Setting your prices
Setting your prices has to be one of the most stressful decisions a business owner will ever have to make. The price you want to charge and the price someone will pay for it are two very different concepts. As a business owner, you want to buy in, make or provide services at as little cost to you as possible. You want to sell that item to as many people as possible at the highest price and make a massive profit margin.
The way to work out your profit on a product is as follows.
Cost of goods – Selling Price = Profit
£12.50 – £25.00 = £12.50
Then, of course, out of your profit, you have expenses that have to be covered. The list of costs can be considerable; however, here are a few, VAT, salaries, rent, utilities for the business, marketing.
Setting your prices to match your corporate salary
When I left the corporate world, I wanted to keep the same standard of living, the same income, and charged accordingly. However, this would not work for my clients, so I had to adjust my prices. I have met other people who offer the same services, and they tell me my prices are far too low. However, I am still in business, and they are employed by someone else. Running a business is hard, but you have to get the finances right or you wont have a business.
Setting your prices is good unless you employ a twat
I remember a lady working for a few years ago. Let’s call her Judas. I asked Judas to provide bookkeeping services to one of my clients. After three months of working for the client under the umbrella of my company and seeing the invoice to my client, she spoke to the client and said she would work for them at the price she charged me. The result being, my company lost out on valuable revenue. When she spoke to me, she told me what she had done. Her only response was that she didn’t want to ‘take advantage of the client off’. She is happy with the price she gets for them, and everyone should be satisfied. Except, of course, I was out of a client and no longer had that income.
Judas had not understood that I had spent my money getting this company as one of my clients. On average, it takes two months to get a new client and can cost up to £1000. This spend is on marketing, meeting and understanding their needs, setting out contracts and terms of payment. (Very similar to what an employment agency does). She could not understand why I was so angry.
As you can tell, it irks to this day whenever I think about it. Besides that, I see her once a month working for someone else.
What I learnt about writing my memoirs
- Sometimes people can let you down, and you have to let it go
- Setting prices is not as easy as people think
- Never employ a Judas
Writing My Memoirs – 31 Day Challenge – Video and Blog Posts
Social Media links you may be interested in
Getting a Real Job
Getting a real job was never a phrase I would expect to hear from anyone when I started my business. It certainly wasn’t a phrase I expected to hear from my mother two or three years into running myPA Virtual Services. It was almost as if she thought I had played long enough with myPA, and now it’s time to return to work and get a real job.
Unfortunately, this is a statement and phrase that self-employed people hear more than you would think. So, what does this mean? It means that the person asking doesn’t have faith in your abilities to run a business. The product or service you specialise in is of no or little value, and that you cannot work for yourself. The person who asked gives the impression that they do not see your business as a proper business in the same terms that Tesco, BT or Virgin are.
Take business for granted
Often a small business owner is ignored, taken for granted, or dismissed. The assumption is that the work they do is not essential. The hours they work are often too many for such little reward, and self-satisfaction is not crucial. This attitude can also come from other small businesses if they offer a service that is not perceived to be of any or little value.
The Value of being Self-Employed
I remember being at a networking meeting in 2006 and speaking to an Action Coach. A business coach’s job is to help you grow your business. To help you become the best business owner, you can be and guide you through the worry of the legal, sales, marketing, and other aspects of business life.
I introduced myself as a Virtual PA. This coach looked at me and said, ‘Oh, you can’t help me, and you’re not the client I am after. You will be in paid employment within a few months.’ He then walked off, leaving me stunned. In his eyes, I will be getting a real job in the next few months. His statement infuriated me. He failed to see a business owner, a marketeer, a salesperson, and an accountant, a business owner who has the same issues as any other business owner. However, I offered a service that he didn’t respect, which was odd, as he suggested to his clients to use a VA.
I am still going strong, and he is still in the same networking sphere as I am. Recently, he tried to get me to join his Action Coach mentor group to help get my business over its first three years. I started my business in 2002. My business has been going for a lot longer than 3-years, and I had to remind him of parts of our previous conversation. He politely said sorry, he didn’t recognise me. His attitude to his clients is not at all complimentary either. He describes them as buying units. Not people, not businesses, but buying units. How many people do you think I have recommended him to?
