How To Increase Your Hourly Rate

Let’s be honest – you’re not paying yourself much.

Not when you consider the financial risk you took starting your business, the long hours, grumpy customers, and staff headaches. Sometimes, you think it would be easier to just be an employee.                 

Getting paid what you’re worth won’t solve every problem, but it sure would go a long way to making business ownership more enjoyable.

There are many ways to boost your business’s financial performance – and your own compensation – but a simple starting point is calculating your current hourly rate.

Not only will it send your dissatisfaction through the roof (a key ingredient for change), but it also gives you a clear line in the sand for which tasks you need to prioritise. 

Calculate

First, calculate your current hourly rate – the amount you’re effectively being paid for your function within the company - along with compensation for ownership.

Many business owners pay themselves ad-hoc from drawings (a poor practice in my view – more on that in another article). If that’s you, check your tax summary from the last financial year or make a reasonable annualised estimate. Then add any additional profit you earned on top of your salary.

Next, calculate the number of hours you work. An approximation is fine. Start with an average week, then multiply by the number of weeks you work each year.

Finally, divide your total annual income by your annual hours worked: The equation should look like this:

(Owners Salary/Drawings + Profit) / Annual hours worked

Commit

Now that you know your hourly rate, it’s time to commit to changing it. 

Peter Drucker once said, “Unless commitment is made there are only hopes and promises, but no plans.”

Here are 4 ways you can increase your level of commitment:

1. Set a new target – what figure that would make you feel happy about your pay?

2. Understand your driver – why is this figure important? What impact will it have on you personally?

3. Set a date – when will you reach your target? Be specific.

4. Tell someone – introduce some positive peer pressure by telling someone your new target hourly rate, and when you will achieve it by 

Change

Now that you know your baseline hourly rate, you can see the value of your time.

To earn more, spend less time on low-value tasks and more on high-value work.

For example, if your rate is $75/hour, swapping a $25/hour task for a $95/hour task instantly raises your average rate.

Start by delegating or outsourcing low-value tasks like phones, emails, data entry, or accounts.

Then focus on high-value work – building systems, improving team culture, or developing strategic partnerships. These can be worth hundreds or even thousands of dollars per hour.

You’ve got the formula – now it’s time to act.

Calculate, commit, change.