by Karen Skidmore | 02,24 | Business Planning, Business Process, True Profit
Have you ever stopped to think why you run your business the way you do?
Most people have ended up with their current model based on one of two reasons;
- It’s because it’s what everyone else in your profession is doing
- You’ve followed advice to teach you what is the most profitable or easiest to run
Running your business like everyone else
First, you may have the same business model as everyone else in your profession, not because of choice but because you don’t know any better. There’s no judgment here; what you don’t know, you don’t know. You may have spent a lot of time learning about marketing and getting clients, but you’ve probably never given much thought to how to design, set up and run your business.
Doing what everyone else in your profession does has its upsides because you know what works already. Why reinvent the wheel? However, there is a big problem with this. Just because most of your colleagues or competitors run their business in a particular way doesn’t necessarily mean they are all doing it correctly.
But … 80% of your profession are doing it wrong
If we take the Pareto Principle, which statistically proves that 80% of output comes from 20% of input, then we could theorise that 80% of the success in your profession comes from just 20% of businesses in that profession.
If we flip this the other way, 80% of businesses in your profession create just 20% of the output.
Hmmm …
Let’s stop and think about this and wonder how true this is.
Could we conclude that no matter which profession or business sector you operate in, too many people seem to be struggling? Look around at the faces at your next networking event or industry conference; how many of those businesses would you say are flourishing?
The reality is that many are experiencing one or more of the following:
- Overwhelm; procrastination over marketing initiatives and new product ideas because busy-ness is taking over the day-to-day, and there’s no space to work creatively on projects that will grow the business
- Overworked; stuck in the never-ending to-do-lists and client delivery
- Underpaid: competing on price and charging by the hour or the time spent with clients, which often leads to over-delivery and doing far more than initially promised to try and keep clients happy
This paints a pretty depressing picture, especially if you realise you may be in this average 80%!
What about the top 20% of your profession?
Are they creating 80% of the output?
There will be, of course, all sorts of reasons for the success of these top 20%, and yes, there is every chance that they are using technology to create massive growth advantage opportunities to allow them to stand out as leading experts in your profession.
You’ve probably already seen colleagues and competitors create new ways of sharing their expertise. From expanding their offerings to serving groups of clients, large and small, through to creating digital content and cutting-edge use of AI, the opportunities to do something ‘different’ and grow the number of clients you work with are open to you if that’s what you want.
This leads me to the second instance, where many of you may choose your business model based on what’s been taught to you as the most profitable or easiest to run.
Running your business because you’ve been taught this is the way that will make you the most money
The internet became mainstream in the late 1990s, changing our lives. When I started my first business in 2004, email marketing and blogging began emerging for small businesses. When the doors opened to mainstream social media sites, such as Facebook and Twitter, digital growth skyrocketed and advances in technology today, don’t seem to be showing any signs of slowing down.
Unsurprisingly, the explosion in selling digital content since 2015 has led to tens of thousands marketing experts teaching digital ways of making money and growing a business from your laptop on the beach, particularly within the consulting and coaching professions.
Because technology has been the reason for the success of a lot of businesses which are very visible online, it’s easy to get sucked into believing that digital is the only way to grow a business.
But this is simply not the case.
Many marketplaces are now flooded with digital offerings that it’s hard to break in and claim your space, especially when so much of the content can be of poor quality. Your client base may already begun to distrust this form of learning or support. I am sure you have already experienced digital learning and Zoom fatigue over the past few years.
You also have to consider that plenty of businesses in this top 20% bracket are running different or more traditional business models. You may not even realise they exist because you don’t get to see their marketing campaigns or brand presence on your Facebook or Instagram feed.
I remember a client told me once that she was impressed by the number of people I would attract at my live training events despite her needing to see more marketing about it. She wasn’t seeing it because I wasn’t targeting her; she was already my client. So be aware that there is plenty of success around you that you are not even aware of; because it’s not being marketed to you, you don’t see it.
Let’s get honest about how it is to run a top 20% business.
On paper, you may have a business that is well within your profession’s top 20%, especially if you are measuring its success on key performance indicators such as turnover, market share or social media followers. But, if you are a regular reader of my blogs and articles, the reality of trying to run a business in the top 20%, measured in this way, is that it may be burning you out.
If you feel you may be getting burnt out by trying to run a business in the top 20%, you will probably be experiencing one or more of the following:
- You’re overwhelmed; you’ve stepped up and created your expert status but don’t like the visibility and constant pressure to perform.
- You’re overworked; you can’t keep up with what you’ve promised your clients and can’t come up for air long enough to hire the right people to help you grow.
- You’re underpaid; your turnover may be great, but there’s not much left for you once you’ve paid your team, advertising invoices and running costs.
Again, another depressing picture, perhaps.
But you won’t be the only one to have created a business that is burning you out because this practice of growing a business based on following someone else’s formulas and business model is rife.
This is why I want you to see the possibilities available by a business model that allows your business to give you the time, money and energy you want and not have it running you into the ground.
You have a choice.
It may be that you are still looking for a formula to follow because you don’t know which direction you should be going in. And creating a formula for your success is what I want to help you with, but based on a choice that gives you the freedom to grow.
You have a choice on what business infrastructure, processes and team to have in place to give you the right business to help you achieve your creativity, purpose and money aspirations to be your authentic self, do good in the world and make money in the process.
You can choose the design, setup and how you run your business based on how you want success to look for you, just the way you can decide on the right car to drive every day.
Choosing which car to drive is similar to choosing what kind of business to run
There are so many different types of cars on the road because each of us has another reason for choosing our mode of transport and to varying stages of our lives.
