Connect with us

Business Entrepreneur

Could offering hourly rates be killing your business?

Contrary to popular belief, your hourly rates could be the very thing limiting not only your company’s expansion, but productivity. Here are five ways to wean off of the hourly rate model.

Published

on

time is money

hourly rates

Hourly rates and your business

Many small businesses struggle with a pricing model, particularly in the service industry, highlighting the reality that there are so many hours in a week that any individual can bill, and therefore a limit to earnings immediately placed on any business.

For this very reason, Mike McDerment and Donald Cowper of FreshBooks and co-authors of “Break the Time Barrier: How to unlock your true earning potential” suggest not only in their book but below that moving away from an hourly rate can actually increase revenue. In their words, they offer the following five methods of transitioning away from an hourly rate:

1. Focus on value, not hours

The first step is understanding the difference between churning out billable hours and delivering value to clients. As a freelancer, you’re not just a collection of hours; you bring an array of creativity, wisdom, talent, and skills that you’ve accumulated over the years. You bring far more value to a client than just punching in and punching out on the clock.

2. Probe for serious pain points

During the exploratory phase, probe your client on their current problems or pain points. Too many service providers focus on small problems, but clients aren’t motivated to solve those, so dig for the serious issues.

Are sales trending downward? Are new competitors emerging? If the client has goals or revenue targets, those create problems too, because if they aren’t met, the client will experience a loss.

Bottomline: clients value solving large problems and they’ll pay for that value. If you don’t identify where your client really needs help, you risk developing something that won’t have a lot of impact and consequently won’t be worth much to the client.

3. Position your services as an investment, not an expense

No one likes expenses, so they try to keep them as low as possible. That’s why so many contractors experience downward pressure on their prices. But an investment is a different story altogether.

To position your service as an investment, connect it to solving the client’s pain or helping them achieve a key objective. For example, if you’re a web designer, instead of building a better looking website, design a site that acts as a marketing and selling engine to help your client hit revenue targets. If you offer to build a site that could generate an additional $100,000 of profit annually, your client would be open to making a $20,000 investment. If you used the traditional hourly pricing model to figure out your fee, you might only end up charging $2,000 to $2,500.

4. Don’t present your pricing upfront

Most initial conversations begin with a client asking about rates and a freelancer obliging with a response, without either side fully grasping the impact or scope of the project. When you present your pricing upfront, you make price the distinguishing factor, not your ability to deliver results. This encourages the client to compare your rate to someone else’s (and having the most competitive rate doesn’t always work in your favor).

If you want to be judged on your abilities, resist the temptation to give a quote before you and your client agree on what they want to achieve.

5. Offer clients more than one option

If you offer just one package or price, the client has two options: accept it or not. Instead, offer a proposal that reads like a menu, with multiple options that have distinct prices. Each choice should address business needs and goals, with solutions at various depths and price tags. Many freelancers are surprised by how frequently clients choose their topline package. In addition, should a client want to pay less, there’s no haggling. They just choose to have less delivered.

The American Genius is news, insights, tools, and inspiration for business owners and professionals. AG condenses information on technology, business, social media, startups, economics and more, so you don’t have to.

Business Entrepreneur

If you’re easily distracted, you’re more likely to thrive as an entrepreneur

(ENTREPRENEUR) If monotony and boredom at work- well bores you, it’s possible you may fit with the other entrepreneurs with a quick and constantly changing career.

Published

on

entrepreneurs work place

When Bill Gates was a kid, he knew he liked messing around with code. He couldn’t have known how it might evolve, but he was willing to live in the distraction, focusing on details when needed, but always learning, moving on, taking risks and growing in the process.

Some of the most successful folks among us are not content to sit and make widgets every day. They cannot thrive in a detail and focused work environment. So, it may come as no surprise to know that people who are more easily distracted are also more likely to thrive as entrepreneurs.

According to this study, if you are intelligent and get distracted more easily, those two qualities combined will likely enhance your creativity. And, that creativity and ability to use distraction as an advantage can be channeled to create new things, jobs, companies, etc.

For those of us who are more easily distracted, who enjoy doing different things every day, and who like learning, a recent article in the Harvard Business Review suggests a good option is to find a career path that provides the right amount of distraction and which is a great fit for your personality. If you do that your talent is more likely to be apparent because you are playing to your strengths. Also, if you are working in your sweet spot you will be more productive and motivated.

Maybe not surprisingly, the top job for those who live in distraction is entrepreneur. The term “easily distracted” often comes with a negative connotation, but considering an entrepreneur is taking risks, making things happen and creating companies, ideas, products that may have never existed, this spins that idea on its head. Entrepreneurs are the chief cooks and bottle washers of the world. They ideate, create, hire and inspire. None of that is possible in a monotonous work environment.

“Unsurprisingly, meta-analyses indicate that entrepreneurs tend to have higher levels of ‘openness to experience,’ so they differ from managers and leaders in that they are more curious, interested in variety and novelty, and are more prone to boredom — as well as less likely to tolerate routine and predictability,” according to the HBR story.

Other careers that are great fits for those of us (me included) who enjoy distraction are PR/Media Production, Journalism and Consultant. What these fields all have in common is, there is never a dull moment, switching from task to task is pretty commonplace, and you will do well if you can be a generalist – synthesizing information and weeding out the unnecessary.

