Monday, 26 September 2016

Work & Life Balance Has Everything To Do With Your Rates

Your rates are a key factor, or even the key factor in your work-and-life balance. If a freelancer or solo practitioner complains about work-and-life balance, big chances are it's because that freelancer's rates are too low — or at least lower than they could be.

You could say: 'Oh, but life isn't all about money.' Sure, it's not. But I want you to see three very important things:

  1. If you're asking about work-and-life balance, it probably means you don't have enough life because work takes too much time. Ironclad fact: If you didn't have enough work, you'd be asking how to get more work, not how to get more balance.
  2. Work time results from workload. You can't not see how the amount of time you spend at work is the direct result of how much work you get or take.
  3. How much work you can get or have to take depends on a combination of factors, where your rates are a prominent one.
The point is: Rates go up, work goes down; you don't have to analyse ebbs and flows to know this.

By contrast, having too much work often results from charging less than you could on the basis of your qualifications, skill, experience and other factors that make your services more valued and more in demand. In other words, chances are you're underselling.

Think of your rates as a slider with which you can manage the size of your workload by adjusting demand.

You should consider having separate sliders for overtime ('rush fees') and anything else you would prefer not to be doing all the time, just some of the time, and be adequately compensated for the added inconvenience.

In other words, use your rates as incentives and disincentives until you find the right balance.

Longer version:

From basic maths at school you certainly remember that 40 * 60 produces the exact same outcome as 60 * 40. For example, whether your garden is 60 ft long and 40 wide or 40 long and 60 wide, you still have 240 square feet.

Similarly, whether you work 40 hours at $60/h or 60 hours at $40/h, your pay is the same old $2400. It will also stay at $2400 if you start putting in 80 hour weeks after agreeing to a reduced $30/h rate to even get enough orders to fill that ambitious calendar with client work. But, it will also stay at $2400 if you take a modest 30 hours of work from your best-paying clients who are ready to pay $80/h.

In fact, should you for some reason completely lose control of your mental faculties and decide to work 120 out of all 168 hours in a calendar week at the cost of having to accept $20/h 'because you get so much work from us', then you'd still be making the same old $2400!

The difference lies in how much time you save — and I chose the example so that your pay always stays on the same level to show you this isn't about making more money, it's about meeting your income targets while limiting the destructive effect they may have on your non-client professional time, your family time and your personal time.

If you think you're too smart for that, analyse your past habits. You could be surprised.

Smart people still do silly things, such as cutting their rates to fill their calendars and make the same money as they did before, only working more hours. There are smart people who, right now, after reading all this, actually disagree and still think they're going to somehow make more money by doubling their work time and halving their rates.

So much time… or is it?

Now, if the perspective of 20 hours of client work a week makes you think: 'What am I going to do with all that time?,' then you might actually have a balance problem that goes beyond being overworked and underpaid in consequence of simply charging too little.

See, not only do your children, other family members and friends have a perfectly valid claim on your time, there are also a lot of professional activities that don't directly involve client work — from paperwork and marketing to continued professional development — and you need to handle them all, on your time. Not client time.

In other words, you spend more time working (as a translator, lawyer, designer, dentist, accountant or whatever else you are) than you spend working directly for your clients.

Apart from the importance of CPD and professional networking to your career, you should also consider motivation and health impact. It makes you more productive and helps you miss fewer days and avoid all sorts of incidents. Strokes, seizures and symptoms of caffeine overdose (if that's all you're taking) don't wait for deadlines. For the record, simple cramps caused by fretting over deadlines don't either.

Attitude adjustment:

No client will pay you so you can do CPD or go on a holiday. And why should one? Even if you work exclusively for big corporations, a client is not an employer or boss and has no such responsibility for you.

But a lot of clients will pay you higher rates because you've done CPD (because it makes you and your services more attractive). And a lot will pay rates that are a certain amount per hour (or word, page etc.) higher because you've decided your child needs a pony or you need a boat or your networking or pro bono activities are worth one full day a week. For the record some of these things are actually quite marketable — this means that they could be skillfully reflected on your website and in your other materials and help make you look more competent, more dedicated, more responsible or in some other way more attractive, helping you justify your fees.

Recap: your client is not your employer or career manager or anything of that sort. As a freelancer, solo practitioner, owner or co-owner, that's your role to play simply because it's part of being self-employed.

Apart from having to calculate it, this also means you need to actually ask the rate you want.

When you go to the doctor or call the plumber, you don't want to be responsible for figuring out what's fair pay. You want them to give you a quote and be done with it. It's the same when they need your services, whatever those are.

Don't go overboard — the way up doesn't always lead up

Optimizing your rates usually means increasing them. But this isn't always the case.

If you rates require a lot of talking or writing to clients who eventually decide against hiring you, then (apart from some room for improvement in your strategy) you are probably losing compared to a smoother scenario with lower rates but less hassle.

This is because not only does 40 hours at 60 per produce the same way as 60 hours at 40 per, your pay also stays the same whether you put 40 hours in actual work and 20 in getting that work or 20 in the work and 40 in getting it.

Suppose you go from (A) 60 hours a week at 40 per to (B) 40 hours at 60 per, but the transition isn't going smoothly.

Hence, out of every 20 hours saved (the pay stays at $2400) you need to give back 1, 2 or 4 because client acquisition takes more work. No big deal and pretty much a given with any price increase. You're still better off.

However, at only 1, 2 or 4 hours actually saved and the rest consumed by selling, chances are you'd better off gaining experience in your normal work, not sales.

But by chances I obviously don't mean certainty. Here are some caveats:
  • Sometimes clients haggle more because your rates are too low, not too high. This happens if your fees are low enough to position you in a highly saturated, highly competitive, bargain-obsessed segment of the market and invite time wasters who ignore anything that isn't discounted at least 33% below a realistic rate before they even start haggling.
  • The added hours in marketing and sales could be just an initial, up-front investment in perfecting your copy and adapting your approach, or a temporary setback such as delayed response.
  • There is more to experience than just the number of years — more challenging, more prestigious jobs that help put or keep your career on the right track can justify working less and selling more.
This all is why you need to monitor the changes. First get a hang of where you are right now. Take notes, analyse a little. Repeat the steps after the change. Give it some time. Compare the results. Adjust or go back as necessary. Don't give up too easily but don't hold on to ideas that don't work either.

Enjoy your new-found work-and-life balance achieved by giving yourself a raise.

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