The Side Business Question: What Is Your Time Worth?

Bob writes in:

I’m in my mid twenties, worked doing tech support all through college, and worked out of college as the IT director for a political campaign of 120 staffers. I now have left to a job that fits my interests a little bit better, but clearly still have a lot of IT skills.

I haven’t been doing any IT work on the side, but the friend of a coworker of mine needs some computer help. I’m perfectly happy to help her. What I really want is money, but I feel awkward asking for it. I’m not in debt, I’m pretty healthy financially, but money is preferred just because I want to spend it on what I want, rather than just asking for a general category of gift (bottle of scotch, etc). Any advice on how best to explain that I charge a certain rate and not feel bad about it? (Her fix is pretty easy for someone with my background, hence the guilt)

The best approach in this situation is to decide what you want in advance, then be up front and clear about it. Communication never fails to be a winner in any situation and the earlier you communicate your needs, the better. You should communicate what you want at the earliest possible juncture in this so that there’s never any chance of there being a misunderstanding of the arrangement.

The secondary question, of course, is whether or not you should feel guilty about doing this.

There’s one big thing to keep in mind whenever you provide this kind of service or any kind of service: people are paying you to provide a service they can’t – or are unwilling to – do for themselves. You are providing some sort of expertise or trait that they’re not bringing to the table, whether it’s knowledge of leverage for moving a piano, arm strength for digging a lily pool, or IT skills for solving a computer problem.

To them, the skill you have has value. Quite often, it has significant value.

What value? It doesn’t matter what you think that skill is worth. It matters what they think the skill is worth. That amount is what the person receiving that service is willing to play. In other words, it’s set by the marketplace – if there are fifty plumbers in a city, they all charge similar rates, for example.

Another factor to remember is that you are selling your spare time. That time has significant value – you have a limited quantity of it and it’s often the only time you have for leisure and recreation. When you fill that time with tasks that you don’t want to be doing, you deserve some sort of compensation for it.

Thus, I would check around in the community and find out what the going rate for the type of service you’re going to provide is, then provide the service at that rate or a slightly lower one. After all, that is the price they would pay for that service in the broader marketplace.

You may decide that a lower rate for family and friends is appropriate and, if that’s the case, reduce the rate you charge to benefit that person. Should you provide that kind of rate reduction? That’s up to you, but if you are providing that rate, make it clear up front and on any receipts or invoices you provide just to keep matters clear for the future.

On the other hand, there is some value in providing the service pro bono, particularly if the service isn’t too stressful for you. This can have an enormous social benefit – it often opens the door to a long exchange of value on both sides of the coin, from work opportunities to assistance with tasks and advice. There is a great deal of value in following this path and, quite honestly, it’s probably the path I would follow in this case.

Good luck in whatever you choose.

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18 thoughts on “The Side Business Question: What Is Your Time Worth?

  1. Anthony says:

    Bob, I’ve been there and here is what I learned:

    - Charge the going market rate. Call around, find out how much all the other shops are charging and set your price somewhere in the middle, or above if you are doing something unique.

    - Charge the going market rate. I’m repeating myself because I didn’t and because you’re going to be tempted not to for various reasons. Don’t listen to your misgivings.

    - Replied matter-of-factly when asked for IT help. “I can certainly help you with that, I only charge $x per hour and I can come out tomorrow night if you would like.” Those who would take offense will be few and far between.

    - Ask for payment up front. Wal-mart doesn’t let you out the door without payment and so shouldn’t you. Besides, $10K in account receivable doesn’t pay the rent, feed the family, etc.

    - Outsource the accounting to somebody else. If things pick up (and they will), you’ll come home so tired but will still have the bookkeeping to do. This will burn you out very quickly.

    Otherwise, good luck!

  2. NMPatricia says:

    A couple of things from my experience and knowledge:
    1. People who value what you do will be happy to pay you.
    2. As I read through this post, I immediately flashed on to Trent’s concept of “social capital”. Because, as Bob admits, this is not a big deal of a job (as in a lot of work or expertise), I would certainly consider the social capital as payment. A more complex job would be different.

