11 Jan 2024
Pricing your services correctly is one of the most difficult parts of being a small business owner. On the one hand, you understandably want to price yourself competitively, but you don’t want to sell yourself short, either. Profit, cash flow and confidence are all important considerations when pricing your services, so here are five key steps to help you get it right.
Step 1: Calculate Your Costs
Even if you have a very capital light business, there are always costs associated with running your own business. There are two types of costs: direct and indirect.
Direct costs are the costs that go directly towards providing services for your clients, such as project materials or project-specific software, employee wages and your own wage.
Indirect costs are more general costs that are necessary to run your business, such as:
● Rent
● Internet
● Phone Contract
● Devices
● Marketing costs
● Website
● Accounting services
● Legal services
● Insurance
You need to make sure that you charge your customers enough to cover all of the above expenses and make a profit on top of that.
Step 2: Identify Your USP
Your unique selling point (USP) will help you to price your services appropriately. If you’re competing based on price, then affordability will be the name of the game. However, if your USP is based around quality service or your specific expertise, you will be able to charge significantly more. If your clients are investing in you because you’ll add value to their business, then they will be much less likely to question you on price.
Step 3: Market Research
It’s important to know how much your competitors are charging, because this will tell you how much prospective clients are willing to pay. Seek out your competitors via Google as well as marketplaces such as UpWork and Fiverr. Remember, however, that the latter sites often feature many providers willing to sell themselves short in order to get started. Pay attention to their target customers, level of experience and location.
Remember that if you’re providing something that your competitors lack, you will be able to charge more than they do, so long as you are able to properly articulate this added value.
It’s also a good idea to try and get some feedback from your network or even conduct a focus group to gain insight around pricing.
Step 4: Consider Hourly vs Flat Fees
Some small business owners charge by the hour whilst others prefer flat fees. The correct path often depends on your industry and also your level of experience. If you know exactly how much time a certain project will take you, then a flat fee might be best, whilst if you’re unsure then it may be better to go down the hourly route.
If you’re just starting out, then you may get faster at your work as time goes on. In this case, flat fees make sure that you’re not punished for becoming more efficient!
In order to calculate an hourly rate, consider the amount of hours you want to work per week and multiply that by 52. Then, subtract holiday and sick time to calculate the amount of hours you’ll actually work.
After that, calculate your billable hours – i.e., the amount of hours that directly generate revenue. Billable hours represent time spent on client work, whereas non-billable hours are the ones spent on admin, marketing, paperwork, and the like.
Next, divide your total expenses by your billable hours. This will give you a break-even hourly rate. Then, multiply this figure by your desired profit margin to find out how much to charge per hour.
Conclusion
After reading this blog post, you should be able to calculate the cost of your services and figure out whether hourly or flat fees make the most sense for your small business. Remember that good quality clients will be willing to pay a fair price for a great service, so be confident about the value that your small business adds and don’t sell yourself short.
Book a free call with us by visiting our website here.
4 Jan 2024
Introduction
Running a small business can be tough – there are many challenges that small business owners face daily. However, maintaining accurate and consistent financial records doesn’t need to be one of them – and it’s a great way to help your business grow. Bookkeeping is the area of accounting that deals with recording financial transactions, and it can play a vital role in the success of your business. In this blog post, we will discuss five ways bookkeeping can help your small business grow.
Track your finances
One of the primary reasons to keep accurate financial records is to track your finances. With bookkeeping, you can see how much money is coming in and where it’s going. This will help you make informed decisions about your business’s future. You can look at your financial statements and easily identify trends, such as increasing expenses or declining profits. This information will enable you to adjust your business strategy accordingly.
Manage cash flow
Cash flow management is an essential aspect of running a successful business. Without sufficient cash flow, your business may not survive. Bookkeeping enables you to track your receivables, payables, and all other financial transactions. You can also forecast your cash flow based on your current financial position, helping you to avoid shortfalls in the future.
Make informed decisions
With accurate financial records in place, you can make informed decisions about your business. You can analyze your financial statements, identify areas that need improvement, and
implement changes that will help your business grow. For example, if you identify that your expenses are increasing, you can explore ways to cut costs. Alternatively, if you notice that your sales are declining, you can develop new marketing strategies to attract more customers.
Prepare for tax season
As a small business owner, preparing for tax season can be stressful. However, with bookkeeping, you can simplify the process. By keeping accurate and organized financial records, you can file your taxes quickly and accurately. This will save you time and reduce your stress levels. Additionally, you can take advantage of tax deductions and credits that you may be eligible for, reducing your tax liability.
