I had a Zoom call with a friend recently where she felt taken advantage of for her knowledge and expertise and didn’t get paid what she was worth. It really fired me up because I know the importance of setting your prices and hourly rate and being confident in them in order to be compensated fairly.
In this episode, I’m sharing my advice for how to accurately and confidently charge for your time and calculate your hourly rate. I give you action steps to plan for profits, know your expenses, evaluate your time costs, and more. I have a lot of experience as a paying customer and a businesswoman and my goal for this episode is to make sure that you are paid what you’re worth for your time and expertise.
Remember that your numbers don’t have to be set in stone. You can revisit your profits and expenses from time to time to reassess your prices. You are worth it.
If you’re a DIY cannabis hustler who is just getting into the industry, make sure to subscribe to my podcast, High Class, where I help you move past the frustration, hurdles, and red tape of the cannabis industry.
In this episode, you’ll learn…
- [01:08] How women in the cannabis industry are often disregarded, even though they bring valuable insight and expertise to the table, and how to counteract that
- [03:05] Some stats comparing the profitability of women-led companies to the amount of funding they receive (spoiler: it’s shocking!)
- [06:02] My steps for how to confidently charge for your time by planning for profits
- [23:22] Remember that it’s so important to gain clarity around your prices and profits in order to succeed in business
If you want to know how to calculate your hourly rate and set your prices with confidence as a business owner, be sure to tune into this episode:
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Transcript for “Adding Up the Numbers: How to Set Your Hourly Rate and Prices with Confidence“:
[00:00:46] Salwa Are you thinking about getting into the cannabis industry but aren’t really sure how? I’m Salwa Ibrahim, your cannabis auntie and I’m here to help you find accelerated success in your cannabis business. And I’m sharing all the details on how to get there. So get comfy as we dive in.
[00:01:08] Salwa So a little while ago, I went out with an industry girlfriend and we were chatting and just having fun. And I had just gotten approved by Apple for this podcast. So I insisted that we have a glass of champagne, even though none of us really drank. But even then, after the bubbles hit, my friend starts chatting about how she just had this like hour long zoom call with a potential client only to walk away from it feeling like her time was totally wasted and she felt like she kind of got taken advantage of, that they just disregarded all her valuable expertise she shared. And during this meeting she gave them a bunch of insight and wisdom based on her hard earned lessons and value that helped them shape the direction of their business decisions and potentially saved them money by telling them what not to do, only to feel like they not only wasted her time, which, let’s be honest, is your most valuable possession because you can never make more of it. But it made her feel unappreciated, which is a crummy feeling.
[00:02:14] Salwa Now, at this point, I was agitated. I was mad that this client didn’t show my friend the respect she deserves. And so I went into like full mom mode. I immediately started giving her advice and may have been a little aggressive about it. All right. Okay. Maybe I was a little aggressive about it, but I’m blaming the bubbles here. The next day I felt guilty. Honestly, I really did about our conversation. But that got me thinking, like, why was that my reaction? Well, the thing is, is that she isn’t the only one that goes through this. And unfortunately, this seems to happen way more to my female colleagues and peers than my male ones. In fact, it’s no secret that this is a male dominated industry and that women do not get near the same advantages as the men do, and the data shows that’s totally unjustified.
[00:03:05] Salwa Since I have your attention, I want to drop a couple of national stats on you. Number one, tech companies led by women achieve 35% higher return on investment. Number two, women founded companies in first round capitals portfolio outperformed companies founded by men by 63%. Yet in 2022, women received 1.9% of all funding available for investment. And in cannabis, it’s worse. And for women of color, it’s way worse. But we’re going to save that message for another day.
[00:03:42] Salwa Getting back to my friend, the one piece of advice I was trying to really drive home for her was she needs to charge for her time even a phone call. And this is the point that I was trying to make to her. When you charge a potential client a fee to meet with you and I hate to say this, but I’m going to, pick your brain, they’re actually going to value the information you’re providing more and take you more seriously because they are paying for your time and expertise and the information that you were sharing. I don’t know why we’re wired this way, but when we spend our hard earned money on information, we just tend to take it more seriously and value it more than free advice. It also forces the potential client to show up prepared. They will likely organize their questions and not just shoot from the hip because they know they scheduled a 20 to 30 minute phone call with you and that’s all they’re going to get unless they pay for more. And that way no one’s time is wasted. But this led me to thinking and reflecting What would I charge for a call? What is fair? What strategy would I implement to figure out what my hourly rate is?
