Have you ever wondered how much the hour of your time is worth?
If you want to evaluate your private project as you spend your time on it, how much it costs? Or if a new potential client comes to you with an offer of a job, but you don't have a time, how much you would call for an hour of your time?
If you ever struggled with that, this article is for you.
Just a quick note: Those're only my thoughts about the topic, there is probably much more to say, but the amount of things that can be covered in one artilce is limited.
It started with a friendly chat...
I have a friend that I really like to discuss different topics with and I told him that I started to count a cost of recording and releasing my first Udemy course. As I tracked the whole time I've spent on the course, I had a nice report of how many hours it took for me to actually record the whole material. This way I could easily count the total cost of the course.
Here is my thought process:
- I simply took the value of my normal work hour - how much I earn as a developer. It was a nice base to start from something.
- Then I've multiplied it by 2. I used my extra time that I value more than a normal work.
- Finally, I've m**ultiplied it by the number of hours of work **I spent on the course.
And his reply was: "You are wrong".
My friend's points
Basically what he said is this: "If you earn a dollar per hour every eight hours of each day, and then you decide to do something else INSTEAD of earning that dollar, then your new work indeed costs you one dollar per hour. However, if you go for a walk and just enjoy your time with your family which does not give you a single dollar per day, doing something else INSTEAD of those activities DOESN'T cost you anything."
And I was like:
Everything he said was logical and I was close to agreeing. But then I started to think.
Indeed, If I could not earn any money in the time I spent on recording the course, the cost would be 0. But somehow there needs to be a way to evaluate your projects based on your time spent on them.
Somehow you need to count how much money you can spend to delegate the work to your employee or business partner!
I did some deep thinking and some research after which this is what I came with. At the end of the article, I'll also share how I used to do it before.
There is always a way to earn money, but there is no way to bring back the time you already lost.
Before I'll cover the actual ways I found to describe how much money your activity costs, let's cover the rest of the domains that actually have an impact on pricing.
The point of this article
I'd love to discuss every possible case and every single thing that can matter when you set up your hour price, but that's not possible. So this is why I decided to focus on estimating the price of the regular work hours.
I think there are several main points that can affect the price of your time, and those are:
- Your needs
- Your current financial situation
- Do you consider extra hours or replacing the regular work?
- How much profit (and extra benefits) it can give you
I figured out that there are several ways to valuate your time and I can't say one is better than the other. I would say: one can be more appropriate to the one's current situation.
For example: If you don't earn money and you never earned money at all, how much you'll call when it comes to choosing your first job? Recall that moment, when you started earning money for the first time ever. Is it comparable to what you have now?
My first own "paid project" was being a Karate trainer at the age of 16. The only thing I needed a money for was founding my own Karate training and events. I needed to think how much money I want and just said: half of my own Karate traning's cost. I had 5 students at the beginning, so the income was quite nice at the time and I was really pleased with that.
But now? Having a child and lovely wife that depends of me? Having a car, flat, phone, taxes, and so freaking lot of monthly passive outcome? Earning just those money that I felt comfortable with in the past would be just crazy...
And here is the first nice discover. The value of your work hour is dependent of your needs.
If I earn currently LESS than I need to live, I'll get any job that'll reduce my terrible situation. If I earn as much as I need, I start to think more about how much money I could need in the future to be safe. But it's not life or death situation, so I can choose opportunities more wisely. My extra time starts to be more valuable because if I don't like something to do, I don't need to do that.
And moving forward If you earn more money that you need, or even better - more than you could ever need... then your extra work hour is valued at whatever, because there are no money that could change your mind because of money.
If you don't want to do something, you wont do that and if you like the offer or the person who offers you something, you can agree on it for free or for milions of dollars. Whatever, because you don't have financial needs that can change your decision.
This is why in the rest of the article, we will consider only the case where you actually need or want some extra money - or you can need them in the future.
Your current situation
So having that point I thought. Ok, if I need 2000$ to live and I'd be fine, my work hour would be worthy of 2000$/180 working hours... around 11$/hour. If that's enough for you and you really don't need more, that could be fine, but what if you are earning twice as much?
If I earn 4000$, I'd never say to my client that my extra time is worth less, right?
This is why the current situation is a really important part of this topic. I think that everyone who ever tries to valuable their work has their current financial situation in mind.
But that's not enough.
The type of the time you want to spend on something.
It's a completely natural thing that we evaluate some activities more than others. Each day has 24 hours and we can't handle more. Als,o there is a time we need for:
- activities we like to do
- family, relatives and friends we like to spend time with
- the work we like (or not) to do
If you don't like cleaning your room, it's actually not a big deal to give it up for an extra project and earn some money. The value of that time would be then much smaller than let's say: going to the party with your love or spending time with your kids.
Converting that time to money is always tough thing to do. The least problematic part would be converting your regular work hours to money as you know exactly how much you can get from it.
If you need to spend your EXTRA time on a new project, you would need to work more thanthe average person, which can affect your:
- general mood.
I think that is enough to say that your extra hours are more worthy than your regular job time.
My situation as an example
I have this nice situation when work hours are elastic, so I can work more if I wish, but also less than full-time. Currentl,y I replaced my full-time job as a developer to get a dedicated time each day for helping our community grow, record and improve our courses and develop the Driggl.
This is why it was quite easy to me to valuate my time spent on the course production.
Instead working on driggl and courses, I could just do more regular coding, and earn multiplies of the hourly rate.
There are two problems however.