Going back to the phrase getting a real job, what does this mean for the self-employed person? The business owner must have the confidence to continue with the business. The self-belief that what they are doing is worthwhile and that the short-sightedness of the other person does not affect their confidence, plans, or business. All this shows there is that lack of self-belief in the other person. A self-employed person has the confidence to believe in their talents and skills and provide the service better than anyone else.
Small businesses work within the sphere of other small businesses. myPA provides admin support to a web developer who provides a website for an IFA who gives financial advice to individuals. It is also interesting to note that the small business, self-employed, and micro-business sectors didn’t get affected by the recession in 2008. We continued to offer the services, turn up to networking meetings, and help our clients survive the downturn in business. The significant effect of the recession for small businesses was a lack of cash flow, generally because of larger companies not paying their bills on time or instigating 90- or 120-day payment terms.
Why was there a cash flow problem?
Payment terms are agreed at the outset of a contract. However, during the recession the owners of small business called their larger clients for payments, and an employee said payment would be delayed. (I lost two clients because of this cruel practice. Their business was a success but needed the cash to pay staff. The owners couldn’t live on cash reserves for two to three months at a time. This also brings in the story of One, which will be another video in this series). But if you told that employee their salary would be delayed by 90 or 120 days, it would be a very different story. I know small businesses that now refuse to work with larger organisations.
An example of now working with large businesses
There is an unwritten understanding that small and micro businesses rarely work for the government because of the payment return. It is far too challenging to get a contract. The number of hoops, reams of paperwork and legal requirements placed on the small business makes it an unprofitable venture even to start.
I know of a small business invited to tender for a government contract. They hired someone to help with the tender paperwork. They increased internal security and upgraded IT systems at their request. Three months of attending meetings, redoing forms, and providing evidence of their service. At the last hurdle, the contract was awarded to an existing supplier. This small business lost thousands of pounds and will never work with or apply for a government contract again.
Are small businesses worth it? Just try Getting a Real Job?
Small businesses are adaptable to changes in the market. They are flexible and offer a quality of services to their clients. They are approachable, and you will always deal with a human being. Just look at LinkedIn, search for small businesses. Look at the likes of BNI, who cater for small businesses and finally think about all those lorry drivers, builders and electricians and plumbers. Most of them are self-employed. We make the world go around. Being self-employed brings ingenuity, innovation, and creativity. So why would you think about getting a real job? We already have one.
I remember I started answering the telephone for one of my clients and the phone provider (I think it was BT) gave my clients 0845 number to Tesco. My client had this number for three or four years. Someone at BT had made an error. We got calls from Tesco’s customers as they held a fruit yoghurt competition. We had a nervous few days trying to sort out this issue. BT and Tesco telling us that the small business would have to get another number and take the hit on reprinting their business cards, headed paper, and other marketing material. All my client’s hard work over the previous three years marketing the business. The cost of that would be in the thousands.
Small businesses work hard for what they do. The thought of getting a real job, or I should say a salaried position with an employer, would never cross their minds or mine. I have a real job and love what I do. My boss can be demanding, but you know what, I know her very well and can ask her anything.
What I learnt about writing my memoirs for getting a real job
- Asking a self-employed person when they are getting a real job is an insult to the hard work, dedication and time a self-employed person has made to make their business viable
- Self-employed small businesses need the support of those around them
- Small businesses make up most business in the UK
Writing My Memoirs – 31 Day Challenge – Video and Blog Posts
Webbie Wednesday is my favourite name for the some of the task I undertake every week. Apart from my post yesterday, I am very organised and have set up several systems within my business to ensure that all tasks get done on time. You need to when you are running a business. Not only can you achieve your goals and become a profitable company, but because there are legal requirements for running a business.
