Don’t let your small business become your prison.
Many people start a business because they want more freedom but then they imprison themselves by never earning quite enough and always putting clients’ needs before their own.
Being self-employed doesn’t mean you have to work 24/7 and panic every time there’s a Bank Holiday that you don’t get paid for. Many small business owners, freelancers, and sole traders create working conditions for themselves that they wouldn’t accept from an employer.
How do you get out of the “always on” trap?
There are two essential factors: Pricing and boundaries.
How to get your pricing right.
Work out how much you need to earn each month to cover everything – and I mean EVERYTHING – you need. This includes everything it costs to run your business and everything it costs you to live, including paying tax, taking holidays, investing in a pension, plus a bit left over for a rainy-day fund.
Then work out how many hours a week and how many weeks a year you want to work. If you have children, take account of school holidays (12 weeks per year minimum) or add in the cost of childcare to your revenue needs. Add in an allowance for illness and emergencies. At least a third of your time will be spent working on your own business, not doing work for clients. In the hours you have left to work with clients you need to earn enough to cover everything mentioned above. Work out what your minimum hourly rate needs to be – this is a guide for your own use only.
Don’t charge your time out at an hourly or day rate.
Wherever possible always work out for yourself how long a job will take and use that calculation to set a price for the project. You will almost always underestimate the time it will take so you need to add a good margin to account for this plus any delays caused by your client – and there will always be some!
Don’t be tempted to cave in on prices.
There will always be people who will do the job cheaper than you but if you pare back your prices you will never be able to build a decent business that will support you and you’ll get trapped. What you can do instead is show how the quality of your work brings real value to clients. People who buy on price are not good clients and will always be pushing for discounts so it’s best to avoid this experience. It will feel scary to turn down work that doesn’t pay enough but there are always businesses at the top end of the market, and these should be the clients you aim for. Paradoxically, when people see you charging top prices, they will assume you do good work. Value is a perception of price.
Set very firm boundaries.
Good boundaries are the basis of all good relationships. Set clear working hours and expectations on deadlines, payments and scope of projects so that your clients know what to expect. This includes not answering emails or text messages out of hours. Good clients will respect this and understand that it means you manage your business well and won’t always be rushing to meet deadlines because you’ve allowed someone else to steal your time.
Create the life you want to lead
You are the main asset of your business, so your own health is of paramount importance. Do whatever you need to do to function at your best.
Your most important relationships are what makes life worth living so don’t sacrifice them for the sake of keeping a client happy.
I’ve worked with hundreds of small business owners who revel in their freedom, enjoy a great lifestyle and are saving money for their retirement. It’s not easy and takes a lot of discipline but it can be done if these two crucial factors are worked out before a downward spiral starts.
If you need help with implementing these ideas or want to avoid being the worst boss you’ve ever had just get in touch. I’m always happy to help.