Most consultants and freelancers are under the mistaken assumption that their prices should be determined by their monetary needs divided by the number of hour they have to consult.
Prospects ask for this in the form of your hourly rate which they then use to erroneously compare the value different consultants provide.
Here is why your rates have nothing to do with the hours you work.
1. You're never going to work all those hours anyway
When most people start they figure they're going to work 40 hours a week for clients. The truth is that if you want to bill 40 hours a week to clients then get ready to be in the office for at least 60 hours.
The most productive consultants manage five maybe six hours a day on client work. A more realistic average is three -- four hours a day billed to clients. The rest of the time is spent billing clients dealing with marketing and working on all those other administrative tasks that come along with running a business.
Once you take out all those hours and put in the wages you want to earn you're going to end up with such a huge hourly rate that many clients are simply never going to want to pay it.
2. Your time isn't what's valuable to you clients
The second faulty assumption hourly billing makes is that your time is what's valuable to your clients. Simply sitting in a chair on 'client time' may mean you earn more, but it's of absolutely no value to the client. The truth is that your client doesn't care how long a project is going to take, they only care about how that project is going to bring value to their business.
Instead of trying to pass off your time as valuable, you need to focus on the outcomes you're going to provide to your clients.
3. When you focus on outcomes you are focused on value
When you start the engagement based on the hours you're going to put in you're setting both yourself and the client to focus on the wrong thing. The client is incentivized to encourage less hours, often at the expense of achieving their desired outcomes. If you want to earn more, then you're incentivized to increase the hours you spend on the project.
This broken business model makes it harder than it needs to be to achieve the outcomes your client's desire. By moving the focus off of hours and focusing on outcomes you have the flexibility in a project to meet the client objectives in new innovative ways.
4. Hourly rates enable erroneous comparisons of value
Every consultant has had a call from a potential client where the question "What's your hourly rate" is asked at some point. This question is fraught with danger since the prospect is going to take anything you say and make a huge number of assumptions about their project and your skills.
First they're assuming that every person is going to take about the same amount of time to finish a project. Thus a consultant that says their rate is $250/hour is immediately disadvantaged to a consultant that says their rate is $50/hour.
It may be that the $50/hour consultant will take 10 hours to complete the project while the $250/hour consultant will take one hour. That makes the $250/hour consultant cheaper than the $50/hour consultant by half.
If you don't quote an hourly rate but stick with a package price then then you're comparing a completed project not two different hourly rates that have no bearing on the final price of the project.
Next time a prospect asks for your hourly rate tell them you don't have one. Tell them that blindly quoting an hourly rate only lets them make poor comparisons of the value different consultants provide.
Instead dig deeper with them. Focus on the outcomes they want and before you send a proposal to them have a verbal agreement around the costs and outcomes for the project. By the time they get a proposal the only thing it should be for is getting final sign off on a project.