  3. Maureen says:

    Print up a business card and pass a bunch to your friend upon completion of the job. Tell them you are hoping to do repairs as a sideline and you would appreciate it if they would consider recommending you to their friends. You may recoup the value of this job in free advertising and your friend will likely pay you next time (possibly even this time).

  4. Michelle says:

    We deal with this ALL the time – DH’s first career was as an electrician. Everyone we know has electricity (and all of Tim’s friends/family has computers, I’m sure). You HAVE to set a precedent that your time is valuable. Repairing a computer might seem like nothing, but the social value of helping the one friend pro-bono might = lots of unpaid labor and future reluctance to charge based on “well, you did it for X for free, why not help me out?” My dh, as an independent contractor, charges $75/hour – the friends & family rate is $50. He brings it up first and foremost – when they ask if he can help. Not after he’s at their house! If folks ‘balk’ at it or give him push-back, he gently refers them to another contractor who generally quotes them 3X what DH would have charged. Hanging a ceiling fan is child’s play to DH – takes him 15 minutes, but that’s his (and my and our child’s) 15 minutes. It’s worth $$ to the friend/family not to spend their several hours finding another contractor or attempting it themselves. My 2 cents.

  5. Michelle says:

    Not sure where/why/how I decided IT guru = Tim, but that’s what I meant above!

  6. Angela says:

    I have had some experience with providing services for the “social benefit,” and I have to admit that it has become a burden. I sew as a hobby, and when I first started sewing I was thrilled to be able to practice my skills on garments that friends needed altered. Several years later, these friends are still expecting my services for free, and it has become time consuming. Also, I have not benefited from any paying referrals due to the fact that the work I do for them is not obvious to other people (trouser hems aren’t really an exciting social topic).

    I have also had problems with the “barter” method. A neighbor gave me a used sewing table (worth maybe $30), and asked me to hem a “few” pairs of pants for her in return. 6 pairs later (at appx. $8 worth of labor per pair), she is still digging up pants that she needs altered.

    As much as I enjoy being helpful to my friends and neighbprs, it didn’t take long for me to realize that my time is not as valuable to them as their money is. Not one of my friends has offered to pay me for my skills, and I have had to make it clear that I can no longer provide free service. I hate charging them, but I have learned that many people will take advantage of those of us that don’t appreciate our own time.

  7. Anna is now Raven says:

    Yes, definitely charge an appropriate rate, even to a friend, for all the reasons given above. I have worked professionally for many friends, and they always pay without question (and immediately, too).

    You can introduce the subject by saying “My starting rate for freelance jobs is $XX per hour.” Then wait for a response.

    Keep a record of such earnings and declare them on your tax return. You are not likely to get 1099s from private customers, but you still need to declare the income. Investigate 1040 Schedule C.

  8. Michelle says:

    I run a side business doing alterations/custom clothing for people. I am a HUGE fan of the trade, for example, I make prom dresses for girls at church, and they baby-sit for me for free. The key is to outline in advance what the terms are. The trade works well if you’re dealing with someone who has a service you would be paying for otherwise. If it’s something you wouldn’t normally buy, just charge them the going rate.

    The bottom line, if you do decide to charge (or trade) set the terms in the beginning.

  9. Anna is now Raven says:

    My previous comment got away too fast ;-)

    The reasons for specifying “starting” rate:

    1. It silently states that you are giving your friend a break by charging at the low end of the range.

    2. It silently states that you could easily be charging more, and may do so in the future.

  10. Marsha says:

    I also recommend charging for your help. What if you don’t and her computer develops a problem a few months from now. She may feel that she’s taking advantage of you if she calls again. Instead of calling you she could spend hours trying to fix the issue herself. However if you charge her, it’s a business transaction. She’ll know that she can call you in the future and that you’ll be happy to help her.

    “Her fix is pretty easy for someone with my background, hence the guilt.”