[00:04:59] Salwa Okay. One note before we dive in. I yet in my career had never had to offer a service or be a consultant in a capacity to where I would charge an hourly rate. However, I have been on the paying end of over at least 100 different consultants and contractors easily. In fact, in this current season of my career where I’m trying to halt my old business and start a new one, that is more of a solo project, I have five different consultants I’m currently working with. That’s right, a solo project still has me leaning on consultants with many different layers of expertise. I promise I am no stranger to receiving proposals and different payment structures and all the things. So I’m going to give this information from the perspective of a paying customer and my business experience to help you and me consider how we would go about charging for an offer or service or your time.
[00:06:02] Salwa So in today’s episode, we’re going to dive into how to calculate and understand your hourly rate, in a way that allows you to stand strong behind your number and be confident when you say a half hour phone call with me is this much or I can’t offer a discount or that’s not worth my time. Or the reverse. When someone does say yes to your offer, you can feel confident going into it knowing that you’re going to get paid what you’re worth and your costs are covered. Now, the strategy that I want to use is one that I think most people are uncomfortable with, but it just needs to happen. We are going to plan for profits. Planning for profits is so critical because this life is expensive and we all need to live. Having a plan gives you something to shoot for and helps the manifesting process take shape. Plus, the competitive landscape is changing every day. How do you plan on staying competitive if you don’t have the extra money to take that online course or hire that business coach or even take some days off to invest in yourself, whether it’s going on a YouTube binge, on Chat GPT or going to a seminar, whatever that looks like. Planning for profits helps you plan your future and stay in business. I mean, we’re not volunteering, right? And for those of you out there that are currently charging an hourly rate and we are guessing that that’s probably right, how much better will you feel actually knowing the number you charge is covering everything you need it to cover?
[00:07:37] Salwa Okay. So I’m going to break this down in sort of a list format so we can go through this together. Let’s dive in. Number one, knowing your personal expenses, the first step or knowing how to price yourself comes from the empowerment of knowing how much you need to make in order to live. I’m talking about personal expenses. Okay, So to get us started, I want you to think about all the things that you need to live your life and survive as a human. This includes your share of the rent, your power, food expenses, child care, health insurance, your phone, a sandwich, a Starbucks, a pair of shoes, a date, just all the things you need to live your life. And this looks so different for everyone, because for some of us, this might be just like a side hustle. Or we have the benefit of dual incomes. Some live with family. Or maybe this is just fun money for you and you have income coming in from an investment, so your ramp up will like look totally different and what you need to charge to get started will look different from one person to the next. Once you have clarity on that point, you have so much power. Now, I know that it’s tempting to shortcut this exercise, and I get it. Facing your finances is so uncomfortable. I’d rather do anything else but taking a shortcut by asking someone else who offers a similar service or offer what they charge to determine their own pricing. This is a bad strategy because you’re not seeing their whole picture. Whoever else that you’re comparing yourself to has a totally different situation than you do, and their needs and bandwidth are going to be vastly different than yours. Whatever your situation is, you need to know that number so you can plan for all the other components of your business. But that number is the floor. Then from there you can see, add and determine and adjust what your income goals are. Now we are one step closer to understanding what we need to charge.
[00:09:45] Salwa So if you’re one of those people where this is a side hustle and you’re just trying to replace your full time job, this exercise might look a little different. You may just want to cover the cost of your current salary. So if you make $75K a year, how many clients or hours would you have to charge to cover that salary? Knowing your costs is critical because you will likely need to make more than $75K to net that income. Once you pay the expenses you have to shell out to make and earn that amount of money and pay all the expenses to run your business. Look, you guys, I feel it. Doing this exercise can seem scary at first, and I know that I’d rather go to the dentist than do this, but it really isn’t that scary. And you will find that after the discomfort comes a feeling of empowerment that you know where you stand and what you need. So I encourage you to push through the discomfort to get to empowerment. I promise I will serve you to have that knowledge because knowing is half the battle, right?
[00:10:52] Salwa Number two, know your business expenses. I’m talking about all of it. Every itty bitty cost associated with your business. You have to take a seat and write down all the bills you pay. You run your business and if you’re not launched yet and not there with your business, you have to pretend to be there. Because when you get your first client, you need to know you are not losing money doing the job or taking on that work. Right. Okay. So we are thinking through everything from your domain to your website expenses to your Canva subscription to the larger items like your LLC registration or your accounting or your bookkeeping expenses, the whole thing. Now, if you’re thinking LLC expenses or accounting, what? You need to spend a little bit of time to learn what it takes to be a legitimate business.