- Even Part-Time job + Work on API Course was more than I would ever work as a developer only.
- I earn more now from a regular job that I did when starting.
First point happened because of difficulties in focusing on one job for so long time, but also because I was so happy with this new activity that I did not feel the extra time so much.
The differences in income comes from the fact that I worked on the course for more than a year. With all the resources I needed to consume and all the mistakes I did to make it happen in the current form, it took some time. In that period I evolved as a developer too and my earnings increased a bit since I started.
So even that way it's not too obvious how to valuate the time I spent on the course.
How much you can get from it (or got).
Now we finally got to another funny part of the topic. If you want to start a project, how much money or benefits** **it can bring to you if any? When client offers an extra job to you, it's easy: He will pay for it.
But if you start your own project, can it give you a value? A long-term benefits?
My course already gave me some income, so my total cost can be reduced by what that course earned already. And when my total cost will be nullified by earnings, it'll mean that the total cost was 0.
If you don't have the already released project, you need to debate about possibilities and that's usually a hard topic. But it's really nice to have that in mind. If a project's earnings will be greater than your cost, it's just perfect.
I also found useful to think about other benefits, not only financial ones that project can give you. But I'll cover that more below.
That's all I found it's useful to consider when you think about the cost of your time, now having all that in mind we can go to the ways how to do it in practice.
Ways to evaluate your workhour.
Those things you should consider when you try to count the value of your time.
- How much you earn now
- How much you need
- How much you want
- How much you expect to earn
- How much you want to earn
So here is what I came with:
1. You need more than you have now.
In case you need more than you have, the one way to count the value of additional money is. Take the amount of money you need yet to earn. Count how much extra hours you could spend on the project. Devide money you nead by number hours you came with.
The result is a BASE.
- If the base is less than your current hourly earnings, you can consider the bigger number.
- If the base is bigger than your current hourly earnings, you can consider switching to new job :).
- If the base is bigger than you need.
2. You earn as much as you need
Now if you went through the first step, your client agreed to your conditions, you earn enough money to meet your financial needs. In that cas,e you already have money and you don't need more at the time. You would like to, but that's not really important. In this case, you can add additional value to your extra hours.
For example, if you value very much time spent with family and you would need to resign from that, you can use your own multiplier to count the value of your extra hours.
For example. For a long time, I counted my extra hours twice as expensive as my regular work hours. I don't do it anymore but I really enjoyed that way to count the value of my time. I really suggest you to try it out.
3. Consider other benefits.
I always like to think if the work I'm considering to take in my extra time gives me other benefits than immediate financial refunds for my time. For example. When I started recording my first Udemy's course about writing API using Test Driven Development, I did not know if there will be ANY financial profit involved. I just wanted to try it out because:
- It worked positively for my personal brand and my general visibility as an expert in that domain.
- It could help me find a future job even without too much sells.
- I learned a lot by working on that project and I really enjoyed that time.
- I started to build a great community of people passionate with similar topics I am.
- There was possible financial income involved.
If I would just think about just "possible" financial profits, but no other benefits would be involved, I'd probably never did that. But the value of those other points is very important for me and therefore I decided to record the course even if I would not earn a single dollar on it.
If something has a value for you, losing it you can threat as your cost, whatever others think.
When you think about other values that the project can bring to you, your live, or your skills, maybe the cost of the workhour could be shifted somehow? Here are few things to consider:
- Can the client bring you more clients in the future?
- Will you enjoy that work?
- Will you be able to share your name as a creator of the project/task?
- Will it positively affect your personal image or your brand?
I found it very useful and I always try to figure that out before I agree on any project I take.
4. Pricing based on what you'd like to have
There is also a very nice approach to valuate your time based not on your current situation, but rather on the amount of money you'd like to earn or your company to earn.
It looks like this. Wonder what is the monthly income you'd like to have. It can be 5 000$, 20 000$, or one Milion. Whatever. Then divide it by 20 days and by 8 hours. Then try to answer these questions:
- Is my time currently worthy of that money?
- If not, what should I change to achieve that point?
- Does this new opportunity: job/project/task brings me closer or further of that point?
Maybe it's not a direct way to evaluate the time, but definitely, it helps you decide if the job is worthy of doing it. I found it very useful and currently I use this technic pretty often - each time I have a new job offer or new project idea comes to my mind.
There is no one RIGHT way to evaluate your time, as this is YOUR time, and nobody's else, however I hope those tips I covered in the article will help you to evaluate it better for now on.
Nowadays there is so much things to do, so much information to process that our time becomes the MOST VALUABLE THING WE HAVE. There is always a way to earn money, but there is no way to bring back the time you already lost. Keep that in mind and never underestimate that.
And as promised, here is a summary for the API course I came with.
Here is the total number of hours I spent on my first Udemy's course:
- First (unpublished) version of the course: 428 h
- Second version of the course: 257 h
- Also, there were other costs, like taxes, software, hardware, promotional video, testing advertisement solutions...
This all was just to publish 5-hour video course of very high quality and focused on productivity - just because I evaluate your time very much I decided to publish the condensed course focused on practice.
So far the total income was 992$. Is it much? I don't think so, but I got value and potential much more valuable than a money in my current situation. So is it a success? For me - for sure it is.
And my point is: I disagree that if you wouldn't earn money in your extra time that means you can't count the cost of that time. The value of anything in the world is quite subjective thing and what has a value for YOU, you can threat it as cost.
- Sharon McCuthcheon for the great feature photo.