As freelancers and small business owners, it’s easy to feel as though there’s a limit to how much we can earn. Especially when you work on your own, you know your capacity isn’t infinite, and there’s only so much you can (and want!) to do.

Having said that, in my experience of mentoring freelancers and small business owners, the likelihood is that you’re actually able to earn far more than you think you can.

While I often talk about understanding your minimum hourly rate being crucial for running a sustainable business, another part of what I teach through Charge with Confidence is how to calculate an aspirational hourly rate. Your aspirational rate is essentially a figure that would allow you to bring in enough money for you to live your ideal lifestyle.

Sometimes when you calculate your aspirational rate, the result is a number that you can't imagine ever being able to charge. However, I’d argue that this isn’t necessarily a bad thing. In fact, it can be a huge positive and can help give your business a push in the right direction.

In this blog post, I’m looking at why it’s useful to have both a minimum and an aspirational hourly rate, as well as explaining how your aspirational rate can be beneficial to both you and your business.

Freelance hourly rates

In Charge with Confidence, I show you how to calculate your minimum hourly rate to take into account your business expenses, personal outgoings, tax payments, retirement savings, and anything else you need money for. We divide your financial requirements by the number of hours you have available for paid client work, which means we also consider things like holidays and sick leave.

When you calculate your aspirational hourly rates, the principle stays the same; it’s just the numbers that change. My mentees usually consider higher personal outgoings and more days’ holiday to live their dream lifestyle. And as a result, they also tend to account for higher business expenses and tax payments to align with the larger incomes they’ll need to fund this lifestyle.

The difference between the bare minimum you can afford to earn and the aspirational rate you’d like to earn one day can be significant. However, this can also prove really useful.

Having both a minimum and an aspirational hourly rate gives you a range of rates to quote between. This means that you can begin to consider things like the client’s budget and what other service providers might charge while still ensuring you’re going to earn what you need from the project.

For example, rather than simply quoting your minimum rate, if you suspect a client has a bigger budget, you can base your quote on a rate that’s closer to your aspirational figure. Similarly, if you think other service providers would be likely to charge more than your minimum, you can quote a higher rate too.

While I often talk about why it’s a bad idea to charge the same as someone else in your industry, what I mean is that you shouldn’t allow another service provider’s rates to influence your own to the extent that you don’t know how much you need to charge to make ends meet or are charging less than you need just to be ‘competitive’. Instead, when how much you need to earn is lower than average industry rates, other service providers can be a great source of inspiration to encourage you to charge more, especially when they’re charging figures that more closely reflect your aspirational rate.

Benefits of having an aspirational rate that feels unachievable

1) Having a high aspirational rate gives you a stretch goal

Although having a high aspirational rate can feel unrealistic, I’d argue that it’s actually a good thing. One reason for this is that it gives you a stretch goal to work towards rather than what you should necessarily be aiming to earn now.

It’s easy to get comfortable with how much you’re earning, especially if you’re not particularly motivated by money and are earning more than you need to make ends meet. Having an aspirational rate gives you something concrete to aim for, unlike an abstract goal to simply ‘make more money’.

2) Setting a high aspirational rate makes you consider what you want in the long term

When you calculate your aspirational rate, it also encourages you to think about what you want from your business in the future.

As part of Charge with Confidence, we do a long-term vision exercise to get you thinking about your life 10 years from now. Many of my mentees have told me that they’d never thought this far ahead before and that doing so was eye-opening. It gave them something to aim towards and made them feel more inspired to develop long-term goals.

To calculate your aspirational rate, you need to know what your income would need to be to fund the lifestyle you aspire to. This makes you think about what you eventually want your business to do for you and the outgoings you’d like it to cover.

Knowing your aspirations gives you fresh goals and a new perspective, as well as an emotional reason for wanting to reach your aspirational rate one day, if possible. All these things will leave you feeling more motivated when it comes to developing your business and taking steps forward rather than remaining where you are.

3) Identifying a high aspirational rate gets you thinking differently

Once you know what your goals and aspirations are, you naturally start to think about how you can achieve them.

Having a big number in mind encourages you to think differently. Rather than being content with your current smaller number, it expands your horizons and encourages you to begin to consider how you might earn that higher figure.

For example, considering that there are clients at every budget level, you might start to ask who would be in a position to pay your aspirational rate. You might then begin to see how you could adapt your service to appeal to those clients with larger budgets.

When you don’t have an aspirational rate to work towards, you’re far more likely to simply accept your current rates and get comfortable with where you’re at with your business. On the other hand, when you do have an aspirational rate, no matter how unrealistic it might feel at the time, you’re more likely to take steps towards achieving it.

Even if you don’t end up reaching your aspirational rate in 10 years’ time, you’re going to be far closer to it and will find that you’re earning a higher income than you would have been if you’d never set an aspirational rate in the first place!

If you’d like some guidance to help you set an aspirational hourly rate you can work towards, I’ll support you through Charge with Confidence. During the programme, we’ll look at the minimum you can afford to earn right now before thinking about how much you’d need to earn in the future to enjoy your ideal lifestyle.

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