A colleague of mine asked whether the rates he was charging were appropriate as compared to others in the industry. He also expressed overall concern about how some projects can quickly spin into unprofitability. So this seemed like a great opportunity to share my tips to run a profitable small business.
Running A Profitable Small Business
- Charge a realistic hourly rate. Important thing to remember is hourly rate needs to factor in business overhead and balance it with the reality of your target customer in the current economic climate.
- If I’m hired by another company to be outsourced to their client, I’ll typically charge a higher fee if they cannot guarantee a certain number of hours.
- Every project is different, but I typically charge a minimum project flat fee. Over time it’s become evident to me that I’ll often invest the same amount of hours for smaller budget projects, so I have to be disciplined and say no to those projects that are destined to not be profitable. I hate to say no, but there are not enough hours in the day.
- I try to not invest more than 2-3 hours of work before a contract is signed. Of course this can vary depending on risk/reward. You’ll have to decide that for yourself.
- I decline pitches that require spec work. Sorry, you’ll have to pay me for my time. I’ve sadly been involved in many pitches over the years that ended up being lies to generate/steal ideas with no intent to award a project or compensate the participants.
- I create processes that help streamline my work flow.
- Let the client pay the out-of-pocket costs directly, when appropriate. That way I don’t have to lay out large amounts of cash and chase after the client for reimbursement.
- Keep the time spent dispensing free advice to a minimum. If someone tries to “bend my ear for a tick” for more than 20 minutes, I frankly let them know they can hire me or schedule a counseling appointment on the days I’m available to coach small business owners.
- Keep the overhead expenses low. Start with a plan for the year, set a monthly budget and stick to it.
Just Say No
As a business owner, there are too many projects and things requiring my attention. To run a profitable small business, I have to say NO especially if:
- I do not believe the prospect’s business model will work.
- I honestly am not confident I can achieve success for a particular prospect.
- My “spider sense” starts tingling that the prospect will be difficult to work with.
My Most Important Tip
I question myself frequently throughout each workday:
“Is what I am doing right now profitable? Will it advance my business in some way?”
If the answer is clearly no, I get back to working on something that is.
(The answer to this question right now is yes, because I turned these tips into a blog post for my website.)
I hope you find this helpful.
Do you run a profitable business?
Please share your tips in the comment field below.