Each Monday we focus on one activity you can do today or over the next week to build yourself a better business. These short, actionable posts will show you what steps you need to take to take your business to the next level.
In case you’ve missed the previous posts, you can catch up here: 20 Days to Build A Better Business.
This is Day 11: Increase Your Rate Per Hour
Never trade hours for cash is something we talk about a lot here on the blog. However, this post is not so much a post about your hourly rate, but looking at your business as an income machine and it’s capacity to earn more income.
Many business owners, especially those providing services fail to charge enough for their time in the services they deliver. This can not only impact their long term prospects but the amount of money that they make from their business.
One way to find out if you’re charging enough for your time is to take your sales for last year and divide it by the number of hours worked by yourself and your team, including any travel time.
This way, you’ll have your businesses “Hourly Rate”. You’ll probably find that you’re charging much less for your time than you should be, which gives you an opportunity to look at cutting back on areas which are less profitable or unprofitable. You can also take the opportunity to cut back on costs of sales, such as discounts, or cutting back on the number of hours worked or the staff required to deliver the sales. (You can also use this technique to evaluate the performance of individuals or groups of employees.)
If market conditions allow you might also be able to raise your prices and charge for the value that your services provide. The more value you provide, the more people will be willing to pay.
For example I know a gardener, he charges £16 ($20) an hour mowing lawns. However, when you factor in the time that he lost due to bad weather and traveling between peoples houses, his actual hourly rate was nearer £8 an hour. For which he was buying, servicing and fueling his mower and running his van. With rising fuel prices he stood to make even less, so instead he now “hires out” his mower to his clients on top of his gardening services.
Are there things that you provide in your charge-out rate but could actually be charged for separately?