As a business owner, more income means more revenue free to use for re-investing in your business. It also means a higher paycheck for you and your
Increasing your target hourly rate is the simplest way to increase revenue. A lot of start-up entrepreneurs don’t do the research needed in order to know what they should be charging. After all, when you’re just starting out, how can you know what the market in your niche or area will pay? You don’t want to be highest nor the lowest. This leads to many entrepreneurs and freelancers working on a fixed-price basis. A fixed-price can be appealing to both new businesses and to clients because it makes it easier for both parties to project what is coming in and going out. Unfortunately, fixed price is only a benefit if your fixed price is high enough to cover ALL the work you are doing.
In order to earn more right now, you must understand what your hourly rate is and THEN set your fixed price package rates based on how many hours it’s REALLY taking you to complete a job. You need to take into account things such as: driving, coffee at the coffee shop, meeting times, costs of goods sold, and admin tasks, like billing, all take their cut out of your profit.
The key to earning more is to know exactly what it’s costing you to deliver your product or service. This comes from tracking your work over time and making sure you track ALL time spent from initial customer lead to completed delivery, adding in your costs (products and services you purchase in order to create your service or product, ie. software, base ingredients, hired help, etc.) Until you’ve put in the time to track several of your projects or jobs, you won’t know exactly what your time is worth to you. Before you get to that step, there’s a simple formula you can follow to estimate your cost per hour:
- Add up the total you’ve earned from the last 5 jobs/projects/products
- Add up the total time (every last minute) it took you to deliver that job/project/product to your customer - from the first time you speak until the final billing
- Divide 1 by 2 and you get 3
- 3 = your estimated hourly rate
Once you have your estimated hourly rate, you will need to evaluate if it’s high enough for you to be doing business or if simply have an expensive hobby. The difference being that a business, in order to be classified as a business, you must be creating enough revenue to end up with a profit after costs. If your “business” isn’t doing this, what you have is not a business--it’s a costly hobby. Moving from a hobby to a viable business means either reducing your costs (materials or time spent) or increasing your sell price. Take a look at where you are right now and determine which you are (a business or a hobby).
If you are an expensive hobby, you need to make some hard choices with your “business”. Is this truly something you want to continue doing? Is the cost worth it? Is it something you no longer want to invest as much time and resources into? Or, do you need to increase your rates right now in order to become a legitimate business. Since you’re reading this article, I’m assuming you’ve decided that the time and energy you’ve put into getting your business this far is worth doing what’s necessary to increase your pricing.
The next question is how much to increase them. We’ll talk about this in the next blog post.
PS. If you're ready to gain some clarity and a written step-by-step plan to reaching the next level in your business and income, we're here to help. Grab a slot on our calendar and we will explain exactly how partnering with Fyrefly Media to write up a Strategic Business Blueprint for your unique business can quickly bring focus, increase your revenue and get you where you're going faster than ever before. Chatting with us free of charge, "sales-sleaze" free and comes with a complimentary comprehensive report of your current online business footprint. (This is the same quarterly report we draw up for our clients and usually charge $250 for).