(Big props to Chelsea – I originally just sketched out the UI, and she knocked out all the code! You readers are amazing.)
- Hours per week = the number of hours you’re going to work, but work includes both billable hours as well as non-billable (paperwork, email, travel, blogging, presenting.)
- % billable = the percent of your work that you can actually charge for.
- Hourly rate = what the clients actually pay.
Being an independent means you can change any of these things, whenever you want. (And you will, through the course of your career.) In a perfect world, you’d track these 3 numbers over time to know if things are getting better or worse, and track the success of your experiments in passive income (training courses, plugins, SaaS apps, etc.)
Hours worked * (% billable) * hourly rate = your revenue.
But don’t think that the last number is the only important one.
Sometimes you want to work less.
Spending time with your family and friends is awesome, and wouldn’t it be nice to retire, too? You need money to do those things – so your rates need to be going up, not down, to maintain your standard of living.
To work less, you have two options.
1. Short term: do less unbilled work.
You don’t get paid (directly) to:
- Do marketing to bring in new leads
- Convert those leads to buyers (do sales)
- Do support to keep those buyers happy
- Sharpen your skills via learning, experimenting, building
- Build passive income tools like training classes or apps
But you get paid indirectly (later) for those investments. If your calculator produces less than 10-20 hours of unpaid work per week, you’re probably underestimating the above work requirements.
You can coast on your existing network & skills for a while, but do that for a year or two, and you’ll suddenly find yourself in trouble. This is how freelancers end up taking a gig they don’t really want, just out of desperation, or end up joining a consultancy.
Don’t want to do unpaid work? You can pay someone else to do it. Sometimes they do it better than you could possibly do it yourself (like my accountant or my attorney or my coworkers.) Sometimes they don’t – like when I’ve tried using Google or Facebook advertising to bring in leads. Compared to what I get from the blog & presentations, the lead quality hasn’t been as good, and it’s been expensive as hell. But if you hate marketing or content generation, you can buy your way out of it. It’s just a matter of setting the right settings on the calculator – your revenue may need to go up in order to justify paying someone else to do stuff.
2. Long term, you need to raise your rates.
Raising your rates is the key to having more flexibility to pick between paid work, family time, relaxation, or investing in your future. When you raise your rates:
- The less billable hours you have to put in for the same revenue, and
- The more time you can spend on marketing or building passive income products like training courses, which
- Increases the demand for your services, which
- Means you can raise your billable rates again
For more info on that, check out Brennan Dunn’s Double Your Freelancing. (That’s not an affiliate link – I just really believe in those concepts, and I think the more people who know about that, the better.)
Optimize your calculator settings over time.
Over time, you should be optimizing this calculator to find the right work/life mix for you, and optimizing your services & rates to minimize the amount of work required. These kinds of conscious planning decisions are the difference between a okay freelance/consulting career and a great one – hopefully short, too, so you can retire and enjoy time with your friends and family while you’re still able.