Latest / Solopreneur Sessions with Fexingo: One-Person Businesses, Freelancing, and Independent Work / How a Solopreneur Used Data to Price Services Profitably
Transcript
- Lucas: So there's this freelance graphic designer I've been following for a while — she goes by Jen on Twitter — and last year she made a post that stopped me cold. Luna: Oh, what did it say? Lucas: She said, quote, 'I just realized my biggest client is actually my least profitable client.' And she backed it up with numbers. She had been working with a major e-commerce brand for two years, loved the relationship, but when she actually tracked every hour and every expense, her effective hourly rate was under thirty dollars. Luna: Ouch. That's less than what a lot of junior designers charge. So what was she charging them? Lucas: She was billing at a hundred and twenty five dollars an hour. But the client had endless revisions, multiple rounds of feedback, and she was doing free 'quick tweaks' that took hours. Plus all the back and forth emails and project management time that she never tracked. Luna: Right — the invisible work. That's the killer for so many solopreneurs. Lucas: Exactly. So Jen decided to spend a weekend building a simple cost-plus pricing model. She listed every single cost she had — software subscriptions, hardware depreciation, health insurance, retirement contributions, even the coffee shop wifi she worked from sometimes. Luna: And then she divided by her billable hours to get her true break-even rate? Lucas: That's exactly what she did. Her total annual costs came to about sixty-two thousand dollars. She was billing around twelve hundred hours a year — after accounting for admin, marketing, and downtime. So her break-even rate was about fifty-two dollars an hour. That means her hundred and twenty-five-dollar rate had a margin of about fifty-eight percent. But only on paper. Luna: Because the actual hours were way more than she billed. Lucas: Right. When she tracked her actual time on the big client — including all the free work — she was averaging about six billable hours per week that she actually invoiced, but spending another eight hours on unbillable tasks. Luna: So she was effectively working fourteen hours a week for that client, but only getting paid for six. Lucas: Bingo. Her real hourly rate for that account dropped to around twenty-eight dollars. That's below minimum wage in some places. Luna: And that's the thing — if you don't measure it, you don't know. I bet a lot of solopreneurs are in the same boat: they think they're doing well because they have a high hourly rate, but the hidden hours eat into everything. Lucas: Exactly. So Jen made a spreadsheet with three columns for each client: invoiced hours, unbillable hours, and total hours. Then she calculated her real hourly rate per client. She found that her smallest client — a startup that paid a flat monthly retainer — was actually her most profitable, because they rarely asked for extra revisions and communicated clearly. Luna: That must have been a wake-up call. What did she do next? Lucas: She didn't fire the big client right away. Instead, she went to them with data. She said, 'Here's the actual time these projects take. I need to either move to a value-based pricing model or increase my hourly rate to cover the scope.' Luna: How did they react? Lucas: They actually agreed to a new structure — a flat monthly retainer that covered a set number of deliverables and included a strict revision policy. She also added a rush fee for anything outside the scope. Luna: So she converted a time-based relationship into a value-based one. That's smart. Lucas: And she doubled her effective income from that client within three months, because the retainer was priced based on the value she delivered — not the hours. She told me that the conversation was scary, but having the spreadsheet made her confident. Luna: It's a great example of how data gives you leverage in negotiations. If you're just guessing, you're at a disadvantage. Lucas: Right. And she also started tracking everything in real time using a free time tracker. She'd write down every task, even five-minute emails. After a month, she had a clear picture of where her time was really going. Luna: So would you recommend that every solopreneur do this? Even if they're just starting out? Lucas: Absolutely. Even if you only have one client, knowing your true cost per hour is foundational. It's not just about pricing — it's about deciding which clients to take on in the first place. Luna: And it can also help you decide when to raise rates. If you've been working with a client for a year and your costs have gone up — software renewals, maybe you're paying for better tools — your rate should reflect that. Lucas: Exactly. Jen now reviews her numbers quarterly. She has a simple dashboard that shows her effective hourly rate across all clients, her utilization rate — that's billable hours divided by total working hours — and her profit margin per client. Luna: What's her utilization rate now? Lucas: She's at about seventy-five percent, up from fifty percent before. And her average effective hourly rate across all clients is around ninety dollars. Luna: That's a huge jump. And she's working fewer hours overall, right? Lucas: She actually cut her workweek from fifty hours to about thirty-five. So she's making more money and has more free time. It's a textbook case of working smarter, not harder. Luna: I love that. And it's such a simple framework — any solopreneur could set this up in an afternoon. Lucas: Yeah, a spreadsheet and a time tracker are really all you need. The hard part is being honest about the data. It's uncomfortable to see that you've been undervaluing yourself, but once you see it, you can fix it. Luna: If today's episode was useful to you in that way — if it gives you the nudge to finally run the numbers — that's exactly why we do this show ad-free. If you want to help keep it that way for other solopreneurs, you can support us at buy me a coffee dot com slash fexingo. Lucas: Yeah, every little bit helps us keep the lights on and the conversations coming. No pressure, but if this moved your work forward, that link is there. Luna: So back to Jen — she also started using her data to set minimum project values. She won't take on any project under two thousand dollars now, because she knows that smaller projects actually cost her more in overhead. Lucas: That's a great rule. And it's something a lot of freelancers struggle with — saying no to small work. But when you know your numbers, it's easier to say no because you can see exactly what it costs you. Luna: So the takeaway here is: track everything, calculate your true cost, and price based on value, not hours. And don't be afraid to renegotiate with existing clients using your data. Lucas: Exactly. Jen's story is a reminder that in a one-person business, you're the CEO, not just the worker. And the CEO's job is to know the numbers.