how should I set my hourly rate?

OK, this really doesn’t have anything to do with running small companies but I am repeatedly asked what hourly rate my friends should charge when they are doing consulting work on the side.

A good rule of thumb is to take your annual salary that you are currently making and divide by a 1000.

So, if you make $75,000 you should be charging approximately $75/hour unless you want to give a friends and family discount.

Yup, it’s that easy.

Why so high? You are a consultant! You have to cover your own health care, vacation, sick time, retirement, office overhead, taxes, accountants, lawyers, unpredictability of cash flow (feast or famine!) the list goes on.

The old way was to take your annual salary, divide by the number of working hours in a year (1,950 if you work a 71/2 hour day), and gross it up by between 30-40%; however, during the current working market demand far exceeds supply so we are left with the easy calculation of divide by 1000.

Now, go live the exciting life of a consultant!