[00:11:47] Salwa Let me tell you something right now. The very first lesson that you need to know in anything related to business, whether you’re in the beam or not, no matter if you’re touching the plant or not, it doesn’t matter. You have to pay your taxes. You know what the first lesson at Oaksterdam University is? At least back when I was at that school, they teach you that Al Capone did not go to jail for selling alcohol, which was illegal or murder or anything like that. The only charge they could stick him with was tax evasion. And that is how he went down. Yep. There is a section of our U.S. tax code that basically says that even if you’re doing something illegal, you still have to pay your taxes on the illegal sales. Our government is gangster and they want their cut first and foremost. So do not skip registering your business because that will save you money when you go to file your taxes. Don’t skip this. It will unfortunately catch up with you.
[00:12:55] Salwa Okay, so we are going to start classifying your business expenses into two categories fixed expenses and variable expenses. Fixed expenses are just that. They are fixed like you can’t move them. They are a cost whether you have one client or one client. They are things like your insurance and your filing and registration fees for your companies supplies, web hosting subscriptions, that type of thing. Variable expenses. These expenses are different from project to project and client to client. Expenses like shipping something else. Do you have to travel? Are you renting furniture or equipment? Or do you need a TaskRabbit or an assistant? These are one off and they will be different from client to client and job to job. Try your best to make this list as detailed as possible. So here is the exercise. What I want you to do is to take a minute and track one project from end to end. I want you to write everything down from the moment you engage with the client in response to the emails, to creating your proposal to prepping the session or the deliverable. What systems and tools are you using and are there any extra expenses that you may have left out? Then I want you to categorize each line item as a variable or a fixed expense. This is going to help you when you go to determine your break even point while you’re doing this. I also want you to track your time. Think of phone calls, prepping an invoice, taking an Uber to get to a location or a meeting. This will give you a number of hours that you can now use as an average on any given project. Ideally, you do this for every project, but I know doing this for every project may be a pain, but if you do it correctly for one project, then you can know, okay, this type of session or work takes 40 hours and I use that as a baseline, feel me?
[00:14:59] Salwa So now we know how much we need to make and we know what our costs are and we understand how much time we’re spending and how expensive things are. You can now plan for a profit, and this is where the magic happens, because if you know that you want to charge, let’s call it 10% above your expenses and you know that that is your profit, you’ll be far less likely to agree when someone asks you for a 10% discount, because now you know that at that point you’ll be just at cost and you won’t make any money. And that is your decision. But at least you’re making it with eyes wide open. This will help you get to your income goals and also set the stage for the type of client you want to attract. Also, after going through this, you may want to raise your prices, and that’s okay too, if you’re doing the work that reflects what you are charging. This would mean that you don’t need to attract everyone to your product or service. You just need to attract the right people to you. Something to think about like I would rather focus on getting ten clients who are going to be stoked off of my work that are aligned with my brand and aligned with my vision. Than 25 people that may or may not be valuing my expertise or who I am or what I bring to the table because I’m just trying to cater to a lower price point.
[00:16:26] Salwa So now kind of going back to your hourly rate, right, and your time. There are a couple different numbers to look at. There’s the project working rate, right? Like, how much are you making when you are actually doing the job and a non project working rate? Like, how much do you charge when you were doing the prep and leading up to the job calls prepared invoice and are in the meetings and doing all the backend stuff to drive the project to completion and deliver the final product? A non-working rate is usually lower than the on the job rate. And to calculate this, I’m going to go back to my overall salary goals and divide it by how many hours I want to work to get to that hourly rate.
[00:17:12] Salwa Okay. So switching gears and back to sort of me as the playing client, I can tell when I’m presented a package where the contractor isn’t necessarily pricing for profit on all the different menu items that they are sharing with me as a paying customer, I can tell like if I’m like, Oh, I’ll take this package A but I don’t need this item, can you deduct it from the package? I know the contractor doesn’t know their costs for all of their items because they’re resistant or don’t know how to deduct it. So that tells me that they have not ran the numbers on all their offerings. So as a paying customer, I prefer when everything is a la carte. Another scenario is when I have hired someone and bought a package that was offered to me that I can tell is a really good deal. But the contractor may not be making money. I have unfortunately suffered because there have been times in the middle of a job a contractor is realizing like, Oh crap, I got to go make more money. I didn’t calculate my expenses correctly and has to hustle to get another job. And they are no longer focused on the job in front of them and their work product suffers and it just creates a bad relationship between me and the contractor. And I’ve done this enough where I can just tell.
