If you want a healthy business, good customers, and enough time to grow your business, you have to charge more. This takes confidence and courage, and it’s completely worth it. It’s important to read this entire post because there is a critical component to this strategy. You have to get both parts right.
The advice in this post if for the person just starting out. You are a one person team and will be balancing providing services or supporting a product alongside running your business. If all of your time is spent on services and support, you aren’t running a business, you are working for one. It’s just yours instead of someone else’s.
We got this wrong when we first started. I errantly thought we could be a low price offering and built a product that simply covered the basics. As a result, we struggled to gain traction, worked really hard for small profits, and had a difficult time scaling our business.
To avoid this trap, especially if you are a service business, charge enough to earn full time pay for 37.5% to 50% of your time. This helps you in three major ways.
First, you will be able to spend 50% to 62.5% of your time working on the business. This includes sales, marketing, business development, creating processes, reviewing financials, and finding people to hire so you can grow.
Second, when you hire employees, and you apply this same principles, you will be able to cover their costs when they are new and make healthy profits as your business grows.
Third, the customers you attract will be customers who value what you provide and are invested in helping you create a healthy business. These customers are interested in longterm partnerships and want to invest in making sure your business lasts. It’s better for them that way, and it’s better for you.
Businesses fail because of a lack of sales and a lack of profit. If you max out your time because you don’t charge enough to cover your costs, you will always feel like you are behind, and you won’t grow.
Now for the very important detail. In order to charge more, your product or service has to solve a critical problem for your customer. Additionally that problem should either cost your customer ten times more than what they are paying your business or help them sell ten times more than what they are paying your business.
If your product or service does not provide your customers this level of return on cost, you will have a hard time acquiring new business. Make sure your business solves a problem or provides a benefit that your customers value and desire. Also, make sure your product or service delivers on this process. It’s better to take your time before you leap out to make sure this part is right so you don’t feel the pain of working too much for too little down the line.
This is not about making more money. Money is a tool to help you achieve your goals. It’s about making sure you have the resources to build a business instead of work for your business. It’s about freeing you to grow and provide jobs. It’s about making sure you are there for your customers down the road.