How to Calculate Your True Hourly Rate?
Hi all, just wanted to mention that we realized in our first year scraping by that we weren't covering our costs of doing business.
Even though we run our business out of our home, we jave insuranc...
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We did something similar. We added up all of our overhead, labor costs, and profit goals to figure out what we actually needed to generate. We also built higher-than-market wages into the numbers because we wanted to attract and keep good cleaners.
What we found was that the exercise helped us understand our costs, but we didn't necessarily want to price our services based on hours. Over time, we moved away from custom quoting and created three service packages instead.
For example, our entry-level package takes about an hour to complete. Knowing our true hourly costs helped us determine what that package needed to sell for to be profitable. So instead of saying "we charge $X per hour," we price the package based on the outcome we're delivering, while making sure it still covers labor, overhead, and our profit targets.
It's made quoting faster, pricing more consistent, and given us a much better understanding of our margins.