Starting out, you’ll probably drive any car you can afford, a small hatchback, or even stick to your bike, especially if you live in a city. Families may drive a big SUV. Some may like fast cars. Others choose their mode of transport based on environmental impact and may even decide they don’t want to own a vehicle and instead use Uber or rental cars for longer journeys.
No one car is right for everyone.
And so it is with your business model.
You can decide on several different business models, but that’s not to say you have to pick just one.
You’ll likely decide you want a hybrid, like many electric cars are entering the market. But a word of caution here: be careful of mixing in too many as you may be in danger of creating a convertible SUV that runs on pedal power; no matter how innovative that may be, you’ve got very little chance of getting it off your driveway!
There’s every chance your business model will also change and evolve as you go on your business journey, just as a couple may swap their compact convertible for an SUV when they begin their family, or a city dweller who relies on their bike may realise they need a car when they move out to the suburbs.
As you and your business grow, you may develop new skills or be attracted to new marketplaces and audiences. You will also stretch your thinking over the years and imagine more significant and different opportunities as you grow confident and shift many limiting beliefs.
So, it’s essential to know that your choice of business model becomes part of your longer-term thinking. You may even need to swap your small hatchback for that super fast sports car quicker than you thought if your business takes off!
If you would like to know more and want help with how you shape the way you run your business, then I invite you to join me on my next live Ignite Workshop. It’s a great place to learn more about how business can work FOR you rather than have a business that works you into the ground.
Click here to see the next dates and book your place.
Meanwhile, I hope this has helped you step back from doing what 80% of your profession does or try to work hard to follow the latest marketing formulas and digital trends.
Has this opened your eyes to realising that you can grow a business to suit you and how you work best?
Until next time,
by Karen Skidmore | 10,22 | True Profit
If you run a busy business, it’s easy to feel responsibility for not only getting new leads and winning over new clients, but also for delivering the work and all the admin tasks that go along with that.
For most business owners I speak with, having a business operate without them being in the thick of everything, all the time can seem an impossibility.
So is it really possible for your business to operate twelve months of the year, whilst you take holidays, weekends away or even finish your work day at 3pm if that is what you want?
However much fire fighting you feel you are doing right now, I want to reassure you that yes, you can absolutely achieve this.
It isn’t something that can happen overnight but over the course of the next few months, you can start to shift yourself from being a busy freelancer to being a CEO of your business.
Step One – Your CEO Mindset
Start the transition from being the person who does it all, to being a business leader.
This starts with recognising your role as a freelancer (the part of you who does the delivery), your role as a business owner (the part of you who is responsible for the running of the business – sales, marketing, operations, finances) and your role as a CEO (the part of you who strategically plans long term and focuses on your next stage of growth).
This important first step helps you move away from ‘winging it and hoping for the best’ because when you are busy, busy, busy it’s no surprise that you can’t think or visualise what your bigger dreams are and where you could hope for your business to be in 5 years time.
You need to slow yourself down so you can clear the mental overload in your brain, and give you the space to clarify your professional and life goals and ambitions.
Have a read of my article next where I dive in to the problem of having an overloaded brain and the time impact it has your ability to long term plan.
Step Two – Get operational support
If you are running everything yourself, with maybe the odd bit of outsourcing of design work or ad hoc admin, then the first action to take is almost always to hire someone to help with your business operations.
If you have a virtual assistant working for you already, it may be time to review their role and assess whether you are ready to hire operations manager level support so that someone else takes on the day to day running of the business for you.
You need to free up some time so you can work ON your business, rather than IN it every day. Breaking this ‘do it all yourself’ habit, no matter what experiences you have had in the past, is essential if you want to be able to take time out of the business for holidays and shorter work weeks and days.
Don’t just hire anyone; it’s important that you write out a job description – what it is you feel you need help with and what kind of person you feel would bring out the best in you. If you don’t know where to start, then have a read of my how to hire an operations manager article.
Step Three – Get a grip of your finances
My version of profitability is not just the potential of your financial gain, but also how well your business model is set to ensure your business delivers the best results to your clients, with the time and energy you want to give.
If you haven’t done much work on your finances over the past few years except to sign off your tax return and company accounts, a deep dive into your finances to help you benchmark and track the numbers in your business is needed and this will help you make better decisions about where to focus.
Decisions such as:
- Are your prices right? Is the price you are charging not only giving you the income you want but also going to give you the cash flow to invest in your sales, marketing, systems & processes to support your delivery?
- Can you afford to outsource? Have you factored in your costs so you make sure you still get paid?
- When and where do you invest your time, energy, and resources? Where are your future profit opportunities, and when would be the right time to diversify or work with different audiences?
- Which products to stop offering and clients to ‘sack’? Are you really making ‘enough’ sales to justify your efforts?
- Can you invest in advertising? Are your sales going to give you the right return on investment?
Without taking a good look at your finances, you may be missing an easier or simpler route for your next stage of your growth.
And even if you have exceptional support from your accountant, this kind of financial work is rarely done because your statutory tax return and end of your accounts don’t give you the right financial information to help you spot your profitability and growth potential in your business.
Step Four – Review your products and service offerings
How easy it is to reach and take on more clients, and increase your revenue and impact without you having to work harder and more hours to get there will depend on what it is you are selling.
If you are already maxed out on either time, energy or client work, the objective at this stage of your business is not to focus more of your time on marketing and attracting more clients, but to assess how well your products are supporting your business goals.
The more personal and bespoke your offers are, the harder it is for you to scale your business; if you don’t have a standard process or framework to take your clients through, you will always be limited to what you can personally deliver.
And, in my experience, no matter how individual you think your service is, there are always repeatable lessons and teachings that can be created and turned into digital content, even if you aren’t interested in creating group programmes or online courses.
Start by clarifying the specific results your clients get from working with you, then map out the exact steps you take to give them these results.
Plus it may be time to review how much of your time is spent delivering during the week.