Plan for growth
Finally, bookkeeping can help you plan for the growth of your business. By tracking your finances, you can identify areas that are performing well and invest in them further. Additionally, you can analyze your financial statements to identify areas of your business that need improvement. By doing so, you can make adjustments to your plans and strategies to ensure your business grows in a sustainable and profitable way.
Conclusion
In conclusion, bookkeeping is essential for small business owners who want to grow their businesses. By tracking your finances, managing cash flow, making informed decisions, preparing for tax season, and planning for growth, you can build a successful and profitable business. Accurate financial records can help you identify opportunities, avoid risks, and make strategic decisions that will benefit your business in the long run. If you haven’t already invested in bookkeeping, now is the time to do so. Your business’s success may depend on it.
Are you ready to take your bookkeeping to the next level? Book a free call with us by visiting our website here.
20 Dec 2023
Adjusting your goals and expectations to what’s within your possibilities will ensure your success. Not to mention, it can help you avoid unrealistic planning frustrations.
Having reasonable goals can be a driving force behind individual, team, and company success. If you precisely determine what you’re aiming at and do it early on, your efforts will have a clear direction and appear more meaningful.
However, setting goals isn’t without its challenges – poor orientation, succumbing to perfectionism, and lack of motivation are among those that are quite detrimental.
That’s why we’ve compiled a list of steps that will help you determine and set optimal goals while avoiding the common pitfalls.
Step 1. Back Your Goals Up With Solid Planning
The importance of thorough planning can’t be overstated.
A goal without a plan is, in essence, just an abstract idea you can’t act on. That’s why the first thing you should think about is exactly how you’ll achieve your goal.
The most effective way to make a plan is to start with the big picture in mind and go more and more into details.
Start with a general road map – setting a certain finish line and marking every bump and turn down the road. Then take a look at the individual stages of the journey and define the challenges you could encounter.
Keep in mind that this is a crucial step – if there are too many obstacles requiring more energy and resources than you can expend, you will do well to reconsider your main goal immediately.
Finally, once you know where you’re going and how you’ll get there, start preparing contingencies.
A good plan will take you a long way, but it would be wise to expect something to go sideways. Prepare to adjust your tactics accordingly.
Step 2. Be Clear and Specific
Setting goals includes envisioning a certain point in the future. However, it would be best if you didn’t stop at a general, low-resolution picture.
You must define all of the details of what you want to achieve.
For instance, aiming to increase your company’s sales is a low-resolution goal. It could be a good starting point, but if you want to ensure you’re progressing in the right direction, you should consider the specifics.
Exactly how much of an increase would you like to see in your sales? How would you want your business to change before and after you’ve reached that goal? Would you be willing to make sacrifices to get there and what would that entail?
There’s plenty of details to flesh out when setting your goals. If you do it right, all your efforts will become focused on the specific necessary tasks and the progress will become apparent.
Step 3. Establish Milestones
A common mistake in planning goals is that people tend to aim for the grandest achievement, disregarding the smaller but vital victories.
This approach can become draining very soon – you might be overwhelmed by how unattainable the set endpoint seems. To avoid the fatigue and discouragement, make sure to have several smaller goals set as milestones.
Reaching the milestones will give you that precious sense of achievement and progress and motivate you to keep going.
Good Goals Are the Way to Success
Aiming for something you can realistically achieve and having a good plan of getting there will set you on the right path.
When you’re convinced your goals are the right ones, pursue them with determination. Great results will follow.
If you’d like to speak to us about how we can support you with your accounting needs, book a free consultation here.
16 Dec 2023
Business growth presents a huge challenge for small business owners. Sustainable growth requires careful forethought and preparation; you can’t build a solid house on shaky foundations. It’s easy to get swept up in all the excitement that accompanies business growth, but remember to take the time to prepare and organise your business to ensure that your growth is sustainable. The last thing you want to do is to end up damaging the business you have worked so hard to build. Let’s take a look at how to prepare your small business for sustainable growth.
Create the Right Team
As your business grows, the demands upon your team will change significantly. Your team may be working well right now, but you need to consider how much extra support they will need as your business grows.
When hiring, don’t just look for skills and talent. It’s important to take an applicant’s mindset into consideration, too. You can provide training to bring an employee up to scratch, but it’s very difficult to reset a negative attitude.
As your team grows bigger, management will become more complex, too. You will need to consider implementing new systems and standard operating procedures to ensure that your team can continue to function at its best as your business expands.