[00:18:34] Salwa Okay, so now that you know your expenses, we have to start thinking about the expense of our time. Think about the expense of time when you say yes to a job, you’re really saying no to something else. You’re saying no to being with your friends or playing with your kids or being with your family, whatever that looks like. So it’s really important that you factor all these things in, because essentially when you say yes to a job, you’re saying no to other parts of your life.
[00:19:04] Salwa All right. Here are a couple more pieces of advice. Number one, for those of you who are starting out and are too afraid to stand out from the crowd and don’t know your numbers well enough to stand behind them. When someone like me looks at a ton of proposals and hires contractors regularly, I get a proposal and there is something in there that says like, Hey, if these numbers don’t work for you, we can discuss it or something that’s flimsy on price. What I’m hearing is that this contractor is not confident in what they’re charging and their abilities. And if I wanted to talk them down, I could. And for me, I read that like, Oh, crap, I have to go negotiate with this person, which is an extra thing for me to do. And I’m busy. And also now I have this insecurity in the back of my mind on the job that if they’re actually capable of doing the thing that they said that they’re capable of doing. So if you are in this space, I want you to come from a place of confidence. So you and I both know you are worth it and you will knock it out of the park because I’m paying you your asking price and I don’t want to have to redo this work. Got it?
[00:20:22] Salwa Number two, do not price emotionally. Look, we’re in a business that requires a lot of heart. And any way you slice this pie, most of us are artists and creatives. I have seen so many contractors that are creatives that are passionate about their work and what they offer, but they don’t know where they stand in the market. So they do what most of us would think to do and look at competitors and see what they’re charging and start comparing themselves to others. Am I better than this person or am I better than that person? What are they charging? And so on. What’s worse is when I see someone who’s super talented, but I can tell they do not have the confidence to stand out and they’re just. Using their marketing to blend in. Let me tell you, as a paying customer, this is the worst thing you can do. You are setting yourself up to be price shocked because if you’re blending in, then the only thing to compare is the price. You need your marketing and branding to be the reflection of you and what makes you unique and stand out from a sea of consultants. You need to be able to communicate why you are worth what you’re charging. So this is my warning to you to price from a place the equation, not emotions. When you price from a place of equations and not emotions, you can just get out of your own way and be confident that you’re charging a price that will help you achieve your income goals and help you and your family plan for the future.
[00:21:55] Salwa Now there is like one limiting belief that I hear and if like, Oh, I live in this city or this little town and that I’m in this particular market and that limits what I can charge. And look, I sympathize with that. I understand tough demographics and market slumps, trust me. But I just want to share that there is always someone out there that is looking for your offer and is willing to pay for quality work. So don’t be afraid to charge what you’re worth or increase your prices to achieve your income goals. If you think about it this way if you adjust your prices to reflect your income goals, you no longer have to attract 30 clients. You now have to attract 16 and have 16 people say yes to you and you can focus on serving them at the highest level and giving them the most amazing experience and giving them the most value so they know you’re worth it. You need to stop trying to attract everyone and start attracting the right client. Plus, you don’t have to worry about being priced shopped any more because you are already setting yourself apart. You just need to focus on doing a killer job and give them an experience that is commensurate to the price you’re charging and focus on having that client come back and recommend you to other friends.
[00:23:22] Salwa This whole exercise is for you to have a better gauge on what you should be charging clients. And these numbers are not set in stone. As you grow and invest in yourself and take that class and upgrade your equipment and gain a skill and further your education or land that celebrity client. Your prices should reflect the investment that you made in yourself. You are worth being profitable and it’s okay to plan for your financial future. That is what business is all about. You can do it. I believe in you. Popular does not pay the bills, but profits do. And I want people to pay my friends what they’re worth. Being financially independent is the greatest power you can give yourself. I believe in you. And until next time, classmate, keep on pursuing the high life.
[00:24:19] Salwa Thank you for listening to High Class. Please be sure to share the podcast and leave a review. If you’re ready to build a cannabis business that you can be proud of, start here today and head over to highsalwa.com to sign up for my newsletter. See you there.