Even if you still feel you are the only one who has the expertise, is there someone who could take on a client support role? i.e. host q&a sessions, take on the initial assessment and onboarding, or even accountability follow up sessions depending on the programme or service you currently offer. This is great first step if you are feel nervous or unsure how outsourcing work will work for you and your clients.
Step Five – Process, process, process
As your business grows, the need for process grows. Process isn’t just for large enterprises; it’s needed at every stage of business growth and size, so it’s critical that you prioritise which processes you need to work on.
There are 4 key areas:
- Operations: everything you need to run your business on a day-to-day basis; from email management and computer backups to monthly finances and renewing insurance.
- Sales & Marketing: you can not rely on word-of-mouth referrals and your inbox to manage your prospecting, so if you haven’t done so already, it’s essential to start putting in the processes in order to generate consistent leads and create sales opportunities.
- Delivery: in order to consistently exceed your clients’ expectations, you need the processes to be able onboard and deliver what it is you’ve promised.
- Team: knowing how to hire (and fire!), as well as how to run your weekly team meetings and quarterly review meetings will ensure managing people doesn’t become the headache that we know many fear it will.
And if this list feels rather overwhelming, go back to the second step, get operational support, as taking action on a lot of these processes is not something you will have to do.
Someone in your team needs to take on some of these process projects so you can keep more of your time free for being CEO, and step away from being freelancer and even business owner (see Step One!).
To sum up …
To sum up, these five steps aren’t something you can do overnight. They usually take between nine and twelve months, whilst still allowing you time to run the business and deliver what your clients want from you.
And yes, there may feel like a lot of work here but I promise you that this kind of work is a lot less hard work than what you are probably doing right now by doing it all yourself.
by Karen Skidmore | 11,21 | Business Planning, True Profit
If you are struggling with the thought of VAT registration, you need to read this.
Perhaps you have a fear of losing clients if you have to put your prices up 20%, or you simply don’t know how to approach the whole situation.
You can become VAT registered at any time, but businesses only have to pay VAT once their annual turnover reaches a certain threshold (currently at £85,000 in the UK). A point in your business growth that should be celebrated as you are now officially adding value to the economy, and you are well on your way to achieving that 6-figure status. But unless you registered for VAT right at the start of your business journey, this growth milestone is guaranteed to trip the majority of business owners up, especially if you are selling to consumers, who can’t claim the VAT back.
What ought to be a pragmatic, logical decision, becoming VAT registered can quickly become an emotional storm of over-thinking.
In today’s article, I want to highlight the possible stories you may be telling yourself (stories that probably not true … but affect your decision making), highlight the three choices you have over when to get VAT registered, and then give you a number of possible opportunities for you to move forward so your business growth doesn’t plateau.
First off, I want to share my VAT registration journey because I got stuck here for almost two years. I was finally forced to register for VAT on 1st April 2016 but not getting VAT registered when I set up my second coaching business in 2013 has probably been the only business decision I’ve ever regretted.
If I’d treated it as part of setting up a new limited company back then, I wouldn’t have had to deal with the painful two year experience of waiting until I was forced to register; registering only when I reached the threshold, and not before. When I started my first coaching business, CanDoCanBe, in September 2004, charging VAT wasn’t even part of my thought process. I wanted to keep things simple and my money goals back then were far lower. I was selling to other business owners but most of them weren’t VAT registered themselves.
Over the years, my business grew, but just as I thought about taking my income seriously, I lost my Dad after 18 months of cancer. My business took a back seat and I barely made a profit during those two years. When I came back to work in September 2010, all I could do was to focus on building up my business again … registering for VAT wasn’t on the radar.
By 2014, I had rebranded and started my second business, Karen Skidmore Ltd, and I had found myself getting close to the VAT threshold quite quickly. Although I had been working with various mentors at the time, technically I had all the support to create and build new revenue streams and raise my game. But somehow I never really upped my game sufficiently enough.
The looming VAT threshold had created a number of stories in my head.
I was experiencing the Big VAT Ceiling.
For two years, my business revenue came in at just under the VAT threshold; I couldn’t have worked any harder to have stayed in the same spot!
Having spoken and worked with many business owners at this level of their business, it turned out that I wasn’t alone. The stories I was telling myself about what it meant to be VAT registered, were the same as many others.
The VAT Stories That We Tell Ourselves
We all have stories running around in our heads, particularly around money and pricing. Stories about why certain people buy from us; how certain marketing campaigns work, and others don’t; how much you think people will be prepared to pay you.
These stories aren’t necessarily true or false, but are based around our beliefs and what we’ve seen, heard and experienced. When we are unsure or emotionally connected to an outcome (ie “I have to make the sale to prove that I am good at what I do”), we make what happens (or doesn’t happen) mean something to us. These stories are just assumptions, and never really based on what’s really going on.
Making the decision when to register VAT creates the perfect conditions for such stories, assumptions and over-thinking. Here were the three stories that I had running around my own VAT registration. Which ones do you relate to?
1. My clients won’t pay VAT as so few of them are registered themselves.
If you are selling to consumers, rather than organisations who can claim the VAT back, charging an extra 20% on your prices can feel an enormous hike.
When I was struggling with this, my clients were business owners, but very few of them were VAT registered themselves. I just couldn’t get my head around increasing my fees by 20%, knowing that they couldn’t claim this back.
But VAT is part of our everyday lives. We may not like paying it, but we know we have to pay it. If VAT was included in prices, then we often don’t blink an eye. It’s when you choose to buy, get excited about buying, go to the checkout and then be told “Oh, that’s another 20% please” … that’s when, as consumers, we can decide that something may become too expensive because the price suddenly changes at the last moment.
