How Much Should You Charge for Your Services?

The market sets the price for services, but there are various factors to consider when determining your fees. In the tech sector, for instance, a company I worked for in the late 1980s and early 1990s charged rates ranging from $95 per hour for a junior project leader or engineer to $250 per hour for a PhD engineer. In 2022, my most recent company paid $8,000 monthly for a part-time CFO and $20,000 monthly for a full-time contract SEO marketing specialist. Simultaneously, SEO marketing specialists from North America and Europe were charging as low as $55 per hour with a minimum of 40 hours per month, but we did not believe they possessed the skillset we required.

How to Determine Your Fee

Deciding your fees depends on what you are willing to work for and the skills you have demonstrated. A good starting point is to look at the salary offered in your area to hire a full-time person doing the job. Multiple that amount by between 1.6 and 2.5 to account for the overhead costs of a full-time employee, including benefits, taxes, and tools. Then divide by 2080 (hours in a work year), 52 (weeks in a year), or 12 (months in a year) depending on how you want to express your rate. Additionally, add any self-employment taxes and costs you will incur. This is your baseline rate, and you should charge at least 20% above this for full-time contract work and at least 50% above it for project work lasting less than six months.

Remember that as a full-time consultant, you should assume that at least 50% of your time will not be billable. This time includes activities such as selling your services, understanding potential client needs, making solid proposals, taking time off, and ensuring you have enough non-billable time to make sure the clients love your work product. You should set your rates based on a maximum of 800 to 850 billable hours per year.

A Fairer Pricing Strategy

My advice is to avoid charging by the hour or any other segment of time. This approach is often unfair and promotes a win-lose scenario. Instead, ask the potential client what difference your service will make once their problem is resolved. Many clients struggle to articulate the difference because they do not think in these terms very often. You need to develop the skill to help them understand the difference, and then they can tell you. Meanwhile, you need to estimate the cost of fixing their problem and mentally calculate the ratio of perceived value to the cost of delivery. If this ratio is above your walk-away limit, you can quote a price that is approximately the geometric mean, the square root of the product of perceived value and cost of delivery.

By setting your prices in this manner, you ensure that both parties experience a handsome return on investment. The key to higher income is solving bigger problems, not working longer hours. This approach shifts the focus from labor expenditure to problem-solving value.