For example, every year, the government wants to know how much you have earned. They want to know that your accounts are in order. That you are paying your staff correctly and your team is paying the correct amount of tax. If you are VAT registered, you need to make a return every three months (sometimes that time can be longer, but most are every quarter).
Suppose you have investors in your business who also want to know about their return on their investment. They need to understand that the company is running profitable and that you are not squandering money. As a business owner, you need to know that you are not spending too much. You can afford to pay your staff, pay yourself, and cover all expenses. Not only that, you need money to invest in your business, your marketing and your team.
Knowing your finances is vital. The phrase MONEY IS KING comes to mind. However, most accountants would follow that with KNOWLEDGE IS QUEEN.
Some soft services also need to be scheduled. For example, your marketing needs to be consistent and on point. As a result, I have created Webbie Wednesday. Every Wednesday, I will update my websites, check the links and reply or delete comments.
On Monday, I call five clients to ensure they are OK, happy with what is going on and see if there is anything else I can do. It is so much easier to work with an existing client than to get a new client. Contacting some of my clients also reminds them I am here and creates a better working relationship.
I used to hate Finance Friday. My accounts were all over the place and a nightmare, mainly because I was not too fond of the software package I was using. I used to use Quickbooks, and it is just not intuitive or user friendly to my mind. I have since changed to Xero and love it. The software is always up to date, and I can safely say that Finance Friday is now a joy and my accounts are in order.
What I learnt about writing my memoirs
- Staying on top of my accounts is a joy when I like the software. Put another way, when you like the tools you work with, the task is much easier
- Knowing your finances enables you to plan for your business, especially growth
- Fun names make the task easier
Writing My Memoirs – 31 Day Challenge – Video and Blog Posts
Other Social Media links you may be interested in
Forgetting my Challenge
Forgetting my challenge seems a ridiculous statement to make, but this happened today. I had such a busy day with some client work and then watched a few teaching videos on editing a video. It just slipped my mind that I had not uploaded this blog and video. I had some narrative written about networking but have had to amend that to cover my forgetting my challenge. I wrote the article on the correct day. The video had been created on the right day, albeit at 5.30 pm when I was at home. Putting the two together didn’t happen until the next day.
I got the critical client work completed
I did all the billable work expected of me, and my clients are happy with the work sent to them. Keeping my clients happy is an essential part of my job. Making sure my clients are delighted. The 31-day challenge is an example to everyone that writing your memoirs is not as difficult as people think.
Networking could be an excuse for forgetting my challenge.
I am a member of BNI; this is a networking group for businesses that meets every week. The primary goal for BNI is that each member of the chapter helps other members get business. In effect, the chapter members become our sales teams when talking to their clients. The commitment for BNI is that you have to bring a contribution each week. There are three types of contribution:
- An offer of a referral to provide a quote for yourself or one of your clients
- A testimonial for one member that you have worked with or for one of your clients
- A testimonial for BNI and what they have helped you achieve
What is BNI?
BNI is an American organisation that is successful the world over. Some chapters have over 200 members (in India). In the UK, we have an average of about 25-40 people per chapter. I think this is a good number, as the primary goal of networking is to create lasting relationships with people. As the phrase goes, people by people and if you can recommend them all the better.
During Covid, meetings are online, so we now have the opportunity to visit chapters worldwide. I am not sure how many people have taken up this offer. I have taken part in other chapters from the comfort of my office.
BNI is strict, and there is a set formula followed every week. The same script read the same people deliver the leadership. Each week, every member gives a small presentation about their business (60 seconds, or 30 in larger chapters). BNI is one of the most formal networking meetings you will ever attend, but it has a wealth of experience. There are online business training courses and help and support. If you are a small business, BNI is undoubtedly worth visiting. BNI is not a 90-minute membership. Most relationship building takes place outside of the meeting during the week.
To find out more about BNI click here
What I learnt about forgetting my challenge when writing my memoirs
- My time management is good unless I am learning a new skill
- Preparation for networking meetings also takes longer than you think
- BNI it not about one meeting of 90-minute every week, and it is up to the member to take advantage of the offer available to them.