An all too common mistake small business owners make is not properly calculating a rate for their service. This is especially important if their business offers a service that sees the business owner and their employees most often at their clientsâ€™ homes.
You might have a small business customer whoâ€™s concerned that they havenâ€™t figured their charge out rate correctly â€“ they might be just using a rate that everyone else charges, instead of actually figuring it out correctly. It could be that increasing that price just by a small amount could make all the difference, but thereâ€™s a few things to take into consideration first.
One of the first questions to ask your small business customer is what income they want. They should think about the standard of living they want, or what they might make elsewhere. Using that information you can help them decide on an annual salary. Weâ€™ll assume a base salary of $80,000.
Itâ€™s time to crunch the numbers to find out if what they want is realistic:
Using these figures you can then help your small business customers decide on a new charge-out rate that will see them achieve their goals. Is that rate competitive? Does it compare to others in the industry? If theyâ€™re lower than average, then there could be an opportunity to increase the rate even more. But if the rate is higher than average, a review of the figures is probably a good idea to decide if everything is realistic.
With your help, calculating an accurate charge-out rate doesnâ€™t have to be a daunting task, and no-one needs to be a mathematical whiz. However itâ€™s important that time is taken to work out the figures properly. The better these calculations are, the more accurate the charge-out rate will be.
Here at TSBC, we can offer you great content around calculating charge out rates, pricing strategies and more. Contact us on firstname.lastname@example.org to find out how we can help you.