2. I hate finances – I want to keep things simple.
I love simplicity. But using simple as an excuse not to understand the stuff that would help me shift my business forward, was … well frankly … a crap excuse.
I am never going to try to convince anyone that VAT is simple but as I learnt, you don’t have to be a VAT specialist to get VAT set up. That’s why you have a trusted accountant who you take advice from, and move on.
Plus you really can’t go wrong by reading through the clear steps outlined on the gov.uk website. You just need to make the time to sit down quietly and go through each section.
3. I’m going to lose clients if I put my prices up.
Similar to story number one, but this story threw up all the insecurities I had about my prices. Pricing is one of the biggest mental exhaustions for business owners, especially for those of you who are selling your time and expertise.
Charging VAT immediately puts up your prices by 20% which may well be the biggest jump you’ve ever had to make since starting your business. So it’s no surprise that bubbling up to the VAT threshold throws up all sorts of over-thinking and worries.
Making the VAT registration decision
Registering for VAT is simple compliance. However, if you’re playing emotional head games and you start believing the stories you are telling yourself, you are going to stay stuck here at this revenue ceiling for many years.
There are three choices you can take with your VAT registration.
Choice 1: Do everything possible to NOT have to register for VAT
I hear of business owners wanting to create multiple businesses, so that they trade different products and services through different businesses. I went through this thought process myself. Legally, there are ways of being able to do this; speak to a good accountant and I’m sure you can find all the right loopholes to allow you to do this.
But, what an absolute over-complication of a very simple problem.
The mindset here is coming from a place of scarcity; of restricting how you operate, which in turn can close down all opportunities for future growth. Yes, there may be good reasons why this could work for you, but what if you are faced with the same problem again in a year or two when your separate businesses all start to bubble under the VAT threshold again?!
I’m all for tax efficiency and only paying what you owe, but if you make this choice, it’s like running a race by always looking over your shoulder at your competitors behind you.
Choice 2: Wait until you reach the threshold and you have to register for VAT
This was the choice that I made, and boy did it create stress at the time. For the few months leading up to this point, I was constantly checking to make sure I wasn’t going to get caught out. Always be seeking counsel from your accountant at this point because there are some hefty fines and potential back payments to be made if you decide to ignore this.
At the month we realised that VAT registration was inevitable, I had to quickly put together a letter explaining the situation to my clients that they would be paying an extra 20% the following month. In the end, I handled it all OK, but I created so much stress for myself. I know, looking back, that this was a big distraction and stopping me from working on future growth plans. Registering for VAT not only turned out to be a painless process, but my business revenue went happily up once I had removed the self-imposed ceiling to my business growth. I was no longer tripping up over all the VAT stories I had been telling myself.
Choice 3: Play the long game and take control over when you are registering for VAT
This is the choice I wished I had made; knowing that I was going to have to register for VAT at some point in the next year, I ought to have picked a date in the future and planned my business growth strategy and marketing campaigns around it.
Here are some of the opportunities that you may have:
- Plan the VAT around your next price increase. All good businesses increase their prices at some point; to not only keep up with inflation and market rates, but also how you are positioning yourself and the clients you are attracting more of.
- If you are working with consumers who can’t claim the VAT back, make your prices VAT inclusive; you don’t need to make the fact that you are now VAT registered a big story so don’t overcomplicate the buying decisions your clients have to make.
- You could take the other approach and make the fact that you are now VAT registered a celebration; it’s a sign of your success and the fact that you are now contributing value to the economy. Choose your messaging carefully though, as your clients have to feel part of your success, rather than now feel they’ve been negatively affected.
- Announce price increases well in advance; I’d recommend between 3 and 6 months. The more notice your clients have, the less likely they will have a grievance with you. They will appreciate your communication and professionalism.
- Increase your prices for new clients only and take the VAT hit with your existing clients. This approach needs to be worked out carefully, making sure you can afford to do this, but grandfathering your existing clients (the provision in which an old rule continues to apply to some existing situations while a new rule will apply to all future cases) could be a smart move to keep your client base loyal, and a thank you for supporting you over the past few years.
Depending on your business model and marketplace, you may have other ideas. The important thing to remember though is when you are able to take control of when you become VAT registered, suddenly you have an amazing opportunity to step up your business to the next level of growth.
If you’ve been struggling with the thought of VAT registration and the fear of losing clients by having to put your prices up, how has this landed with you? Your personal beliefs around money create a lot of energy – positive and negative – around what you take action on to grow your income potential. And VAT registration can be a big emotional trap for many business owners, so you are not alone.
I’d love to know your thoughts. Please leave a comment below.
Until next time, do less, be more, play bigger.
by Karen Skidmore | 07,21 | True Profit
“Get More Clients!” It’s the message that many marketers want you to hear.
Making money is, of course, an important function of your business but when the numbers in your bank account may feel smaller than you think they should be, money has this habit of taking up more of your attention (AKA worry, anxiety, feeling of lack) than it should.
It’s why I see, time and time again, business owners get hung up on the ‘get more clients’ marketing tactics and end up spending too much time, money and energy, learning how to do these new marketing ideas and processes (usually involving digital tools such as social media and funnels) that don’t make you any happier.
Of course, more money in the bank helps a lot with your finances, but have you ever stopped to consider what revenue will make you happy?
Happy Revenue was a phase that came up during one of our Momentum Pod Calls. At the end of each 90 Day Plan, each member presents their learnings and celebrates their successes. One particular member was sharing her learnings around her sacking a client.
This particular client was, on the surface, a big and important client and they were paying her a substantial monthly retainer. But the problem was that they were turning up to meetings late and sometimes not at all. They weren’t sticking to the project timelines and generally a pain-in-the-arse to deal and it was impacting how she was serving her other clients.