    The thing to keep in mind is that because you’re good at what you do, you’ll be able fix the computer better and faster than someone without your background. There’s nothing to feel guilty about. All this means is that this person will be getting top-notch assistance.

  11. Sue says:

    Be clear upfront about the cost! I was doing computer work for a friend under the barter system, when she volunteered to pay me instead. Unfortunately, we had different ideas of what my time was worth. I lost a friend over it.

  12. BD says:

    “There’s one big thing to keep in mind whenever you provide this kind of service or any kind of service: people are paying you to provide a service they can’t – or are unwilling to – do for themselves.”

    SO TRUE. And yes, we’re selling our spare time, it’s of significant value, and we deserve compensation for it (monetary is always best).

    Artists ESPECIALLY need to follow this advice, because we’re often expected to do art for free or for “exposure” or as part of a “contest” (ie, Design a Logo, and the best one gets used! Oh, BTW, we aren’t paying any money for it either).

    It’s a nice sentiment, but it doesn’t pay the bills.

  13. Michele says:

    I echo the clarity comments- I have a friend who was working on her internship in a particular area. She asked if she could present classes (that are of interest) to parishioners at the Church where I work. She did say that as soon as she was certified, she would be charging a fee for the same classes. I agreed, and kept in touch with her on her timetable for charging for the classes. Since she was clear, and prepared me to pay for the classes eventually, I was ready and willing, since they are worth the value received. I knew what to expect, and when- and now that she is charging for her classes, we can either limit the available classes (budget constraints) or make it a ‘line item’ for the upcoming budget year. And I’m not taking advantage of a friend based on her religious beliefs or her friendship!

  14. Cheryl says:

    Bob mentioned this was a friend of a coworker. While he might have a hard time charging a friend, the friend of a co-worker is hardly a close connection. Go ahead and offer your rate up front, and don’t feel guilty. If it was a close co-worker that needed the help, a discount would be good, or just a favor, saying “Normally I’d charge for this, but since you’re such a good friend, I’ll do this one for free…”

  15. I want to emphasize offering a rate above what others offer, too. This is the quickest way to find out whether they just want cheap help (if that’s the case, let them hire their 14-year-old cousin’s best friend), or whether they want *you*. In either case, your time is valued.

    I would never advise offering a rate that is below market. You’ll end up filling your plate full of “work” that pays a marginal rate, and then have to raise it later and be left with frustrated clients.

    Maybe I am getting ahead of where you are…in which case I would just say that I started a FT consulting business, and in its infancy, a lot of that was computer repair.

    -Erica

  16. Brittany says:

    If you really want money, I second asking for it. However, I agree that the social capital benefits can be great. I take advantage of an IT friend for advice–I’m tech savvy enough to do fix most programming problems, but sometimes need someone to walk me through it, so problems are occasionally met with a quick phone call or IM to him. I’ve never paid him in more than tequila, but I have referred him to several people (and he now does all of the tech work at my father’s business), so the 20 minutes he spend on the phone with me were well worth it.

    Same for my freelance editing work… I’ve spent countless hours helping a good friend with college and fellowship applications since high school. Never got more than dinner, but having gotten him into 4 of the top 5 Ph.D. Chem programs in the country (didn’t help him with the 5th ap!) on my portfolio has made it worthwhile, not to mention the personal satisfaction I get from a helping a friend… plus science help anytime I need it.

  17. It’s worth of not wasting it. :-)

  18. Excellent points all around. Erica Douglass is on the mark when she said that undercharging is essentially a sure-fire way to fill your time with marginally-profitable work–and, in my experience, also with high-maintenance clients.

    Valuing what you charge and knowing how to set your rate are such important topics, I devoted posts to them on my blog (www.StartMyConsultingBusiness.com).

    Figure out your rate, be up-front and matter-of-fact when discussing it, and not only will your clients will value your work more highly, but you’ll be less stressed, since you’ll be making more money and you’ll also feel like you’re being paid what you’re worth.

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