A new friend of mine gave me two ways to value yourself on the market. The first is your hourly rate. The second is the value of the service you provide (usually the opportunity cost).
To calculate your hourly rate, you can
- use your last job’s pay as a reference
- compare yourself to what freelancers on the market charge,
- calculate how much you’d need to live your dream life.
Charging hourly tends to prevent you from making big gains though. If you charge by the hour (*cough* lawyers!) then you’re incentivized to be inefficient and painfully bureaucratic. You’re also probably bad at estimating how many hours a project truly takes to do.
That’s why you can use the value of your work instead. Let’s say that the work you do (thanks to the knowledge you bring) takes you 10 minutes to do, but will bring in $15,000 for the company over the next 2 months. You could simply ask for 50% of that, and make $7500. That’s $1250 an hour, if you’re curious. Not bad!
It’s tough to do because you can’t always say how much value you’ll bring in exactly. Another thing to do is calculate the opportunity cost of your work. If you’re installing phone software for a medical clinic that’ll automatically tell callers how many estimated minutes an appointment will take, the opportunity cost would be the time that the secretary spends answering the calls, multiplied by her wage.
Both approaches have their pros and cons, but I think charging for the value you provide is better, in general, than charging by the hour. Thanks to Victor for sharing this with me.