We helped her sack her client gracefully and professionally, and the difference this client sacking made was enormous; not only did she create the opportunity for a new and better client to replace her pain-in-the-arse client, she also stepped back into her power because she was no longer playing a servant role.
Happy Revenue; this is how Caroline, one of our members, described it.
Why chase the ‘get more clients’ story when actually it’s not MORE clients that are going to serve you.
In my book, True Profit Business, I take you through the four choices you can make to help decide which business model will suit you best.
1. What’s the role you want to play in your business; what’s the right balance of technician (delivering what it is you are selling) and manager (having associates or other team members being the customer point of contact)?
2. What’s the optimum number of clients; will you work best with clients 1:1, 1:Group, 1:Many or 1:Mass?
3. What’s the best delivery method; what’s the right balance of in-person, virtual or digital delivery that will allow you to deliver your best work, without burning you out?
4. Which selling system would suit you best; internet marketing, conversation marketing or a hybrid of the two?
These are the four profit levers in your business that can either help you grow, or keep you crazy busy, often with low profitability. They are your top four potential energy, time and profit drainers and/or energisers in your business, and they give you your True Profit.
However, there are no ‘most profitable’ or ‘easiest for you to make money on’ answers here.
Why? Because this is the BS that is being fed to us entrepreneurs right now; particularly those of you in the coaching, therapy and transformation professions.
Digital businesses that focus on having an internet marketing selling system in place and having hundreds of customers every year, can be highly profitable, hugely scalable and a lot of fun to grow and run. But for some people, there types of businesses can be hell on earth, drain you of money and burn you out. Just hearing the word ‘funnel’ is enough to freak you out!
The same goes for those of you who may have been told that selling a VIP or premium level of service is what will work for a business like yours; only to find that you are running yourself ragged, trying to prove that you are worthy of this level of pricing. For some, it doesn’t matter how good the advice is, if you haven’t done the personal development work or built up enough credibility, then you are going to feel extremely uncomfortable at selling at high prices, which is not going to make for an easy, simple business model.
You, believe it or not, have the choice on what’s going to work best for you, based on your own money goals, time needs, core values, personality and impact you want to make. And when you decide what you feel is going to work best for you, you then put in the right boundaries, processes, team and business infrastructure in place to support this.
Let’s tie this back to this phrase Happy Revenue.
I love this phrase and I wish I could credit the person who first came up with it for my client, Caroline, to have shared it in our call yesterday, but it seems that not even Google can give me any clues. (If you know, please let me know – thanks!)
It may become the title of a book I my write in the future if I could drum up enough energy to go through the book writing process for a third time! So for now, I simply want to gift these two words to you: Happy Revenue.
And I invite you to come back to the real reasons why you decided to start your own business. For some of you, you may have grown in confidence and ready to scale up your business to bigger revenues. But for many, starting your business was to give you a sense of freedom; freedom to earn you money in way that was fun, creative and gave you time to do what else you wanted out of life. And if your revenue has stopped being happy, then it’s time to take a breather and review your business model.
Of course, if you want help with this, then me and my coaching team are only a zoom call away. You can book a free True Profit Call to discuss your Happy Revenue potential with us right here.
Until next time, do less, be more, play bigger.
by Karen Skidmore | 07,21 | Pillar Articles, True Profit
The problem with selling services, such as coaching, advice and consulting time, is that it’s very easy to get caught up with how much you ought to be charging. Emotional stories such as “I’m not that worth that much” or “There’s no way my clients will pay that” whip you up into a storm at times, and you can spend days, if not weeks, agonising over the price of your next proposal or new programme.
When you’re selling your time and expertise, you have a low cost of sales, which means you don’t have to spend that much each month to be able to do what it is you that you do. So your prices are often based on how much you feel you can charge.
Although I am a big fan of trusting your intuition in business, emotional feelings are not good commercial indicators, especially if you are working hard to find enough clients each month and you may be coming from a place of worry or anxiety over where your next piece of business is coming from.
What if you could have a simple pricing formula to ensure the prices you charge, give you the income that you want at the end of each month?
There are a number of ways of calculating prices.
Cost based pricing; good for physical products, but not so good for services because of the very low costs involved, particularly if you work virtually and don’t have any office or clinic space.
Value based pricing; typically used for services, but because of the emotional stories, very few service professionals allow them to charge enough and so end up using the next method.
Market based pricing; set your prices based on what everyone else in your market place is doing. The problem with this method is that the only way to ‘win’ at this one is to be the cheapest. Customers will typically use price as the deciding factor when choosing you and you get trapped into having to work harder by having to work with more clients. It’s like putting your next proposal or new programme on Amazon marketplace and just hoping you come out on top of the searches.
There’s a fourth method and that is income based pricing; charge the price that gives you the income you want. And this is what I wanted to demonstrate in this article.
Before I dive in, I have a few caveats.
1) I’m over-simplifying the figures in this article to make it easy for me to share examples. Do you own finance work and costings to make sure it stacks up for your own business.
2) The kinds of businesses that this can work for are usually service providers, such as consultants, coaches, accountants and therapists, because operating costs are usually very low for these kinds of businesses, particularly if you are working virtually and have no office or clinic space.
3) What I am sharing here is not professional accountancy or finance advice. I am not a qualified finance advisor so do seek proper tax and accountancy advice from your own accountant.
4) In my working examples below, I write about monthly revenue. For most businesses, your revenue ebbs and flows. Sometimes people refer to this feast and famine, but in my experience, there is always a natural cycle of a few months of harvest and a month here and there of letting your fields go fallow. So don’t get hung up on the fact that a monthly income needs to be consistent to be successful, because consistent income is one of those holy grails that marketers sell you, but isn’t always easily achievable! It’s how you manage your manage your money during the harvest months that allow you enjoy the fallow months that matters.
