Prepare your work without, and make it fit for yourself in the field, and afterwards build your house. Proverbs 24:27
I’ve heard many people say that you shouldn’t forget to pay yourself when figuring out your business expenses. That makes sense, but keep it minimal. Use only as much as you need for basic expenses, even if it means living a bit more frugally than you are used to. Keep as much equity as you can in your business.
Include the money you pay yourself in the financial part of your business plan.
Since we are on the topic of financial matters, how much should you charge for your products, or services? I have heard a lot of debate about this in my Virtual Assistant circles. Some will tell you to charge what you are worth, and some will tell you that you need to be flexible and charge less in order to be competitive. The people who subscribe to the first school of thought may even say that you make the industry look bad, by charging too little.
However, competition is part of our free-market, capitalistic economy, and I would not have it any other way. As a Virtual Assistant, I compete in three areas.
The three things I compete on are skill level, experience, and price. To keep my skills sharp and up to date, I spend a lot of time reading, researching, and keeping up with new technologies. It’s time-consuming, but not a waste of time, because it keeps me ahead of the pack, and establishes me as an expert, and makes me valuable in the eyes of my intended audience.
Figure out who your ideal client/customer is, and include that in your business plan. What is their:
- Geographical location
- And any other applicable demographics
One of my associates, Michelle Arbore, stays current on all Facebook changes; she amazes me with her ability to find out about them before anyone else does. She then shares her knowledge, which adds tremendous value to her audience. Mari Smith is another Facebook guru who provides valuable marketing tips and information. This can be the most time-consuming area to compete in, but it is time well spent, in the long run. The next arena is the price.
Determining the right price can be tricky. You have to strike a balance between what you want to earn, and what the market will let you earn. Over time, you may get to the place where you can command the salary you want, but it won’t happen immediately. It’s like being a new hire, when you were working for someone else; you were able to negotiate a raise, eventually, but you had to prove yourself first.
This is no different.
In the financial part of your business plan, figure out the bare minimum that you need to keep in the business AND how much you need to pay yourself each month. Factor in emergencies. Divide this by 4 to get a weekly rate. If you have a service/consultant business, you need to figure out your hourly rate, per service rate, or both. I have both an hourly rate, and a lower, per service rate for some services. Look at what your competition is charging, and look at the price that the market is buying these services. Elance provides information about what freelancers are earning on their site.
This is a list of U.S based Virtual Assistants; several of them show their hourly rate, and the experience they have. This is just one of the ways you can see what your competitors are charging. LinkedIn is another good resource; you can do an Advanced Search by keyword, industry, location, and other criteria.
These are just some ways you can equip yourself with knowledge to help you get as close as possible to optimal rate. There will still be trial and error; that is why it is a good idea to review and revise your plan every 6 months-1 year, and review your financial plan more often, and make changes as needed.
You probably don’t want to adjust your rates up and down every six months, that will annoy your clients, but you can have sales, discounts, special offers, etc. to reward current clients, and hopefully bring in new business. Most companies that sell products do this, and service businesses should follow suit.
If you sell products, you can also use the methods laid out above:
- Figure out how much needs to stay in your business
- Figure out how much you need to pay yourself
- Check out what your competition is charging
Find out when they hold their sales, discounts, etc. Get on their mailing list, if you can. You have to think like a marketer, and part of that is keeping an eye on what your competition is up to.
As I mentioned in my last post, Entreskills is a good resource to help you with your business plan. Do all of your financial work in Excel, where you can conduct “What If” analyses to see what effect your changes will have on your projected budget. If you need help with this, contact me, and we can set up a Google Hangout session where I can walk you through it.
Was this information helpful? If you have questions or feedback, I would love to read them, in the comments.