How to Make a profit & Manage it
Where it all starts…
More times than not, we start a business, package, and price our services as best as possible and then realize we weren’t intentional enough. Sometimes we notice this when we realize the problem is not that we’re not making sales, but rather, that we’re not making any profit from our sales.
But don’t worry, you’re not alone, and I’m here to help!
Pricing and packaging can be super tricky but when done correctly you might just have some profits to play with, I mean, manage, but more on that later.
How do you price and package to make a profit, exactly? Well, there are a couple of things that go into it, here are my top 3.
1) Don’t forget to look internally, not just externally
In other words, don’t start at market research, start with your cost of goods (COGS) and expenses (variable & fixed). A lot of times we start to research without knowing what our starting point must be, and by “must be”, I mean how much it must be to cover the business expenses you’ll incur. When we make enough to cover our expenses only, means we broke even.
But we don’t want to just break even, right? That’s no way to run a business!
2) Conduct Market Research
That’s why we must also conduct as much market research as possible. A couple of rule of thumbs for you, though — stir away from extreme competition & be wise. Meaning, look up people that not only match your niche but that are not completely irrelevant to your timing. If you’ve only been in business for nearly a year, don’t look up what someone with 5 or more years of experience and that “know & trust” factor, charges.
Instead, look for someone closely related to your timeline, and even then, don’t forget step 1 above, and what those numbers dictate. Also, be wise, don’t just go into Facebook groups aimlessly, asking things like, “how much would you pay for “x”, because you don’t know if those people are your ideal client and therefore they may just give their opinion but it may not be worth much if they’ll never purchase.
Instead, figure out who your ideal client is, first, get in front of them, and then ask your questions.
3) Value Price
Instead of following the adage, “charge what you’re worth”, though I love that, instead, try a more analytical and tactical approach.
Outline as much value as possible. When you’re pricing and packaging your services, “less is more” is not your friend. You could condense something you know how to do into 3 words but for someone else reading it, will those 3 words convey the full value they’ll receive? Ask yourself, “how much is x,y,z worth at the end of the day?”.
Packages that are packed with tons of value are easier to digest when followed by that price tag. Which reminds me, make sure you’re positioning all the value up front and then the price, it’s easier for someone to see the value in $x after knowing all they’ll get, rather than the other way around.
When you’re able to package and price your services correctly, you’ll be able to see that, not only are you attracting more of the clients that value your work, but also, that you’ll have some money left over after covering all your expenses.
What you should do with that money is next!
So, we’ve made some money, what do we do now?
1) Business Bank Account
Well, for starters, you should have a business bank account where that money’s landing. Having a business account for your business will ensure your business and personal expenses are kept separately. Which will, in turn, help you a ton, come tax time!
2) Recordkeeping System
In addition to having a separate bank account strictly for your business’ incoming and outgoing cash flow, you should also invest in a recordkeeping system that’ll seamlessly integrate with your business bank account and auto-feed every transaction.
Wave Apps is a free one you could start with but depending on the stage of growth your business is in, you may need more capabilities, in which case, I’d recommend you check Quickbooks out.
3) Cash Flow Management
This is probably the most neglected of them all, managing your cash flow. It’s possibly neglected by you also, because like most of my clients say “I just don’t know where to start or what to do”.
Cash flow management is a system of being proactive rather than reactive. It’s taking into account your:
Accounts receivable- (fancy term for invoices out to clients and awaiting payment for the month)
Accounts payable- (another fancy term for how much you’ll incur in expenses for the month)
Once you’ve figured these two out, you should be able to see what those figures look like and know ahead of time (preferably before the month starts) if you’ll be in the red (under), breaking even, or in the black (making money). These two are the building blocks necessary to start managing your cash flow. Having these two down will help you, later on, to expand into financial goals, cutbacks, and most importantly, decision making.
Now it’s time for you to check up on your packaging and pricing, are you being intentional and checking all the boxes? Moreover, how are your cash flow management skills? Are you in a cycle of “making but not growing”? Take a look at these financial components today and see if you can identify some of the hurdles holding your business back. If you need help, schedule a free coffee chat, it’s free so you’ve got nothing to lose!
** This blog post includes an affiliate link for a tool we love and use. If you make a purchase through it, we will make a small commission.
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Geily Romero is a Money Management Strategist helping creatives get ahead of their business + personal finances over at Cutting Edge. She offers Money Management Strategy packages and Business Coaching Strategy Sessions,