How you may be using your income reports right now
For most people, you hire an accountant or bookkeeper to keep track of your finances, and at the end of each year, your accountant hands you your end of year accounts. This is when you find out exactly how profitable you were over the last year, how much tax you now need to pay and how much you’ve actually earned.
There are two problems to this approach. One, you may end up being very disappointed by the final figures, wondering where all your money went after working hard all year. If you’ve not been on top of your finances during the year, this is also where you may find that you’ve not put aside enough tax. This happened to me in my early years; it’s not a nice feeling!
Two, your tax returns and company accounts aren’t really designed for your business use. Tax returns and statutory accounts are legal requirements to let the Inland Revenue know how much tax you have to pay. As day-to-day tools to help you manage your business, they are pretty useless. Some business owners will have accountants who help them with management accounts each month, but for most, they are still too clunky to be use them to help decide on what their pricing ought to be.
You need a simple pricing formula that you can use to quickly and easily price up proposals and programmes.
The Profitability Sweet Spot
If you are like most service based business owners, there’s every chance that you allow yourself to think that whatever you charge your clients, is what you get as income, minus a few expenses and a little bit of tax.
Thus if you charge a client £1000, you may think in your head that your income is about £900, give or take. If you have been trading for several years, this may be why you feel deflated at the end of each year when your accountant hands you your tax returns, and you realise you ended up making very little money. This can often trigger those thoughts that you aren’t working hard enough and thus you keep on the crazy ‘work harder’ hamster wheel.
Here’s how I look at a business’ finances, and how I use them to help them with my pricing.
There are four main areas that your revenue needs to go towards, apart from your personal income; tax, running costs, business growth and personal development.
Let’s go through each one.
- 20% Tax. You only pay tax on your profits, rather than revenue, and there are different tax rates depending on your overall income, including personal tax and corporation tax, if you are a limited company. This is why I make the caveat above about over-simplifying. I am not a tax accountant and nor do I want to be working out my own tax each year. But I do want to include a percentage of tax in my pricing to ensure I am being paid the money I want in my personal bank account. 20% is often slightly higher than it needs to be, but I always work to have more money in my tax account rather than risk having a short fall and not being able to pay my tax on time. Anything extra left in my tax account after I’ve paid my taxes I see as a great way of saving, so it’s a win win in my opinion.
- 10% running costs. Of course, this is going to vary depending on your business, which is why you have to get clear on exactly what you spend each month. But over the years of working with many consultants and service businesses, this figure is a good average to work from to get started. This percentage needs to cover everything from internet services and website hosting, to admin support and insurance.
- 5% business growth. Your business needs income, too. You may need ad hoc technical support, or need to invest in a new website, images or brochure design. Having this percentage ensures you have the cash to build up a buffer to pay for what you need, when you need it. Too often small businesses like yours struggle to invest, particularly as they start to scale up and grow, because they are trying to pay for things like new websites or branding out of cash that month, and that’s never easy to do.
- 5% personal development. Investing in yourself is critical as a business owner. Yes, this may cover the obvious such as coaching or mentoring, but you may also want to invest in CPD training or keep yourself up to date with the latest industry trends or attend a conference. Again, like business growth, people often try to pay for these things out of cash that month and if you struggle to have enough money, you forgo what is needed to develop yourself, both personally and professionally.
So the profitability sweet spot becomes 60%, which means for every £600 you want to earn, you need to sell £1000 to get that income.
Or let’s put it another way, for every £1,000 you sell, your true income is just £600. How does this make you think about your prices?
Now that you know you need 40% of everything you sell to go towards tax, running costs, business growth and personal development, can see why you have to charge better than most of your competitors.
Let me give you some working examples.
Example #1 Freelancer wants an income of £2,000 a month so needs to sell £40,000 of services a year
20% Tax: £8,000
10% Running Costs: £4,000
5% Business Growth: £2,000
5% Personal Development: £2,000
60% Personal Income (Profitability): £24,000
To sell £40,000 of services in the year, your monthly revenue needs to be £3,300. And if you work with five clients during the month, they each need to be spending £660 with you each month. Thus, £40,000 divided by 12 months = £3,300 divided by 5 clients = £660
Example #2 Consultant wants an income of £6,000 a month so needs to sell £120,000 of services a year
20% Tax: £24,000
10% Running Costs: £12,000
5% Business Growth: £6,000
5% Personal Development: £6,000
60% Personal Income (Profitability): £72,000
To sell £120,000 of services in the year, your monthly revenue needs to be £10,000. How this breaks down per client will depend on your business model but if you are predominately working with as a consultant, then this may look like five clients a month need to spend £2,000 a month with you.
If you sell group programmes, then maybe you need to be selling ten places at £1,000 a month. Or if you sell longer term contracts, such as training or consulting, then that may be ten clients over the year that all need to spend a minimum of £12,000 each.
What will typically happen with a business this size is that you will have a few different revenue streams, and your revenue will often ebb and flow over the year, as highlighted above in my caveats. But it never needs to be complicated.
If you struggle working this through with a business this size, then reach out to me. I do this work with my clients all the time so it’s easy for me to show you what your revenue model could look like with the right prices in place.
What if you are running at a higher profitability than 60%
What if you are genuinely paying yourself far more than 60% of your revenue each year? If it’s working for you, then great. You don’t have to be putting aside 5% for business growth and 5% for personal development, for example. And you may find your running costs are less than 5% over the year.
But there are two profitability danger spots you need to look out for.
Swinging into 80% or more
If you are swinging towards 80% profitability and above, and earning £800 for every £1,000 you sell, then there is a danger of your business being under-invested and under-resourced.
In the short-term, this may work. Enjoy the fruits of your labour!
