How do you determine the value of your work? Do you know what a fair price is – not just for the client, but for yourself too? For many entrepreneurs, setting their hourly rate is more of an educated guess than a strategy. They base it on a quick sum, a competitor’s rate or a gut feeling. Understandable, but rarely effective.
A good rate isn’t just about numbers, it’s about your position as an entrepreneur. Your experience, costs, goals and the value you deliver. Whether you’re just starting out or have been up and running for years, your hourly rate deserves more attention than a quick estimate. With this step-by-step plan, we take you through a smart, strategic approach to setting your rate – or setting it again.
Step 1 – Know your costs.
Your rate needs to cover all your costs, including the tax you are required to pay. As an entrepreneur, you also have to cover your own pension, insurance, holidays and a buffer for setbacks. So you include these in your cost calculation. Think, among other things, of:
- Personal expenses: rent/mortgage, groceries, insurance, subscriptions
- Business costs: laptop, software, insurance, marketing
- Tax: income tax, VAT, any contributions
- Pension: buffer, holiday pay
Example: You need €2,500 net per month to live comfortably. Add around 35-40% tax to that. Then you need to bring in roughly €4,000 gross per month.
Step 2 – How many hours do you really work?
You work 40 hours a week, but in reality you invoice your clients for a lot less. You also spend time on admin, marketing, development, client contact, training – you name it. So you can’t simply divide your desired income by 40 hours a week either. Count on 50%-60% billable hours, and factor in holidays and sick days too. As a rule of thumb, work with 1,000 to 1,200 billable hours a year.
Example: €4,000 x 12 months = €48,000 per year
€48,000 per year / 1,100 hours = €43.50 per hour
Step 3 – Don’t forget profit and growth.
You’re not an employee paid by the hour – you’re an entrepreneur. A healthy business makes a profit, invests and grows along the way. Don’t forget to factor this into your hourly rate. Add a profit margin of 10% to 30%. If you want to invest, grow or hire someone, include that too. You’ll soon arrive at an hourly rate of, say, €60 to €90 – and in many sectors that is perfectly reasonable.
Tip: Do you work in a specialism or niche? Then you can often charge a bit more.
Step 4 – Look at the market. What do others charge? What do you charge?
It’s wise to look into what others in your field charge, but compare the context too. A designer with 15 years’ experience and a full client base will naturally charge something different from a starter with a few odd jobs. It’s not about charging the same rate, but about understanding why someone charges a certain amount. So pay attention to:
- Do they work full-time or part-time?
- Do they offer something extra?
What is their level of experience?
Don’t let rock-bottom prices throw you. Low rates sound attractive, but rarely lead to growth. Dare to show your worth – especially when you know what you’re capable of.
Your rate is more than a number. It’s a strategic calculation. A good rate reflects not only your costs, but also your knowledge, experience, value and growth ambitions. Whether you’re just starting out or have been in the game for years: take the time to underpin your rate consciously – it’s the foundation of your business. Because what ends up on your invoice determines more than just your turnover. It determines whether you can invest, go on holiday with peace of mind and not get a fright from the blue envelopes on your doormat.