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Common Sense Customer Service!
The key to growth in any business; whether it be the largest corporation on the planet or someone working a home business from their laptop on the dining room table; is exceptional Customer Service. Customer Service can’t just be ”good” or ”OK”; it...
Increase Your Sales - Accept Credit Cards
Many people today simply prefer the convenience of paying by credit card. If you want their business, you must be able to accept their credit-card payments. In part one of this series we will discuss why you should accept credit cards, and the...
Making Press Releases Work - Creating News Where None Existed
Aren't you tired of hearing how extremely easy it is to get free publicity? Have you tried the suggestions that most public relations "gurus" give you? The hard, cold truth of the matter is that you cannot write a press release about any old...
Management Coaching vs. Performance Appraisals
The question often comes up, “Isn’t management coaching a lot like the familiar performance appraisal process?” Our answer is that the two are dramatically different. The CMOE team originally became interested in the coaching process because of our...
The Only Way to Get Even at Work
R.J. Rehwinkels said, "The only people you should try to get even with are those who have helped you." Sir Winston Churchill and Lady Astor would have done well to heed his advice. Those prominent British politicians experienced one of the most...
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How To Realistically Set Your Fees - Part 3
Effect of Benefits
We have previously examined realistic billable hours and the effect of business expenses on your hourly rate. Now we'll look at the effect of benefits.
Once upon at time, when we were employed, we received a benefits package from our employer. This usually included health, life and disability insurance. Many firms also had available pension programs, profit sharing, dental and vision coverage. In addition, one-half of your social security was paid by your employer.
As self-employed individuals, we have to provide these benefits for ourselves. This means an additional boast to the hourly rate we've calculated so far. For the sake of argument, let's figure a standard benefits package consisting of health, life, disability, pension and profit sharing. Let's figure health insurance costs at $300 per month; life at $50 per month; disability at $150 per month; pension (a SEP-IRA) at $500 per month and about 10% for a profit margin.
If we total these up we get a yearly figure of $12,000. Now keep in mind, that most of these will be paid for in after tax dollars. So, we need to add approximately an additional 30% to this number, for a true total of about $15,600 per year. The 30% represents the amount of taxes you need to pay to end up with the net amount of money needed to pay for your benefits package. Keep in mind that I chose 30% as a completely arbitrary number. Your own tax situation may be higher or lower.
How does this effect our hourly rate, let's see. Last article we left off at $56 per hour. This represented a yearly salary of $42,000 plus annual business expenses of $15,000. If we take the $15,600 in benefit costs and divide by our billable hours of 1100 per year, we get approximately $14 per hour. This brings our total hourly rate to $70 per hour.
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Now, we need to factor in our profit sharing percentage. Once again, I choose 10% as a representative number. Your targeted profit could be higher or lower. If you take your $70 per hour rate, multiply by 10%, you end up with $7 per hour. Your total hourly rate comes to $77 per hour.
This is the amount you need to charge to cover all we discussed so far.
Compare this to the approximately $20 per hour you would need to get paid by an employer to earn our hypothetical $42,000 per year. And yes, I know today many employers require a co-payment on their benefits package. I stated it this way for simplicity sake.
So, you need to charge almost 4 times what you would earn in salary to end up at the same place. Don't be discouraged, there are many people out there that are charging a lot more than this and getting all the business they can handle. Remember, these numbers are hypothetical, your situation may be much different.
Copyright 2003, DeFiore Enterprises
Interested in having your own successful, home based creative real estate investing business? Chuck and Sue have been helping folks start successful home based businesses for over 17 years, and we can help you too! To see how, visit http://www.homebusinesssolutions.com for the latest FREE tips and tricks, educational products and coaching in creative real estate investing and home based businesses. No time to visit the site? Subscribe to our FREE "how to" Home Business Solutions Digest, it's like having your own personal coach: mailto:subscribeHBS@homebusinesssolutions.com
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