But long-term, you may find yourself burning out, particularly if you are in the higher revenue bracket as seen in example #2. If you run a business with a revenue of £100,000 and more, then there is every chance you need a good operations person, and perhaps even start looking at hiring associates if you are in high growth phase, so it may mean you aren’t spending enough to give you the team, processes and systems to support you in your work.
You are working hard at doing everything yourself, and although this can work in the short term, over many months and years, your health and wellbeing is going to suffer trying to keep up with delivery work, as well as what it takes to sell and support you and your clients.
Swinging into 40% or less
If you are swinging towards the 40% profitability and lower, and earning less than £400 for every £1,000 you sell, then there is a danger of your business being over-invested and under-resourced.
In the short-term, this may be necessary; you may be going through an intense period of growth and hiring new members of your team whilst the revenues go up. Hang in there if this is the case, and stay strong with your vision.
But long-term, you may find yourself over-spending and if there is one guaranteed way of a business going under is a lack of cash.
One area I often see being over-spent is personal development; high priced coaching programmes and getting sucked into big marketing programmes can often put a business owner into a cash flow crisis, especially if you are using a credit card to finance.
The other area is hiring too many people, especially if you have decided to run a big launch or you are developing the digital marketing side of your business. You want to have a tight rein on your finances and ensure that whoever you are hiring have clear ROI targets and know what is expected of them.
So watch out for these two swings in both directions. Over the many years of working with consultants, agencies and service professionals, the sweet spot for your personal income happens around 60%, whilst ensuring 40% of whatever you sell goes into your tax, running costs, business growth and personal development pots.
How does this help with your pricing decisions? Let me know what you put into place and how this impacts your business.
Until next time, do less, be more, play bigger.
by Karen Skidmore | 03,21 | Pillar Articles, True Profit
Fatigue, stress and hormone imbalances have become serious problems for many business owners, particularly those of us in our 40’s, 50’s and beyond. And it’s caused many to pull back and play small to protect themselves. When we feel exhausted, we can talk ourselves out of plans we feel we don’t have the capacity, confidence or courage to take action on. But this fatigue and fear of not having enough energy is costing us dearly, and over the years I have come to see that our health is the number one investment we need to make in our businesses.
I’ve experienced fatigue over the years and I know only too well how frustrating and costly this exhaustion can be.
I’ve been frustrated and, at times, incredibly angry about how crap I’ve felt as I’ve gone through my midlife changes and there have been long periods of my business when I’ve pulled back and not done the things I wanted to do. When have the right conditions to fuel our vitality, growing profitable, sustainable and scalable businesses is much easier. But in order to do this, we have to understand and know how to work with, rather than against, our own cycles and flow, as well as the cycles and flow of our business, the economy and the planet we live on.
My fatigue began in my late 30’s. I was in full Superwoman mode; mother to two young children and running a successful term-time online coaching business. Then my Dad got sick. After 18 months of going through three rounds of seriously intensive chemo, he died of Lymphoma in the summer of 2010. My parents lived in Devon at the time. Me in Surrey. So I spent the best part of two years driving up and down the A303, sometimes back and forth in one day. It was no surprise that my shoulders seem stuck to my ears from all the driving, and I had consistent chronic neck pain.
My life seemed to take on a black comedy as, if that wasn’t enough to deal with, I had been convinced to take on a 9 month rescue dog because the family wanted a pet. The autumn of that same year of my Dad dying, he got run over by a truck. £6,500 worth of vet bills and reconstructive leg surgery later I was left looking after a lame dog, whilst dealing with our family grief. I tried counselling but one session was enough for me to decide I didn’t have time to let all this grief out so I zipped it all in. And in January 2011, I went headlong back into making my business work again.
I re-designed my business to get away from the constant launching of digital programmes and closed down a membership site product. I knew I didn’t have the capacity or the inclination to spend my time learning and keeping up with the latest digital tactics that I was teaching. And I missed direct contact with clients, being involved with their decision making and simplifying their marketing systems.
My business moved into a one-to-many model and I launched my first group coaching programme in June 2011, The GID Marketing School, which is still offered today as a foundation course for our Momentum business growth programme.
All the changes I was making to my business was working on paper. I was certainly doing less, having more fun and making more money than before. The problem was that I was still in Superwoman; that same driving force I had back in my 30’s was being used in my 40’s. And let’s not forget the trauma of losing my Dad I had buried deep inside of me.
In the summer of 2012 I hit the proverbial wall. I simply couldn’t get out of bed one weekend. I realised that this tiredness I was feeling wasn’t going to be fixed by a few early nights. I would like to be able to give you a happy ending, but unfortunately, my exhaustion confused and depressed me. My GP told me I was fine and that all women my age go through this kind of symptoms and as my blood tests all came back normal she simply suggested I take some iron tablets.
I conveniently blamed my physical state on peri-menopause which gave me permission to believe that all women went through this so just get through it and by the time I’m 52, all will be well. Ha! My saving grace finally came from finding a community called One of Many in 2017 and it was through some deep personal development work that I began to feel alive again and take back control off my physical and mental health issues.
What I’ve come to deeply understand through my fatigue journey is that you can look to others for inspiration on what makes a business work, have the best product funnel set up and following the latest surefire, tried-and-tested marketing system … but if you don’t find the ways to create the right conditions to fuel your vitality whilst you go about growing your business, you’re in danger of boom-and-bust and crashing your body.
That’s entrepreneurial burnout. And it’s rife right now. But it’s not doom and gloom.
The reason I wanted to share my story is to inspire you that there is life, vitality and the full force of creativity on the other side. That once you make the decision to invest in your health and wellbeing for the sake of your business, you will experience it for yourself why it needs to be the number one investment to make before you look at any growth opportunities.