Not sure where your strengths lie? Here’s a quick quiz to give you some feedback on how curious you really are.

Continue Reading

Business Entrepreneur

How can a small business beat a large competitor moving in next door?

(BUSINESS) How do you stand out when a big competitor moves to your neighborhood? Reddit has a few suggestions – some obvious, some not so much.

Published

on

small restaurant competitor

Small businesses, especially restaurants have been hit hard by lockdowns. Many closed for good this year, and those that are still hanging on are in a precarious position as their local economies shift.

Last week, a user on r/smallbusiness asked a timeless question that is especially relevant right now. Reddit user longbottomjr writes: “We have a strong competitor moving in next door in a few months. Our restaurant is one that pays the bills but […] I feel that if this new competitor takes up enough market share we will lose our restaurant. Can anyone chime in with resources/ideas I can use to help put together our plan of action?”

Comments quickly pointed out what common sense would dictate.

First, ensure the basics are covered. Being clean, quick, friendly, and high quality will take you far, no matter what competition you’re up against. And as u/horsemullet said, “Customer service also happens before someone walks through the door!” So make sure that your online hours, contact info, menus and social media accounts are up to date and accurate.

Another point emerged that is less intuitive: Competing businesses will naturally gravitate towards similar locations. This is a well-established phenomenon known within game theory as Nash’s Equilibrium. In the restaurant industry, this is actually a good thing. It brings entirely new customers to the area and ultimately benefits all the other nearby businesses, too.

Take advantage of the attention by offering something other spots don’t, like loyalty rewards, specials, unique offerings, or meal deals.

Speaking of the area, a great way to stand out from larger competitors is to build relationships with the community you serve, as u/sugarface2134 emphasized. “In my city there are two Italian restaurants in the same location – just across the parking lot from each other. We always pick the smaller one because the owner truly makes you feel like a member of the family.”

That’s an advantage of being a small, local business that all the money in the world couldn’t buy. Get to know your customers personally and you will not only create loyal regulars, but friends as well.

One of the top rated responses, from u/seefooddiet2200, made an often overlooked but critically important point.

“Talk to your staff and see if they have any ideas. These are the people that are working every single day and may know one or two ‘annoying’ things that if they were switched would make things easier. Or maybe they see that there’s specific things people ask for that you don’t serve. Every single [one] of your employees is a gold mine of insight, you just need to be open to listening to them.”

That is applicable to any business owner who wants to improve their practices.

Ask employees what they think, especially the ones who have stuck around a long time. Not only do they know the ins-and-outs of their jobs, but this builds rapport and trust with your staff. A good boss realizes that employees are more than their job descriptions. They have valuable thoughts about what’s working and not working, and direct access to customer’s opinions.

Good luck, u/longbottomjr! We’ll be rooting for you.

Continue Reading

Business Entrepreneur

How a newly funded coffee delivery startup is thriving during COVID

(REAL ESTATE MARKETING) Seattle’s Joe Coffee finds successful funding in hyper specific clientele and operations even mid-pandemic. But how did they do it?

Published

on

Joe Coffee delivery

Amidst a pandemic, you might not expect a small company with limited clientele to thrive. Yet, Joe Coffee, a Seattle-based delivery service, is doing just that.

Joe Coffee, an aptly named coffee runner, has received millions in funding, a large chunk of which was raised mid-pandemic. Their mission is simple: to bring coffee from smaller shops to local consumers, especially without endangering either party.

There’s a lot to be said about Joe Coffee’s valuation and mission, but what’s more intriguing is their unlikely success.

A food delivery service that focuses on coffee may not seem that niche, but when you look at Joe Coffee’s determination to stick to the Seattle area, coupled with its staunch resolve for frequenting smaller shops (e.g., not Starbucks), the service begins to look pretty specific–and, in an economy that honors sweeping solutions, this is a welcome change of pace.

The way their service works is fairly simple: Joe Coffee provides shops with signs and information on how to order through the Joe network, then consumers are able to download and order through a mobile app on all of the usual platforms. Joe Coffee takes a nine percent cut of the order total, credit card fees included.

In return, customers are able to order from their favorite, local, non-chain coffee shops, both supporting them and sustaining their caffeine addiction at a time where alertness is paramount and grouchiness is all too common.

What’s truly interesting about Joe Coffee’s example is that it demonstrates an availability for small services with extreme specificity in terms of operating capacity. By sticking to unique businesses in a relatively small metropolitan area (as opposed to, say, multiple cities), the service is more likely to be successful in execution and delivery, thereby solidifying its relevance to both consumers and businesses alike.

And, by playing into the need for curbside pickup or home delivery these days, Joe Coffee only furthers the perception that its service is necessary.

If the country begins to reopen–whenever that happens–it will be no surprise to see Joe Coffee maintain a relationship between consumers and smaller businesses in the Seattle area. For anyone offering a similarly niche service, this is a perfect example of a company to which you should pay attention.

Continue Reading
Advertisement

Our Great Partners

The
American Genius
news neatly in your inbox

Subscribe to our mailing list for news sent straight to your email inbox.

Emerging Stories

Get The American Genius
neatly in your inbox

Subscribe to get business and tech updates, breaking stories, and more!