Challenges, Ideas

How should small business owners price their services? 0 1255

In a survey released earlier this year, 15% of small business owners said one of their biggest early mistakes was pricing their products or services too low. When a business is starting out, it can be tempting to try and draw new customers in with low prices. However, this can be a deadly mistake, meaning you never earn enough to really get yourself off the ground.

But how should you work out how much to charge for your services? Unlike companies that sell products, working out the material value of your services can be tricky.

There’s no secret formula to deciding what your services are worth. That said, the following tips can help you draw up a decent estimate.

Determine your hourly rate

Calculating your hourly rate can, in certain businesses, be an effective way of charging for services. To estimate your hourly rate, you first need to decide what you want the business to turn over this year.

Say your target is $100,000. Within that total, you need to account for all your business expenses, including all salaries, overheads and tax, and factor in profit too.

Next, decide how many hours you and your employees will work each week, and minus any holiday.

At the end of this calculation you should be able to work out roughly what your business’s hourly rate is.

Charge a fixed price

Charging a fixed price for your service has pros and cons. If you end up taking a lot longer than anticipated to do the work, you might be disappointed. On the other hand, as you get more experienced, you might be able to complete the job a lot faster, making the business more profitable.

Competitor prices

While it’s not best practice to focus too much on your competitors’ pricing (because you want customers to see you as unique, not cheap), it’s worth keeping in mind roughly what others in your space are charging. If, for instance, your competitors have all raised their prices, you could be doing yourself a disservice by staying low.

Perceived value

Ultimately, people will only be willing to pay what they feel is a fair price. You need to do some market research to get an idea of what customers are willing to pay. Win customers over through a great customer experience and build trusting relationships with them.

Pricing your products and services is not an exact science – the most important lesson to learn is stay flexible, constantly reviewing whether your current pricing model is working for you. Good luck!

Previous ArticleNext Article

Leave a Reply

Your email address will not be published. Required fields are marked *

7 Ways to transform your schedule into a sales tool 0 1033


If you think of your schedule as a one-dimensional organizational tool, you’re missing out. That schedule that you’re keeping is a secret sales tool waiting to work for you. We’re talking big-time revenue potential, if you use it correctly.

It doesn’t matter how large your company is, how much revenue you’re bringing in, or how long you’ve been around, if you have a business – your schedule can (and should) be boosting your bottom line.

How can you transform your schedule into a sales tool?

  • Digitize and publicize your calendar. If you want your schedule to start making you money, you have to make your calendar accessible to potential clients. Leverage an online booking platform where customers can view openings for appointments, demos, classes, events, etc.

  • Link your calendar to marketing materials with a “Call to Action” button. Make it easy for customers and prospects to find your calendar via CTA buttons on your website, in email campaigns, or other digital marketing materials. These buttons should be the center of attention of your content, and labeled clearly with phrases like “Book Now” or “Schedule an Appointment.”

  • Put the power in your customers’ hands. Allowing your customers to reserve their own time slot on your calendar can make a powerful impression and win you major customer service brownie points. Online booking is a slick feature that is affordable and easy to manage, and shows a high level of professionalism. In addition, opening your calendar to your audience conveys the message that you are prioritizing their time by putting the power of scheduling in their hands, and skipping the painful phone tag or email inquiry process.

  • Capture contact information. When your client reserves a slot on your calendar, it is essential you capture contact information. At a minimum, this should be an email address. If it’s appropriate, snag a phone number and a mailing address here too. Obtaining this contact information opens up a world of opportunities to continually market to a warm customer base – people who have already come in contact with your brand.

  • Reduce cancellations and no-shows. Businesses can bleed money if their customers continually neglect appointments. There are a few ways to address the problem. First, you can take payment or a deposit online at the time of booking, if applicable to your business. Second, you can send friendly email or text reminders in the days and even hours leading up to your appointment. In these reminders, offer the opportunity to reschedule if necessary. People are forgetful. A simple email can be the difference between a lost sale and a closed deal.

  • Offer bonuses and promotions. If someone reserves time on your calendar, you’ve already made an impression. Now the goal is to keep them coming back. Track customer patterns and send targeted offers that remind them to return or try something new. For instance, if you own a spa and a customer routinely books massages, send them a special offer for booking a manicure/pedicure combo. If you use your calendar to schedule demos of a product, send a follow-up email to customers who completed the demo but did not follow through with a purchase. A little extra prompting may be all a person needs to make a purchase or increase their spending.

