One of the consistent themes I’ve found from talking to early stage businesses is that people don’t put a value on their time. An artist pricing their art worries about recovering the cost of materials, but doesn’t consider how many hours each piece takes her. An HR specialist is anxious about missing sales, so doesn’t take into account her years of experience. And so it goes on.
I think this is something that most of us fall foul of when new to running a business. We put ourselves under so much pressure to start selling that we sometimes forget that we are running a business, and that we need to make money. And if we are good at what we do, then we deserve a decent income from it.
It’s also challenging in a direct sales environment. It’s so much easier to focus on how much you sell your stock for vs how much you paid for it. But what about the costs of advertising your business, petrol, etc. And after all those costs are taken off, dividing the resulting profit over the number of hours you worked can be really sobering. Do you call £1 an hour a good wage?
I don’t mean to be all doom and gloom, but I do want to make you think. Have you sat down and done a basic forecast which looks at how much profit you are likely to make, and how many hours you need to put in to make it happen? Have you thought about all those extra hours on admin, business development, travel? If not then please put it near the top of your priority list.
One approach is to try some reverse engineering. Figure out how much income you need to pay the mortgage, support your family, pay for the occasional holiday, and have a rainy day fund. Work out how many days / hours a year you can work. That will give you your rate per hour. Is that achievable from your business as it stands? If not what do you need to change to get there?
And don’t forget that your time is valuable. If you could earn more an hour by working at the local petrol station then maybe you should reconsider your business – or at the very least seriously revisit your pricing!