Update Your Infrastructure
You will need to scale your IT infrastructure in line with your business. Of course, this can be a very expensive process and may require you to hire new staff, which is a big drain on your resources.
Often, however, you can find cloud services to support your essential business functions, such as CRM software, HR management programs and email services. Cloud services are easily scalable and can help you to avoid many infrastructure-related growing pains as your business evolves.
Manage Your Books
Financing planning is a crucial part of planning for business growth, but before you can make a plan you need to get clear on where you are right now. This means updating your books and making sure that all of your records are impeccable – a task which many business owners tend to let slip.
Build Credit
You should always aim to establish a strong payment history with lenders to enable you to borrow more in the future. Cultivating a good relationship now will really pay off further down the line. It’s also important to pay your bills on time and maintain separate business and personal bank accounts to prove to lenders that you are fiscally responsible.
It’s always wisest to borrow when the going is good. You should arrange some credit now so that you can access it as and when you need it, rather than trying to secure funds when you’re in a difficult spot. Building credit before you need it puts you in a better position to shop around with creditors and negotiate better interest rates, too.
A good way to do this is to take out a line of credit, which is a pre-set borrowing limit. It is there for you when you need it, but you won’t pay interest until you actually borrow. You can then pay it back in increments over a set period of time, much like a traditional bank loan.
For more flexible options, consider arranging an overdraft and business credit card to smooth over short-term cash flow issues. However, bear in mind that these credit options are not suitable for long-term borrowing.
Summary
When anticipating a period of business growth, it’s important to ensure that your team is primed to handle growth and that your IT infrastructure can support the increased demands that it will incur. You should also ensure that you have access to plenty of credit and that your records are in good order so that you are able to make the right financial decisions at the right time and protect your cash reserves. Business growth certainly comes with its fair share of challenges, but good preparation is the key to profitable and sustainable growth.
If you’d like to speak to us about how we can support you with your accounting needs, book a free consultation here.
8 Dec 2023
Discover for yourself whether you’re tracking the three most important KPIs. And if not, learn how to start doing so.
The only way for a business owner to know if their company is meeting its goals is to define and track key performance indicators. However, the first part may be trickier than the second.
How do you even come up with the right KPIs to track?
Know that there are two groups of KPIs that every business should track, which are industry-specific KPIs and universal KPIs.
This article is about universal KPIs that are essential for every business.
Profit Margin
The gross profit margin is one of the most critical KPIs. After all, the profit motive drives most businesses since if there’s no profit, there’s no business.
But some companies make the mistake of spending way more than they earn. While this is okay in some stages of a business, it can spell troubles in the long run.
That’s why it’s important to keep an eye on your gross profit margin. Here’s how to calculate it:
Divide the gross profit by gross sales. The number you get is the fractional profit margin, which you can multiply by 100 to express in percentage.
If your profit margin is going up, that’s great! But if it’s lower compared to the same quarter of last year, maybe it’s time to make a change.
There are two ways to increase your company’s profit market, and they have to do with the gross profit formula: gross sales minus cost of goods sold (COGS). So you can either decrease COGS or increase sales (at constant or a smaller increase in COGS).
You can accomplish the former by cutting costs and saving money on suppliers, utilities, and such. As for the latter, you can improve your products or services so you can raise prices.
Revenue Ratio
How can you tell if your business is going in the right direction?
Your revenue ratio is a good way to measure your company’s growth in a particular period.
The revenue ratio is the ratio of the current period’s revenue compared to the same period of the year before. It shows how fast your revenue is growing, and the best way to increase this ratio is to increase sales or revenue.
If the revenue ratio is higher than 1.0, your revenue is growing. The higher it is, the faster your company’s revenue growth.
Conversion Rate
The Internet has enabled business owners to track conversion rates more precisely than ever. If you’re spending money on ads, for example, it’s essential to find out which ads work and which ones do not.
It’s also possible to calculate the conversion rate for anything, not just paid ads. It could be the percentage of people who clicked on your link or bought your product, for instance. To do so, calculate the conversion rate by dividing the number of conversions by the total number of leads (those who saw your ad, for example).
Conversion rates give powerful insights and they can help optimise or fix things.
Track Everything
The most critical KPIs may depend on your business. Among others, you might want to track your profit margin and revenue ratio.
In the digital world of today, it may also interest you to monitor specific conversion rates.
Tracking these KPIs will let you know the state of your business so you can come up with ways to make it even more profitable.
If you’d like to speak to us about how we can support you with your accounting needs, book a free consultation here.
