When was the last time you actually found out what your hourly rate was? Not the posted one, but the one you actually work for. Think they are the same, think again. The formula to figure this out is simple, but is it really the truth? Here’s what they say, revenue less COGS (Cost of Goods Sold: i.e. commission, time, direct marketing, etc.) gives you what you earn. How does this apply to your hourly rate?
Let me give you an example, you are a plumber, your hourly rate is $85 dollars, you get a call to go to Belle River from Windsor, approximate driving time there, 20 minutes. You spend 35 minutes at the customer’s house and fix the problem. Time to get to next appointment, 20 minutes. Now COGS would have you look at gas consumption, time, direct costs related to getting this customer, and so on, however let’s just keep it simple. 20 minutes to get there, 35 minutes at the clients house, equals 55 minutes, you get paid $85 dollars for 60 minutes, so your hourly rate was $92 dollars! Every minute is worth around $1.42 to you, so the five minutes gained was worth around $7 dollars. Not bad, but what happened on the next call?
Now let’s say you own a business and you pay them like a car dealership does, that is you’ve establish a time for each task, so as an example a lube, oil and filter change would be .3 or ½ an hour. The mechanic however gets paid an hourly rate; say $30 dollars an hour. Now let’s say that your posted rate is $87 dollars. So, we know how much the mechanic makes an hour, we know your posted rate, and we know the time paid for each task, so let’s add one more task and time for it and build a day. For this example, we will add; tire rotation and balance and pay .6 or 1 hour for the job. Here we go….
John the mechanic did the following today
So the question is what is your real hourly rate?
Let me give you an example, you are a plumber, your hourly rate is $85 dollars, you get a call to go to Belle River from Windsor, approximate driving time there, 20 minutes. You spend 35 minutes at the customer’s house and fix the problem. Time to get to next appointment, 20 minutes. Now COGS would have you look at gas consumption, time, direct costs related to getting this customer, and so on, however let’s just keep it simple. 20 minutes to get there, 35 minutes at the clients house, equals 55 minutes, you get paid $85 dollars for 60 minutes, so your hourly rate was $92 dollars! Every minute is worth around $1.42 to you, so the five minutes gained was worth around $7 dollars. Not bad, but what happened on the next call?
Now let’s say you own a business and you pay them like a car dealership does, that is you’ve establish a time for each task, so as an example a lube, oil and filter change would be .3 or ½ an hour. The mechanic however gets paid an hourly rate; say $30 dollars an hour. Now let’s say that your posted rate is $87 dollars. So, we know how much the mechanic makes an hour, we know your posted rate, and we know the time paid for each task, so let’s add one more task and time for it and build a day. For this example, we will add; tire rotation and balance and pay .6 or 1 hour for the job. Here we go….
John the mechanic did the following today
- 15 lube, oil and filter change (.3 times 15 = 7.5 hours)
- 5 tire rotation and balance (.6 times 5 = 5 hours)
- Total hours: 12.5 times $30 dollars per hour = $375
So the question is what is your real hourly rate?
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