Price your time, not just your hours
Work out an hourly rate that covers the hours nobody pays for, and charge it.
6 min read
If you sell your time — teaching, repairs, haircuts, design, accounting, consulting — the most common pricing mistake is to think of an hourly rate as what you earn for an hour of work. It is not. It has to pay for every hour you are not being paid: travelling, quoting, chasing payment, learning, waiting for the next customer. Whether you are setting your first rate or have charged the same one for years, it is worth doing the sum properly.
Billable hours are fewer than you think
Start with how many hours a month you actually spend on paid work. Then look at where the rest of the working week goes:
- Travelling to and between customers
- Answering enquiries and writing quotes that do not turn into work
- Invoicing and following up payment
- Buying supplies, maintaining tools, learning
- Gaps between bookings
For most service businesses, paid hours are well under the hours worked. That gap is not a failure; it is the cost of running a business, and the rate must cover it.
The sum
Work out three numbers for a month:
- What you need to take home — your living costs and savings.
- What the business costs to run — rent, phone, travel, tools, software, supplies, any help.
- Your billable hours — the hours you can realistically charge for.
(take-home + business costs) ÷ billable hours = the lowest hourly rate that works
A made-up example: a home tutor wants ₹30,000 a month to live on, spends ₹6,000 a month on travel, books and phone, and can teach 60 paid hours a month around preparation and travel. ₹36,000 ÷ 60 = ₹600 an hour is the floor. Charging ₹400 because "that is what tutors charge" means working for less than they need, however busy the diary looks.
Then look at the market
Your floor is the least you can charge. What customers will pay is a separate question, and the answer is often more than your floor — especially if you are good, reliable, specialised or easy to deal with.
| What you find | What it means |
|---|---|
| Market rate well above your floor | Charge closer to the market. You have room. |
| Market rate near your floor | Look at cutting unpaid hours, or at a niche that pays more. |
| Market rate below your floor | The business does not work as it is. Change who you serve or what you offer. |
Pricing low to win the first customers sets the price they expect for ever. It is much harder to double a regular's rate than to start at the right one and offer a small introductory discount you clearly label as such.
Charge for the work, not only the hours
Some work is worth more than the time it takes: an urgent repair at night, a design used in a big campaign, a fix that saves the customer a day's business. Charging the same hourly rate for those leaves money on the table. Rates that rise for urgency, complexity or value are normal — say them upfront.
Revisit it every year
Your costs rise every year, and so should your rate. A small increase each year, told to customers in advance, is far easier than a large one after five years of standing still. The lesson on raising prices covers how to say it.
Ask the tool below to work through your own rate, with your costs, hours and city.