Entrepreneurship, consulting and freelancing are all tricky for one primary reason: There are no financial boundaries. No one will sit you down during a negotiation and say "This is how much I should be paying you." or "This is how much your company is really worth." (And if they do, then know that it is a trap.) I have spent time in all three roles, and the very appeal of having no rules is the very reason it is more difficult to know your true worth compared to other structured professions.
My upcoming book with fellow independent Jeanette Hurt, The Passive Writer: 5 Ways to Make Money in Your Sleep, aims to demystify what we should actually be earning. Here are three big themes to keep in mind.
Set your goal before you talk to clientele
It's much easier to settle for less when you are establishing your financial goals based on what the clientele is offering rather than your own vision. The problem is the client is giving you numbers based on their budget, not on yours.
Instead, create a clear cut view of what numbers you want to hit well before you factor in client opinions. You will then begin to decide on which clients you want to work with based on your ultimate goal, leading to you negotiating better and being less likely to keep unsatisfactory business.
If you're stuck, trying using a tool like Mark Hendriks Your Rate to determine a realistic goal based on billable hours per year.
Focus on your hourly rate, not on your project rate
I began my career as a journalist, and we can become obsessed with the per-word rate: $.25, $1.00, and so on. The problem is that it doesn't reflect the actual time we put into writing said story. The same could be said for any profession paid based on flat metrics.
For instance, a carpenter may only get $1.00 for pulling out a nail, but if she is able to pull out 300 nails an hour, then that rate suddenly sounds reasonable.
Include the PITA tax
My mentors over the years have taught me to include the PITA tax: The pain in the a** addition. It means being more budget friendly with easy-to-work-with clients and factoring in stress and difficulty with other opportunities.
The same can be said for other partnerships or leadership roles. For instance, being on the board of a particularly challenging organization may be compensated more in points, percentages or other factors.
The PITA tax can create a win-win scenario: If they balk at your rate, then you potentially avoid soul-crushing work, but if they do work with you, then you are compensated well.
Ready to take your ideas to the next level? Join Damon's priority-empowering discussions at JoinDamon.me and download your exclusive solopreneur guide.