Make sure you're costing your jobs adequately!
The quickest way to experience burnout as a small business owner is preparing quotes that don’t sufficiently compensate you for your work. Irrespective of the industry you’re in, it is vital your quoting procedure takes into account all relevant factors and costs. A little planning and research goes a long way in making sure you’re amply rewarded for your work.
Accurate costing of products and services is critical for profitable businesses. A simple costing system can provide a framework to estimate the cost to supply your services or products, to analyse costs and how they affect profitability, and to better understand the value of your inventory.
Time is critical!
List all the activities that the job you’re quoting on requires and make sure you include the time factor. At this point you may well be thinking, ‘what's all this about?’ Time spent on the following is a cost and needs to be accounted for:
- Researching your client’s needs or their industry
- Time and fuel costs spent driving to and from meetings and supply stores purchasing materials
- Creating the work or performing the service
- Estimated setup and dismantle time
Failing to account for time in your quote means it won’t reflect the true costs of the job and could end up costing you money.
Quoting made simple.
This simple five-step process provides a framework designed to ensure you're adequately compensated for completed works each and every time:
- Decide how much you want to make per hour for each of the tasks involved in completing the job. For example, during the research phase you may value your time at a certain hourly rate, but during the execution phase, you may value your time at a higher hourly rate. Watching a printer print out fliers for a client takes sufficiently less mental effort than designing the fliers, so develop your price per hour or per activity accordingly.
- Estimate the material costs for the job. If you will use up part of a print cartridge, paper stock, paint, lawn care items or food items, then estimate the cost. Include the costs you will pay for shipping and handling, GST and any other out-of-pocket expenses in your calculations.
- Research the industry standard rate for services or products similar to yours. You can do this by looking at your competitor's websites or even asking friends and family members how much they typically pay for services such as yours. If you decide to charge more than your average competitors, be prepared to sell the benefits you offer to customers. They will want a good reason to spend more.
- Set prices based on your research and cost predictions and decide on a mark-up amount. Charging a mark-up (a percent or dollar amount above your labour and material costs) helps cover business expenses that are indirectly related to your client or customer service. These costs include administrative tasks, accounting, your self-employment or small business taxes, employee salary, health insurance costs, business liability insurance fees and the money you spend marketing to attract new clients.
- Be prepared to defend or negotiate your rate with your client. Go into your meeting with an idea of the absolute lowest amount you will accept for the project. If your client suggests something lower, you can turn it down knowing that the amount they are willing to pay is not worth the time and trouble.
When first starting your small business, however, you may need to set lower “acceptable” rates in order to build a portfolio or gain some experience in your field.
So make sure you receive a fair day’s pay for a fair day’s work. To find out more, take advantage of our free no-obligation consultation.
With you in every success,
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