Stop trading time for dollars is an all-too-common refrain when it comes to pricing your services. But what does that really mean? In this episode, we’re diving into the missing part of this conversation and what you really need to know about trading time for dollars.
One of the very first things I learned when I arrived in the online business world is that you shouldn’t trade time for dollars. That your business model, your services, and your pricing should be built around the idea of value.
It sounds good on the surface. But as someone with a successful business who was charging by the hour, it made me feel terrible. I wondered if I was doing something wrong.
This is a conversation I’ve had hundreds of times with clients over the years as they feel the same way. This is why I’m tackling this topic and am here to share the truth about trading time for dollars.
We’re going to talk about why this business advice is everywhere, what we need to know about it, and considerations for pricing your services.
Listen Now To This Essay On The BS-Free Service Business Show
While online business has successfully villainized trading time for dollars, they’ve failed to understand one simple truth.
This is capitalism. As an economic system, it is fueled by the majority of people trading time for dollars in some way. There are only a select few that aren’t doing so and reaping the benefits of truly passive income.
Going back to the realities of running a business that’s designed to generate so-called passive income, the premise is flawed. The idea is that you make something once or create a group program, and then you sell it at scale.
But to sell it at scale, you need resources, including a team. And guess what you’re doing with your team? They’re selling you their time to help you make money.
Again, they’re creating leveraged income, but make no mistake it isn’t passive. The business owner may not be trading their time, but someone on their team sure is.
As a side note, I’m not going to get into the level of exploitation that goes on in a lot of these businesses, as I’ve discussed this in prior episodes and essays, in particular, 2022: The Year of the BS-Free Business.
Trading time for dollars has been villainized with very little understanding of the realities of how our economic system actually functions. The sooner we can accept that work in and of itself is about trading our “time” aka our labor in exchange for payment, the more strategic we can be about making a living in this broken system.
If you’re listening to this podcast, you clearly need to work, and you need to make money to survive, and ideally thrive. This is why it’s so important that we truly understand the conditions we’re operating within, and how we can run businesses that support us.
We can stop wasting time worrying about if we’re doing our businesses wrong as the majority of us ARE trading time for dollars. And we can stop feeling like we’re failing because we’re not able to reach some bullshit revenue goal, or bad that we actually have to work instead of waiting for our passive income to roll in.
With that out of the way, let’s talk about the service business model and pricing your services so you can get paid.
Now, let’s talk about pricing, as it’s the best tool you have to ensure you’re being paid fairly for the value you deliver.
While I talk a lot about high ticket pricing and bitch about the inflated prices in the online business world, the truth is that the majority of service business owners I’ve worked with are underpricing their services.
What happens is that if they’re working by the hour, they’re leaving themselves short, and their hourly rate is quickly degraded by the hard costs of running their business.
For the sake of simple math, if they’re charging $100 an hour, and then work 15 billable hours a week, they’re making $6,000 a month.
That $6,000 quickly gets cut down as they realize that they spend non-billable time running the business, they have hard costs around taxes and tools and so on.
Quickly, that hourly rate isn’t as sustainable as it appears on the surface.
Now, in this scenario, let’s say this person is billing 15 hours a week, but then there’s scope creep with a couple of clients so they’re doing client work that’s not being billed. That further degrades their hourly rate.
It’d be easy to decide that the solution is project pricing as then it’s a flat rate and you’re not worried about hours.
Here’s the thing. Project pricing is great when it goes well, but when it goes wrong, it goes very very wrong. I always think of a project that we priced at $10k, but when we looked at hours we quickly discovered that it was incredibly unprofitable and there were so many things we couldn’t have foreseen.
From my point of view, if you use hourly-based engagements or project-based ones with your clients matters less if you have a defined hourly rate based on actual data.
If project-based pricing work for you, make sure you’re doing the math to figure out the time involved and using your baseline hourly rate to ensure you’re being compensated appropriately.
If charging by the hour works for you, ensure your hourly rate is high enough that you’re factoring in all the items that truly go into an hour of billable work.
If you need help figuring out your baseline hourly rate and pricing your client engagements better, Profitable Pricing in the SBB Shop has a pricing calculator that can help. Plus, it will walk you through pricing strategy and what to consider. (As a podcast listener, you can take 15% off this product using the code TIME at checkout).
Once you have a baseline hourly price, you can use that to back into all of your pricing, and stop worrying so much about if you’re “trading time for dollars”, as that’s really just some marketing hype.
To wrap things up, the more important consideration is if you’re being compensated in a way that helps you meet your goals, and enables you to not be stuck working every minute of every day.
Anyone who’s worked a minimum wage job or struggled to make ends meet knows the harsh reality of what it’s really like to trade time for dollars.
For most of us running a business, that’s not our reality, and we’re incredibly privileged to be able to do so. Let’s bring respect back to people who do trade time for dollars because we all are in this capitalist regime and recognize that we have choices in how we price our services.
Links for this episode:
- Your Chances Of Becoming A Millionaire By Race, Age, And Education
- Who Becomes an Inventor in America? The Importance of Exposure to Innovation
- Who Gains from Creative Destruction? Evidence from High-Quality Entrepreneurship in the United States
- What ‘Capitalism’ Is and How It Affects People
- 2022: The Year of the BS-Free Business
- Predatory Pricing Practices in the Online Business Pyramid Scheme
- Profitable Pricing in the SBB Shop