In Pinoy Tech? What should your salary and hourly rate be?
“Set and enforce an aspirational personal hourly rate. If fixing a problem will save less than your hourly rate, ignore it. If outsourcing a task will cost less than your hourly rate, outsource it.” —Naval Ravikant
I recently started an outbound drip email campaign for owners of marketing agencies in the Netherlands (I now use Lemlist). Nothing massive. Just enough to get some meetings to see if I could do a bit of Facebook ads and chatbot outsourcing there. My youngest brother just moved to Amsterdam for a corporate gig, and I want to build something that could fund a regular visit to him (and Europe).
Anyhow, I received this awesome reply yesterday:
What an expert Jiu-Jitsu move. In a few lines:
- He turned the tables on me, and made me his prospect
- This would probably deter most guys doing sales or business research (not me though haha)
- He clearly states that his time is valuable and I must meet that value for him to allot attention to my agenda
And all these in a polite and unambiguous way.
I would also want to do this. This is only possible for us if we know our own hourly rates.
This is more than just data for a tactical move. Knowing our hourly rate is a fast and clear way to decide whether opportunities are truly worth pursuing from a monetary perspective. Here’s #35 from that epic tweetstorm from
:I found it extremely helpful to calmly reexamine my career and business worldview with this tweetstorm. In case you wish to do the same, I made a guide:
I finally got Naval#35 done, with values for different years of experience. Sharing it here in case you might find it useful. Also, I’d appreciate feedback on the computation.
Pinoy tech salary
I’m more of an online marketing guy since leaving corporate tech, but the only raw salary data I have is from that open Google sheet/form that went viral in 2016. Salary ranges are probably similar between these two groups. Here’s the spreadsheet I used. It contains the raw data and a link to the source.
After cleaning up the data to leave only those with numerical salaries and years of experience, I plotted the data in a graph. I did not bother to remove the absurd numbers. They are probably outnumbered by those who wrote accurately.
There are clearly a huge variations between salaries per experience level. What we need is just a number near the median, so we get reasonable benchmarks. Getting the trendline for this data is a quick and dirty way to do this. I tried out several kinds:
The power series seems to be the most sensible trend line. The formula it gives is y = 21211x^0.612, where y is the monthly salary and x is the years of experience. If we plot that into a table, we get this:
Hourly rate
The hourly rate is not just monthly salary divided by the hours you normally work per month.
Consultants have to pay their own expenses, and they almost never bill forty hours in a week even when they consult full-time. They have to reserve time for business development. So, most consultants add a cushion of thirty to fifty percent on top of the hourly rate they calculated based on their annual salary. — Forbes Magazine
Plotting that:
According to this 2016 survey by Freelancing.ph, 33% of web developers have an hourly rate of $3-$6 and 25% of them charge $9-$12. Let’s be optimistic and make our benchmark a talented rookie who earns $10/hr. If we plot that with the same rate of increase per year, we get:
I would use the peso hourly rates for consulting local companies and the dollar rate for companies abroad.
Founder considerations
Founders tend to underpay themselves. The reasoning is that they want cash for growth, to get a greater payout in the future. Or cash is tight and the founder is always the last one to get paid.
I think a better perspective is to grow your revenues enough so you can pay yourself like a non-founding CEO.
According to this article “median CEO pay is 4.6% of company revenue.” The benchmarks here are companies in the US which hire professional CEOs. These tend to be large.
I have a friend who follows Profit First. I think this is a good guide for freelancers and consultants. In this system, the recommended owner’s pay is 50% of total income.
If you run a large company, your salary is around 5% of revenues. If you are a freelancer or consultant, it is closer to 50%. Small companies would probably be somewhere in between. According to this article, “most small business owners limit their salaries to 50 percent of profits.” Let’s assume a conservative margin for a service business, say 20%. At 50% of profits, that means CEO salary is 10% of revenues.
The differences are huge, but here are the numbers for whatever they’re worth:
Here’s how I think about this: what revenue should my business hit so I could pay myself a salary similar to what I would have gotten in the corporate world?
Then are of course considerations that cannot be plotted in a table — like freedom, the joy of working with a great team, doing interesting and creative work, and whatever your reasons are for starting a company.
