Get Real About Your Income
Would it shock you to know that many small business owners have no idea what their month-to-month income looks like? They know how many clients they have but beyond that they don’t keep track of their expenses and other discounts they may have given to certain clients. Having a “ballpark” range isn’t in your best interest as a business owner. Let’s change that. When you can know with at least a little certainty how much money you’ll be making, it’s a lot easier to create a budget.
Let’s start by merging your two spreadsheets together – or looking in your app – first at your gross income and then at your expenses. Hopefully, these records show that you’re in the black – that you made more than you spent in any given month. Are there any surprises? So often, when we don’t keep track of our finances, we think we’re bringing in a lot more money than in reality. Likewise, we don’t think about all the little expenses that add up each month, cutting into that profit margin.
Part of your new monthly accounting process is to create a Profit/Loss report. Many invoicing programs have this feature and depending on the app you’re using, that may be an added feature, too. When you print out a report or view it on your computer, those are cold hard numbers staring back at you and they don’t lie. Right there in black and white is how much you made minus how much you spent with the remainder being the profit you made that month.
Reports don’t sugar coat things; they will tell you right there that you’re spending too much or you need more clients to increase your revenue.
Let’s Start at the Beginning – How Much is Your Time Worth?
Get back to basics and think about how you came up with your pricing. Was it an arbitrary number you pulled out of thin air or did you actually use some math and easy calculations? Melissa Ingold at TimeFreedomBusiness.com has an easy and free calculator that brings you through the four easy steps of discovery. Of course, this is a subjective number because there are other factors that go into your hourly rate, such as experience and whether or not your target audience can afford that price, but it’s a very good starting point.
Now compare your new hourly rate to your invoiced client rate. Is it the same, higher, or lower? If you’re charging higher than this calculation and have clients willing to pay, hoorah for you and keep doing what you’re doing! But if you’re charging significantly lower, you have to get real and understand how much money you left on the table because you undervalued your time. Here’s that fear mind block coming to rear its ugly head again. Take out your money journal and recite your millionaire mindset affirmations or meditate on ways you can increase your income. All is not lost…you just need to regroup and make a plan.