How much do others charge? Entrepreneurs about their hourly rates
- KVK Redactie
- 12 Sept 2019
- Edited 18 Dec 2020
- 5 min
Self-employed professionals (zzp’ers) need to set an hourly rate. The success of your business partially depends on it: if you charge too little, you won’t make it. But high tariffs may cost you clientele. It is a well-known dilemma among starting entrepreneurs. “How much do others charge?”, is a question the Netherlands Chamber of Commerce KVK Advice Team often hear.
Read how gardener Bindert Kelder, personal trainer Semmy Schilt, photographer Eric van Nieuweland and painter André Fuselier determine their hourly rate. Who knows, it might help you determine your hourly rate.
Also see: Determine your hourly rate
"I do not negotiate"
“I remember it vividly: my first assignment as a self-employed professional. Landscaping the entrance path to the Gateway Diner in the Almere Beatrixpark.” Kelder had no idea how to set an hourly rate. He searched for data tables online, and looked at the rates other landscapers charged. “I weighed the quality against the tariff, and worked out what that meant for my hourly rate.” He landed on €35 per hour, but that was not enough to cover his costs. “I discovered it all worked out if I charged €2 more, so I quickly adjusted my hourly rate.” That was then. Now, nearly 6 years later, his hourly rate has gone up to €50. Kelders’ business has grown, and so have his costs. “I pay wages, and I am building up a pension.” His accountant advised him to raise his hourly rate in 2021. “Higher wage costs mean a higher hourly rate.”
Word of mouth
The landscaper aims to make his clients happy. “I don’t need to advertise. Satisfied customers share photos with family and friends. Or neighbours passing by see my sign ‘Another Kelder Hoveniers garden’. Success comes from what you do and how well you do it, not how much you charge.”
Bigger vs smaller jobs
Previously, Kelder tried mostly to land larger gardening and landscaping projects. “But that involved a lot of work, taking care of administration, getting materials. After completing the work, I would often go by for finishing touches. Those activities cost time, but I don’t get paid for them.” Although these big jobs do bring in a lot of money, it is the smaller maintenance jobs that bring in the most turnover.
“So I have decided to spend 1 or 2 weeks a month on periodical maintenance. That will give me a steady income. And it is better for my health; garden tiles have become larger and heavier over the past few years. The work is physically challenging. Maintenance work will help to balance out the workload.”
Negotiating your hourly rate
Kelder does not negotiate. “I always say: we’re not at the marketplace. It costs what it costs. I do not make up prices. But people still try.” With a large assignment coming up, Kelder sticks to this standpoint. “I expect they will want to haggle, but I am not so good at that, so I simply don’t do it.”
“Quality is more important than fame”
During his kickboxing career, Schilt worked at a gym as a trainer. When the demand for lessons kept on growing, he decided to set up his own business. In 2001, he started the Fight Game Academy. He organises combat sports-related training sessions as a personal trainer and for groups. The ex-kickboxer also hosts workshops and clinics at secondary schools.
Accessible for everyone
A fighting sports icon, now within reach in Zuidlaren. Do customers flock towards Schilt, or does the rate he sets play a part as well? “Naturally, people like the idea of working out with Sem Schilt, but the product has to be good. In the end, quality is more important than fame.” The entrepreneur wants to be within reach of everyone. “Charging a higher rate on account of my name doesn’t feel right.”
He looks at product-market combinations when setting his prices: which product is meant for which target group, and are the product and price evenly balanced? “I want to be a personal trainer and gym for everyone. A ‘price for everyone’ is part of that deal”, the entrepreneur explains.
He does take his revenue model into account. Personal training brings in the most turnover: “I charge a rate for 45 minutes”. Although group lessons are relatively more common, they bring in less money. “People take out a membership to participate in group lessons. That requires proper planning.” Sentiment also plays a part when Schilt sets his tariffs. “Schools are a different story. I offer those classes from a more socially motivated standpoint.”
Raising the hourly rate
Schilt: “I raised my rates last year, because I hadn’t done so for 4 years. Right now, corona has a large impact.” The attendance rates have fallen by a quarter. “If I want to continue making the same amount of money, I should raise my prices again.” But that, he feels, would be unrealistic. To keep his turnover up, he has started livestream lessons.
“Remain true to yourself when setting an hourly rate”
A freelancing acquaintance got Van Nieuwland involved in a project making 30 portraits. “I had no idea what I could charge for such a project, so I thought: what is the budget?” It is a question he still regularly asks. “Much of my work comes from the cultural sector. The budgets there are usually not very high.”
Saving and investing
Asking a client how high the budget is sometimes results in a lower hourly rate than he would like. “And then it’s up to me to decide whether I like the assignment enough to take it. Or whether I should look for assignments that bring in more money.” Wedding photography is often the biggest earner for Van Nieuwland: “Quite often, I can pay my fixed costs from 1 wedding shoot, or I use the money to save or invest.”
“Negotiating is tricky”, the photographer says. “But I have become better at it. Sometimes the assignment makes a difference. How much fun is it? Is it a prestigious assignment? You have to set an hourly rate that allows you to remain true to yourself. If the assignment is not that great, but it will make you a reasonable amount of money, that’s an option too.”
Average hourly rate
In the end, Van Nieuwland settled on an average hourly rate. By keeping a close watch on his records, he knows what his income and spendings are. “It is important to know what the minimum income is that you want to earn. What are your fixed costs, like your house, your food, and your car? If that amounts to €1500 and you make about 24 billable hours per week, that leaves you with an minimum hourly rate of €62.50.”
Van Nieuwland still has difficulty determining his worth every now and then. “You may find out that competitors are making more than you are. If you are working within the same sector and your quality is on the same level, it makes it easier to negotiate a higher price.”
“Use your competitors as yardsticks”
“The first contact with a customer is important. I always dress correctly, this is the first impression you make on people.” During the first meeting with a potential client, Fuselier asks what their wishes are. “I look at the current colour scheme, and ask what colour they want.” He always brings the quotation in person.
Observation is important, says Fuselier. ”It helps to prevent additional costs. For example, the window sealing often has to be replaced. Or the surfaces I am going to paint have bad patches, that need to be treated first. As a craftsman and expert, you need to be able to recognise those things. In the end, it is the customer who decides whether or not I put those additional matters in my quotation.”
Fuselier uses a systematic approach for drawing up his quotation. “I measure the number of square metres I have to paint using a laser. Are we talking walls, ceilings, or window frames? What type of treatment is needed for the surfaces? Light sanding and varnishing, or complete to-the-surface sanding? Those questions all affect the price.” To make the quotation, he uses a software program. He inputs all the data and the software helps to produce a clear quotation.
“I only use high-quality paint. Cheap paint produces a lower quality result, and it often takes more time to apply it correctly.” When setting his hourly rate, the painter takes investments into account. Part of his income is meant for replacing or purchasing new machinery, equipment, and tools.
Be clear, avoid discussions
Fuselier hardly ever has to discuss the price he sets in a quotation. “I know how much my competitors charge. I use them as yardsticks. My added value is the trust I gain from my customer. My quotations are clear and, as a result, I never have to argue about a lower price. If I did lower the price, to me it would mean I overcharged them to begin with.”