that by 12, then divide that by four weeks, then divide that by five days, then divide that by seven hours or again, depending on how often you’re going to work, maybe just switch a couple of those numbers around to make sure you are charging enough for our boom, and there you go, my friends.
So that is it. That is the formula for figuring out your hourly rate. As a web designer. Again, there’s a ton of different ways to go about this. This is simply the formula that makes sense to me. And my simple mind. If you want to see the visual of this, go to Josh howell.co/ 172, you can check that out. Maybe I’ll even make it a download or something for you that you can just download and use that.
But it’s that simple. And again, I am not a math guy, this was hard enough for me to make sure I didn’t screw up for you. And let’s just say this was actually the second or third time I recorded this because I screwed up the equation. But we got it this time Third time’s a charm. So there you go use this equation. And my challenge for you. Here’s my big coaching challenge. This is something I do in my coaching community in my web design club. I’m going to give this to you for free this challenge. Because I do this with all my members in there, I am going to challenge you to think of just a little bit bigger.
If you think $50,000 A year is just like holy cow, I’m gonna challenge you to bump that up by 20 to 25% go for like 75 I the reason I say that is I actually have a student who did that, at the time of recording this. We’re recording this in 2022. She did that in 2021. Her goal was 50. And I said I’m gonna keep her name anonymous. But I said let’s shoot for 75. In in December 2021, she sent me a private message in my web design club, because I coach everyone directly in there. She said you’re not going to believe it. But to remember the goal that you challenged me with a hit it, which was $75,000 a year.
And this formula will help you do the same because it’s also last note before we close before I sign off here, it makes it a little more achievable, doesn’t it? Wait, like when you think about $75,000 a year you’re like, oh my gosh, how you might be in the place where like, I can’t even imagine that, or particular moments when once we get to like six figures. And then multi six figures, I do have students who are making over 200,000 Now per year, it’s hard to think about that as a whole.
But if you take it off one step at a time and you take chunks out of it, it’s a lot more manageable. If you go out and you want to lose 100 pounds. The people who are successful at doing that, don’t go out and start running in immediately lose 100 pounds, you lose one pound at a time, one step at a time pun intended. So it’s just this is what helped me when I thought about big numbers and breaking them down is you figure out what you want to make per year. Break that down to what you want to make per month. Break that down to what you want to make per week and then per day, and then per hour and it just makes it so much better.
My four-step proven formula, the Josh Hall hourly rate formula, copyright LLC, maybe I need to copyright that but anyway, that’s what I did. That’s all you got to do. I hope that helps out. Leave me a comment. I want to know if this helps you. I really do go to Josh hall.com/172 drop me a note. And let me know if this has helped you out, maybe gave you some more confidence maybe helped you raise your rates.
Also, if you know of any other web designers, I have a request for you. If you know of any other web designers or freelancers who could benefit from this, share this with them, because this is not web design specific. This could help photographers or any other industry out there. So share this episode with them. Let them know hey, this really helped me out. Maybe this will help you to stop undervaluing yourself and listen to this episode by Josh to see if it helps. That’s my request for you.
My last request is if this has helped you out, and you’re enjoying the podcast, please consider leaving a review. Wherever you listen, it really means the world to me, I feel like I gotta be honest with you. I feel like I’m just a little light on reviews. And I feel like the podcast, not just myself, but the amazing guests that I’ve had on. I think they deserve a little more. So leave a review. Wherever you listen, you can actually go to Josh hall.co/podcast review all one word. And then I’ll zip you to a page where you can choose where you’d like to leave a review. But again, if you wouldn’t mind sharing this episode, be ever so grateful. And I hope it makes an impact for whoever you can help as well.
So go to Josh hall.co/ 172 to see the visual of this and cheers my friends to figuring out the perfect hourly rate for you and should go without saying you’re going to want to adjust those numbers every year because you want to make more. There you go friends, see in the next episode.