This week’s question from our portal “Ask Us Anything” comes from Carolyn.
A client hired me to do a project, and he paid a fixed price. We’re going to speak again today, and I need help figuring out how to quote him for the rest of the work. I don’t know whether I’ll be working 50 hours or 100 hours on the project. I don’t know the cost.
Normally I’ll talk to the client, get the project details, then say, “Give me a day or two to figure out pricing and scheduling”—because I want time to think through everything and come up with something real.
Am I approaching this correctly? In the back of my mind, I’m thinking, “Is this what David and Steph would do?” Or would you know in advance how much you’d charge?
Yeah, we would know our fee ahead of time.
You should know the cost ahead of time, before you get on the call with the client. You should know ahead of time how long it will take you to do the work.
The idea is to break down your value to how much you’re worth per hour.
This number is based on how much you want to earn, versus what it costs you to run your business and live the way you want to live.
You should know what your value is per hour.
Let’s say your value is $495 per hour. Then it’s like, “If this project is going to take me 30 hours, what’s 30 times $495? Are there any extra expenses I’ll accrue along this journey? Will I have to fly somewhere or stay in a hotel?” All of that gets added in.
You don’t need to know the number of hours. You need to know how much you’re worth per hour.
Do the math before you have the conversation.
You should know how many hours it will take you ahead of time, before you get on the call.
Here’s an example. If you want to make a million dollars a year, you would look at like this:
If I want to work 40 hours a week and make a million dollars a year, then my time is worth $480 an hour. If you do anything for less than $480 an hour, then you won’t make a million a year, because you’re spending your time doing things that are less valuable compared to what you want to earn.
If you say, “I want to make a million dollars a year,” that means you’re worth $480.76 cents per hour. If you find out it will take you 12 hours to do this work, then the cost is $5,769. That’s what you charge.
If you want to earn $200,000 over the next 12 months, while working 30 hours a week, then your time is worth $128.20 per hour.
Next you scope the project. How many hours will it take you, times $128.20? That’s how much you charge the person.
Then you also have to add in whether there are any expenses that you’ll incur on top of that.
Always do that math before you get on the call.