What’s your time worth? Is it enough?

By Caitlin Kelly

Self Employment Tax Form - Schedule SE
Self Employment Tax Form – Schedule SE (Photo credit: Philip Taylor PT)

Really interesting piece in The New York Times Magazine about the value of ideas, and our time:

Measuring productivity is central to economic policy — it’s especially crucial in the decisions made by the Federal Reserve — but we are increasingly flying blind. It’s relatively easy to figure out if steel companies can make a ton of steel more efficiently than in the past (they can, by a lot), but we have no idea how to measure the financial value of ideas and the people who come up with them. “Compared with the mid-1900s, goods production is not as important a part of our economy, but we continue to devote about 90 percent of our statistical resources to measuring it,” says Barry Bosworth, a Brookings Institution economist who is a leading thinker on productivity in the service sector.

This question is central to my work as an independent creative, a full-time freelancer, whether I’m selling my ideas/skills/time to a newspaper — The New York Times — or a magazine like Cosmopolitan — or a website — like bbc.co.uk, all recent clients.

Or to an individual who wants my guidance on their own material.

Like everyone who works hard for a living, I don’t intend to live hand-to-mouth scraping by. I’ve developed excellent skills and the ability to work on a wide range of projects. But ginning up the income I really want is challenging when I refuse to work more than a 40-hour week and rates are low.

I also — contrary to some beliefs — don’t work 40 hours doing nothing but writing!

Much of my time is spent coming up with ideas, developing them, pitching them, invoicing, filling out administrative paperwork, chasing late payments, delegating to and managing my assistant and working on book ideas and other long-term projects.

I also need to speak to my agent and various editors. I network, in person, on-line and on the phone, with other writers about new markets.

There are many moving parts to running your own business, many of which suck up unpaid time — an opportunity cost in itself. So every hour has to bring in income, shortly or soon thereafter.

Vincent Laforet, a highly successful American freelance photographer, just wrote a really interesting blog post on this, called the C.O.D.B. — the cost of doing business.

If you’re working for yourself and don’t know the costs of every single day, and how much you’re earning in profit (or losing), you’re not running your business efficiently:

Basically it’s a number that represents what it costs you to operate your business for every day that you work. 

On a basic level, you add up all of your purchases and expenses to run your business, as well as your salary (I suggest you add your salary, but some people don’t)  and divide that by the total number of days you expect to work each year.    That will give you a number that is the MINIMUM you must make each day to BREAK EVEN.    If you make more per day on average than your C.O.D.B., you are profitable.   If you match your C.O.D.B but work fewer days than what your expected, your business is in the red, and your on a path to being out of business…

What has amazed me time after time is how few of my colleagues know what their number is, and how that in turn makes it very difficult for them to grow their business over time – let alone what to charge their clients.

You should know this number by heart as it should help you determine the minimum rates you need to charge your clients on a job per WORKING day, to stay solvent as a business.   Keep in mind that if you get paid per SHOOT day – and don’t get paid for treatments, conference calls, research, prep and post – you need to cover ALL of those days in your SHOOT DAY FEE of course.    In other words, if you get paid 3 shooting day rates, but you actually worked a total of 12 days between pitch, prep, shoot, and post – you need to QUADRUPLE your DAY RATE (or daily C.O.D.B. day rate) to break even for those 3 shooting days you are actually being paid for.

When people dream of self-employment, they rarely factor in all the additional attendant costs — whether out of pocket dental bills, maintaining their website, attending conferences or upgrading their equipment.

Let alone vacation days, sick days and days-from-hell when you simply can’t get the work in, or done.

A new client has asked me to do some work for him, and he estimated that the $1,000 he’s offered per story buys three days of my time.

Which wrongly assumes he knows my CODB.

Let’s do the math: three typical work days = 21 hours’ total, tops. That’s about $50/hour if I do nothing but his story. Sounds like a lot, right?

Not in my book.

Every hour I devote exclusively to a lower-paying project, (although it might be someone with a steadier appetite for my services or someone more pleasant to deal with) is lost to finding and/or completing something else paying more, possibly a lot more.

It’s a constant juggling act giving everyone good service, (albeit some in fewer hours).

Do you price your own time?

Do you have a formula?

Is it working?