Ah yes. The time-honoured question of practitioners for eons. We all know it well.
First of all, I’d like to get rid of the word ‘should’ from the equation. ‘Should’ conjures the image of a principal looking down their nose and wagging their finger at you.
As with most things in life, there really is no right or wrong. Just outcome. So this is where we can start…
What do you actually want to get from your practice financially? I know it’s a hard question for many practitioners. Many of us even feel guilty charging people for our service. But we have to make a living, right?
So rather than separate money and our passion, let’s integrate them…
And think about what we need to do to make a life for ourselves – in a way where we feel a deeper connection. A life that enables us to grow and develop personally and professionally. This is what we encourage our clients to do. So, in essence, honouring the work we do and the advice we give by truly living it.
So now let’s ask the question:
Question 1: What do you want to earn a week?
Your ‘net income’ is post-tax. So let’s look at what you would like to take home per week. Then work out how much tax is on top of that. Not sure how to do this? Just Google ‘income tax calculator’ for your state or country.
Exercise A: Write down your ideal Weekly Gross Income.
Question 2: What are your business costs?
Your business expenses could include things like:
- Consumables like oils, needles etc.
- Association memberships/registration
- Scheduling system
- Wear and tear of equipment
Here you also want to include:
- Holiday pay
What you need will vary from one person to another. It is important, as a practitioner, to make sure that you take adequate breaks throughout the year to prevent burnout.
Work this out over 12 months. Make sure you include all of your costs. Divide those costs by 52, so you have a weekly figure.
Exercise B: Write down the total amount for Weekly Expenses.
Question 3: How many clients do you want to see?
I mean hours spent only seeing clients – not total hours working (i.e. NOT including admin, research, further training, etc.). We’ll get to that in a minute.
Exercise C: Write down the total amount of Weekly Hours
From here it’s really quite simple. We have:
A: What you want to earn
B: What your business costs are
C: How many hours you want to work
The easy equation: A + B ÷ C= your hourly rate
Let’s say you want to take home $1500 (This is in Australian dollars) per week after tax. With tax your gross weekly income would need to be $2065 (A). You have worked out your weekly expenses to be: $400 (B).
You need to earn A+B or $2065 + $400 = $2465 per week. This is what you need to cover your bills, pay your tax and receive your desired income.
As you are aware of the risk of burnout in the long term, you decide that 25 client hours (C) per week is manageable long-term.
So your hourly rate is determined by: (A+B) ÷ C = which equals $98.60.
This could be the hourly rate you have chosen for yourself. However, you also need to factor in time spent on that non-client work: admin, research, further training, marketing, etc. So my suggestion is: add 20% to your final figure as an estimate. If we round this final figure for ease, it takes your client fee to $120 per hour.
Now I can hear the combined whistle of air through lips as this figure sinks home to those of you who charge $60-$70 per hour (again, these figures are in Australian dollars).
Don’t want to charge $120 per hour?
No problem. All you need to do is to work more hours. Or be okay with earning less – which may mean pulling back your spending at home.
But what if you need to support a family?
This might include costs like: a mortgage, health care, schooling, uniforms, holidays, and extra food, electricity, phone, etc all on one income. Or you may not have a family now, but plan to down the track. How easy will it be to increase your fee from $70 per hour to $120 then?
Feeling challenged by this?
Looking at you practice in terms of hours and money can be hard. It can even be frightening or create a sense of shame. You are not alone. I have been there too. However, I urge you to explore your reasoning behind your fee. Is it legitimate or purely emotional?
If you are happy and contented with your rate, then I applaud you. For many practitioners it is a constant bone of contention.
What do you think?
Take some time to play with this equation and let us know what you discover…We would love to hear your experiences with deciding what to charge. Have any questions? We’d love to hear those too. Feel free to comment on this post, or contact us directly.