Start Making $60/hour Today!

Summary

In this video, the speaker breaks down the real costs of running a business or side hustle, revealing why billing $50 per hour might not be as profitable as it seems. They explain how overhead costs such as fuel, vehicle maintenance, insurance, and lost time can eat into earnings. By working backward and factoring in these expenses, the speaker shows that you need to charge between $75 and $90 per hour to make a decent income. They stress the importance of knowing your true costs and not undervaluing your time, encouraging viewers to do the math and set their rates accordingly.

Takeaways

• 😀 Charging $50 an hour may seem profitable, but it often doesn't cover all the hidden business expenses like fuel, vehicle wear and tear, and materials.
• 😀 Business owners should factor in non-billable time, such as driving to the job site and estimating, which can account for about 20% of the total work time.
• 😀 For each hour worked, it's important to include costs like mileage, insurance, and materials, which can add up to $27.16 per hour just to operate.
• 😀 Billing $50 an hour may leave you with only $22.84 after accounting for overhead costs, which is often less than working a regular job at a lower wage.
• 😀 Charging $90 an hour can leave you with $62.84 per hour after covering business expenses, a much better rate than $50 an hour.
• 😀 Business owners need to consider other expenses like insurance, workers' compensation, and truck payments, which further reduce profits if the hourly rate is too low.
• 😀 If you're charging below $75-$90 an hour, you're either not paying yourself or not making a sustainable profit, which is risky in the long run.
• 😀 To determine your proper hourly rate, calculate your overhead costs (vehicle, insurance, tools) and then add what you want to earn per hour.
• 😀 Don't let clients dictate your pricing. If they say you're too expensive, they probably aren't your target customer, so focus on finding those who value your work.
• 😀 The key to success in business is knowing your worth and charging accordingly. Don't guess at your rate; use math to back it up and ensure you're profitable.

Q & A

Why is billing $50 an hour not as profitable as many people think?

Billing $50 an hour may seem lucrative, but when you factor in various business costs like fuel, vehicle maintenance, insurance, small materials, and non-billable time (like driving or gathering materials), the actual profit is significantly lower.

What are some hidden costs associated with running a business that people often overlook?

Some hidden costs include fuel expenses, vehicle wear and tear, vehicle payments, insurance, small materials like nails and screws, and the time spent on non-billable activities like driving to job sites or gathering materials.

How does the average non-billable time affect the profitability of billing $50 per hour?

If you’re billing $50 per hour, but you lose about 20% of your time to non-billable activities, like travel or estimates, your effective hourly rate drops to around $22.84 after accounting for lost time.

What impact does charging $90 an hour have compared to charging $50 an hour?

Charging $90 an hour allows for a higher effective hourly rate after accounting for all business expenses. While charging $50 an hour might leave you with $22.84, $90 an hour results in an effective rate of $62.84, which is much more profitable.

How do you determine your hourly rate to ensure you're covering your business expenses?

To determine your hourly rate, calculate your overhead costs, including truck expenses (fuel, insurance, maintenance), small materials, and lost time due to non-billable activities. Then add the amount you want to pay yourself and work backwards to find a sustainable rate.

Why is it important to avoid negotiating your rates with customers who think you're overpriced?

Negotiating with customers who think you're too expensive is risky because they may not value your work correctly or be willing to pay for the quality and costs you incur. It's crucial to stick to your rates that ensure you're covering expenses and making a profit.

What should business owners consider when calculating their vehicle costs for a business?

Business owners should factor in vehicle mileage, maintenance, fuel costs, insurance, and vehicle payments to determine the true cost of using their vehicles for business purposes.

How do small materials like screws and tools factor into the pricing of a service?

Small materials like screws, nails, and tools add up quickly. These costs should be included in the estimate or billed separately to ensure the business covers all the costs associated with the job.

What is meant by 'non-billable time,' and how does it affect a business's bottom line?

Non-billable time refers to time spent on activities that don't directly generate income, like driving to a job, gathering materials, or doing estimates. This time reduces the total amount of billable hours and, ultimately, the business's profitability.

Why do businesses need to charge at least $75 to $90 per hour to remain profitable?

Charging $75 to $90 per hour allows businesses to cover both direct costs (like vehicle maintenance and insurance) and indirect costs (like non-billable time and overhead). Charging below this range might lead to not paying yourself or failing to generate enough profit to sustain the business.