The math is the math

After the survey went out, someone messaged me asking why people were calling $96.36/hour “low”.

“That’s more than any of us could find a job making — it sounds pretty great to me!”

And they’re right… if we were talking about a paycheck. But being an employee and running a business are two entirely different equations — and that’s not, at all, an accurate comparison.

So, let’s break it down, because it does get interesting.

Let’s call it $100/hour for the sake of easy math.

Most folks are working 40 hour weeks. But, of course, not all of those hours are billable. You’ve got email, project management, sales, marketing, onboarding, troubleshooting, learning, and scrolling The Admin Bar Facebook group.

Most folks land somewhere between 20 to 30 “billable” hours in a week. We’ll split the difference and say it’s 25.

25 hours a week, 52 weeks a year = $130,000.

Not bad! Until you remember you need rest, and vacations, and you probably don’t want to be answering emails on Christmas morning.

So, let’s knock it down to 48 working weeks. That’s $120,000.

Still pretty good, eh?

But, let’s not forget expenses… Software, hardware, hosting, insurance, coffee, internet, marketing, those little lunches the company pays for (whether they’re deductible or not, they’re still a cost). Most solo shops can run somewhere between 20-30% in expenses. That’s actually incredible in business terms, but if we split the difference and call it 25%, that’s $30,000 gone by the end of the year.

Down to $90,000.

That would be great for most people — a near 6-figure salary — but your government wants its piece of the pie too, my friend!

Here in the States, that’s about 25% of profits — and there goes another $22,500.

Now we’re at $67,500 net… That $100/hr “salary” is in actuality around $32/hr.

And that’s with your business running perfectly… A steady stream of projects, everyone pays on time, no scope creep, and you don’t take a single Friday afternoon off. Sadly, you don’t have health insurance, sick days, or savings for equipment upgrades, or professional development.

When you run the math, it makes sense why 2/3rds of our survey respondents are making less than $50K a year. Not because they’re not working hard or doing great work — but because the math is sneaky… And I wonder how many people have ran the numbers.

This example changes quite a bit once you start building a team (where your billable hours increase, but so do your expenses), and I’m not suggesting you bill everything hourly. I don’t. But your rates still play a role — even if you’re doing project-based or value-based pricing.

If your goal is to bring home $100,000 (not that you need to, but only because I know that’s a goal for a lot of people), then you’re probably going to need to be billing at around $150/hour… $175 if you want some wiggle room.

It might sound like a lot, but the survey numbers back it up. If you filter it down to agencies of one with a take-home of $100K+, the average hourly rate is $149.40.

The math is the math — have you ran the numbers to know exactly what it would take for you to hit your goals?