  • Alert and educate. Use the contact information you’ve gathered to alert your customers when new opportunities are available. Educate them about upcoming changes, or send newsletters with valuable information that does not push a sale. Consistent communication paired with valuable and relevant information will help you build a loyal client base of people who will continually look for more opportunities to connect with your business.

Accounting basics for new business owners: bank accounts 0 988

If you started your business as a side-hustle from your main job or college degree, there’s a good chance you accepted payment for your first invoices into your personal bank account. It sure feels good getting that boost to your monthly bank balance, but in the long run, this approach is just not sustainable – especially as the business grows.

Let’s look at why you need to open at least two separate accounts in addition to your personal one: one for tax and one for income after tax.

We’ll also explore whether you need to open a dedicated business bank account, or if you can just keep on using a standard personal checking account.

Why you need to open at least two new accounts for your business

When starting your business, it’s highly recommended that you open two new bank accounts, besides your personal checking account and any savings you have. There are a few obvious reasons for doing this:

  1. Keep your personal account for personal spending

Perhaps the most obvious reasons for separating your accounts is that you save the confusion of having your personal income mixed up with the business’s money. Once you have separate accounts, it will be much easier to track how much money the business is making, and cuts the chance of any confusion about which payments are personal, and which are professional.

  1. Putting money aside for tax season

If you’ve never filed a tax return before, you should read up on the dates by which you need to file your taxes with the Internal Revenue Service (IRS), and find out about the forms you have to fill in.

In any case, you’re going to need to put aside a proportion of your income from your small business to eventually pay your taxes. How much you will need to pay depends on a number of things, including your income, expenses and the type of business you’ve set up. Here’s a decent guide from The Balance to working out what you will owe.

Say you estimate that about 20% of your income will go on taxes. Every time a client makes a payment and it lands in your business account, you should get into the habit of syphoning off 20% into your ‘tax’ account, so you’ll never come up short when you go to pay your tax bill.

  1. Keep business bank account for business spending

This bank account will hold all your income after tax, and belongs to the business. Anything the business buys, or any payments you make to employees should come from this account. It’s also a good idea to ‘pay yourself’ from this account, sending a monthly salary to your personal account – it means you avoid ever over-spending.

Separate accounts back you up if you get audited

There are other reasons you should keep your money in separate accounts, besides tax and pay. Perhaps most importantly, if the IRS ever decides to audit your business, it will be much easier for you to hand over your statements if your personal and private banking are kept separate.

Why might the IRS investigate a small business like yours?

A common reason is that the IRS may suspect you are running a ‘hobby business’. A hobby business, such as occasionally running a stall at a flea market or doing a garage sale, is not counted as a ‘real business’. Nonetheless, some people try to claim expenses on any losses their hobby makes, which the IRS does not allow. If you seem to be running a hobby business, you therefore may be audited. However, if you have a separate bank account for your business, and can show that this is your principal source of income, you won’t have anything to worry about.

OK, so what kind of account do I need?

The answer is: it’s up to you. Many freelancers, solopreneurs and small business owners choose to use a regular free bank account for their business income. This is totally fine if you are registered as a sole-proprietor. However, if your business is registered as an LLC (Limited Liability Company) you have to open an official business bank account.

Business bank accounts usually come with some kind of monthly charge, which is one reason freelancers and those just starting out prefer to stick with a free personal account. That said, there are definite benefits to using a business bank account as a solopreneur:

  • Perks and credit

Most business bank accounts give you a lot more credit than regular accounts, as well as other perks and benefits. You may well also get access to free advice from an account manager and you boost your chances of getting a loan from the bank if you ever need one.

  • More professional

This is about perception as much as anything. If you need to write checks to your suppliers, it looks a lot more professional to have your company’s name and address printed on the check than your personal details. This also goes for the IRS, who will also see the business as a serious concern.

  • Connect to your accounting software

Many banks have set up agreements with accounting software companies that allow you to connect the two. This just makes for much easier accounting and bookkeeping as the business grows, and saves you a lot of hassle.

Once you’ve got the basics of bank accounts in place, your business will be much more sustainable, and your finances less confusing. Ultimately that means you will have much firmer foundations on which to grow long term.

Most Popular Topics

Editor Picks