A couple of recent blog posts have got me thinking about teams and internal valuation lately.

When I started in the tech world, I had no idea how to value my skills. In a fit of desperation, I took a salaried position that paid barely above minimum wage because I thought it was all I deserved. Thankfully, an incredibly honest company came along and offered me more than twice what I was making to change positions - "still, this isn't what you're worth, but it's a step in the right direction."

When I started freelancing, I charged what I felt was the most fair rate - essentially charging what I thought I should be earning per hour. As a result, I earned a lot of clients rapidly. As I was still learning how to budget and quote for projects, though, it also lead to a lot of barely-break-even and taking-a-huge-loss clients. Thankfully, one of my best clients held firm and helped correct my mistake.

You're work is worth considerably more than you're charging. Really, you should have more respect for yourself and stop low-balling us. We won't pay this invoice until you double your rates and send us a new one.

Value of Labor

I've had lunch with managers at various firms who, after a drink or two, have told me exactly what they think my time is worth. It's been an interesting experience to learn that they'd be charging so much per hour for my work "if [they] were [me]."

It's also educational to learn, after discovering what they'd charge clients for my work what they'd actually be willing to pay me for that same work.

With almost no exception, there's a massive discount applied. Not one I've ever agreed to, and definitely not one I'm comfortable with.[ref]This is not to say I fail to see the overhead involved with working on a team. I understand that not every dollar I bring in can go to my pocket. We have team members not working on billable projects who also deserve to be paid. We have an office. We have company tools. We pay for travel and other outreach/sales-related expenses. I understand where the overhead comes in and fully recognize it's a part of doing business in the industry. My point is in how much overhead is applied.

I once met an executive who told me he was confident they could bill upwards of $300/hour for my time. He then proceeded to offer me a salary of $50,000/year. For those not running numbers in their head, that would be the equivalent of $24/hour. I know for a fact we aren't in a business with >90% overhead.[/ref]

When you work with a team, a large portion of your hourly rate is absorbed into overhead. It's a consequence of working with a team that you focus on your strengths (i.e. billable hours) while others focus on theirs (i.e. non-billable sales calls to build up a client pool). From the perspective of the employee, though, this is really an investment you're making in the company.

If I know I can bill $100/hour on my own as a freelancer, and I'm only paid $30/hour, then the only way I can justify that difference there is that I'm investing in the success and future of my team. Investing in recruitment. Investing in outreach. Investing in skills development.

From the business side, we have to recognize this implicit investment our employees make to our success. Like any other investment, it's one that needs to show a return, or we can't reasonably expect them to stick around for very long.

Even the best intentions to return on that investment pale in comparison to someone else coming along asking less from your staff. The short term (salary today) is often an attractive siren that dulls the ears to whispers of a long-term return.

How much is your time worth - to you? How much could you (or would you) be able to make working a solo gig?

How much is your time worth - to your employer? How much overhead are they extracting from your hourly billable rate?

Is this an investment that promises substantial return in the future? Is your investment today worth playing the long game?