Once my fatigue was under control, my business began to blossom once again and through my teachings around True Profit Business and the work we do with our Momentum members, I feel I am doing my best work yet. Yes, I have invested in systems, processes and my team but it wasn’t until I began to take my health seriously that I experienced the shift in my own business growth.
I still have to manage my health and wellbeing and yes, I do have set backs as I get tempted with bread and cakes, and eating too much sugar. But I stay alert and tuned in to my body because I know, if I want to do the work that I want to do, I have to make sure I have the right rhythms and rituals in place to support my health.
It’s why we now have Health & Wellbeing as one of the five steps in our Grow Strong™ planning process in Momentum; it’s the foundation that each 90 day plan is built up from so that each of our members are clear on what rituals and rhythms they need to support their growth.
So along with their sales targets for the next cycle, they have to submit what they are doing to move, as well as nourish their mind, body and spirits.
What to do if you feel you need prioritise health as your next business investment
Perhaps you’ve hit the wall like me back in 2012 and you’re staring at this screen frustrated that your brain fog is so thick you can’t think straight. Perhaps you’ve not hit that wall yet, but you recognise the tiredness is affecting how you think about your business and you’re perhaps pulling yourself back on plans you previously had. Wherever you are at with your current health, if you feel you need prioritise your health, here are some of the things I did to start taking some control back of my energy levels.
1. Recognise you have a health problem
The sooner you stop kidding yourself that everyone else is tired and this is just the way of the world, the sooner you can start helping yourself recover. Start with your GP. And yes, I know from experience, that many GPs are just not equipped to understand and investigate fatigue illnesses or hormonal changes so it can take months, if not years to get the medical help that you need. And you may have to go private if you can afford to pay the fees. I’ve found that hormone testing is best done privately because you’ll simply get better results. If you’re interested in speaking to someone, then I can recommend Nicki Williams from www.happyhormonesforlife.com
But don’t get ahead of yourself and make this a bigger problem than it needs to be. One visit to the GP and a blood test later and you may find you have a real simple medical treatment to follow. The reality is that there’s every chance you’ll have to be making some serious lifestyle changes – what you eat, drink and how you exercise and move – but start somewhere and your GP will hopefully be the place for that.
2. Ask for help and explore your options
I know from experience that fatigue causes confusion, brain fog and decreases your ability to make decisions so you need to ask for help. I battled with this for years. I thought I could fix it all by myself with Google searches and a few books on menopause. But it wasn’t until I started getting recommendations for health practitioners such as kinesiologists and acupuncturists that I started to realise that my fatigue had a shed load of trauma and grief blocked behind it. It wasn’t pretty, that’s for sure, but shifting this blocked energy helped me tremendously to get my physical health back on track.
Explore your options, speak to friends or family members, try out treatments recommended to you and you may surprise yourself with what works for you.
3. Is your business model right?
As the pace of our living gets faster and social media feeds us a stylised version of what business success looks like, we seem to be obsessed by how to get more done in less time. And when we’re not sure exactly what needs to be done, rather than look to our vision and business strategy for answers, we buy into the next “should-be” marketing tactic, funnel or success formula that promises us results but simply distracts us by never-ending to-do lists.
It’s easy to see how a lot of people get trapped by building the wrong business model and end up selling and delivering the wrong products and programmes that only drain them of their energy. It’s why one person’s success formula won’t necessarily work for another.
The more time we spend understanding ourselves and how we work, the easier it becomes to build a business that fuels us. Personality profiling tools such as Talent Dynamics are a really quick and easy way of starting this process and other tools such as Motivational Maps can help us understand what makes us tick. Think of it like packing for a holiday; if you were going on a beach holiday, you wouldn’t be taking your ski jackets with you. It’s the same for your business. If being in front of screens all day drains you, is a digital business really right for you … even though you’ve been told by many experts that passive income is the way to go?
Build a business model that’s right for your being, your values, how your energy flows and the money you need to make the choices of how you spend your time.
4. Know that energy flows and needs replenishing
I have learnt that we have many energy states that we have access to help us thrive and rise to our full potential. Energy isn’t static; you can’t keep it topped up and have it stay there. Nor is to be treated like a credit card; think you can go full pelt for a few weeks and then catch up with sleep at the weekends.
Energy flows in cycles and to help my clients experience how to work with this flow, I teach three different energies to use when they are growing a business: Lean In, Lean Back, Ground.
Giving energy flow form can help you keep going forward with your business growth plans, but without the drive and push energy that can burn us out. When you know which energy to use for different tasks such as visioning, planning and implementing, you’re able to make better decisions and find a simpler flow to working during your week.
If feeling energy flow is new to you, then I recommend you first start tracking your energy cycles and flow that happen throughout the day, week and month. It can be hard to do if you are particularly fatigued so it may be that you need to action steps 1 and 2 first before you try this. But what you will find is that some tasks you do in your business light you up and some suck you down. At some points of the day you feel alive and at other times you may just want to crawl back under your duvet. For women, your monthly cycles have a direct impact on our energy so if you haven’t done so already, starting tracking these immediately.
I’m no bean eating, juicing goddess!
If you know me, you’ll know I’m certainly not some bean-eating, juicing goddess who gets up every morning and starts her day with yoga and meditation. I’ve tried but it’s simply not me. If that is your thing, great …. but you may be pleased to know you don’t need to be all zen in order to create zen in your life.
What I do know is that without creating the space in your week to work on your vitality, the vision we have for our business just doesn’t happen. And this is what I want to help you stop from happening. Because when you are exhausted, you pull yourself back; you will talk yourself out of plans you feel you don’t have the capacity, confidence or courage to take action on.
If you want to discuss this with me and what you can do to redirect yourself and your business, get in touch or book in for a 30 minute zoom call. I’d love to help if I can.
Until next time, do less, be more, play bigger.
