I use two models and like to answer this question with a story and a definition.

The billionaire and the tradesman

Once upon a time, there was a billionaire named Charles who decided to take a journey around the world on his yacht. However, during his journey, he encountered a problem with the ship on a remote island. Many tradesmen came to help him with varying time requirements but relatively low hourly wages. But none of them were successful in fixing the issue.

Then, one day, a tradesman arrived who looked at the ship, got a hammer, searched the ship briefly, and after just a few taps on a pipe, the problem was miraculously solved within minutes. The tradesman demanded a very high hourly wage. Charles was taken aback by the price and thought it was unreasonable to charge so much money for just a few minutes of work and a few taps of a hammer.

To which the tradesman replied, "I'm not charging you for the few minutes of work and the taps on the pipe, but for the time I took to build up the knowledge and find the spot where I needed to tap."

Pay What You Want (PWYW)

Pay What You Want (PWYW) is a pricing model where customers can choose the amount they want to pay for a product or service. Instead of a set price, customers are given the option to determine their own price based on their own perceived value of the product or service. This concept is often used in digital products such as software or music, but it can also be applied to physical products or services.

The aim of PWYW is to give customers control over the price they pay and to allow them to choose a price that they feel is fair and reflects the value they receive. At the same time, it allows businesses to establish a relationship of trust with their customers, as they show that they value their customers' opinions and are not solely focused on maximizing profits.

PWYW can be a successful pricing model for businesses that have a loyal and engaged customer base, and for products or services that have a high perceived value. In these cases, customers may be more likely to pay a higher price for the product or service, even if they have the option to pay less.

However, PWYW can also be a risk for businesses, as it can lead to lower overall revenue and profitability, especially if the average price paid by customers is significantly lower than the cost of producing the product or providing the service. Additionally, it can also lead to confusion and uncertainty among customers, as they may not be sure what a fair price is.

Why the combination?

Calculating a fair hourly wage is a complex task in my eyes, as it depends on a variety of factors, including local cost of living and skills and experience.

In a local region with a high cost of living, for example in a big German city, I think the fair hourly wage for a job is higher than in a region with a lower cost of living. This is because workers in the high-cost region have to earn more money to cover their basic living costs, such as living and eating.

The reason why my hourly wage goes up when I have spent more time in my accountancy writing on training in the previous year and thus gained more experience is because experience generally leads to more knowledge and competence in a certain field or activity. I feel that this makes me more efficient and able to handle more complex tasks than someone who is new to the job. My experience is that for most tasks, the bottom line is the same. The hourly wage is higher, but it takes me less time.

The difficulty in determining a fair hourly wage is further complicated by the fact that it can vary significantly even within the same industry or labour market. For example, two people in the same field with similar experience and qualifications may have significantly different hourly wage expectations depending on their individual needs.

In addition to the cost of living, the labour market and the demand for certain skills also play a role in determining a fair hourly wage. For example, if a job requires specialised skills or experience, an employer may need to pay a higher hourly wage to attract and retain employees with those skills. This last point has not played a role in my calculation so far.

My way of charging clients in my area an hourly wage and offering other things per Pay What You Want (PWYW) is thus a compromise.

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