If You’re A One-Man Business, Stop Thinking Like One
Every time I’ve tried to scale, I’ve hit a metaphorical brick wall.
The problem is that I started with no money, no skills, no experience and no book of contacts.
So I learned to do everything myself. And I mean everything.
Photoshop, copywriting, web design, emails, so on, so forth.
This becomes troublesome when it comes to scaling.
On the one hand, you have the natural inclination to do everything yourself. On the other hand, if you do that, your business hits a ceiling pretty quickly because there simply aren’t enough hours in the day.
I have two choices with the business:
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Either move into something more scalable or;
I literally can’t take on more clients… and so I have to change the way I do business.
I take on only a limited amount of clients but gradually increase my price until I price myself out of the market and some other guy like me swoops it all away.
Or I take on people, train them and build a de-facto agency to deal with my client work.
Now… I’m working on a private members thing for here and ecommerce and a million other projects as well (silly me) so it’s all questions that are floating around from time to time.
But the constant remains the same – if you’re going to scale, you have to act like you’re already big.
Get It Out Of Your Head That You’re A Freelancer
Your value proposition isn’t you even when it is.
A lot of businesspeople say “your business should run without you” but I’ve never been sold on that. Your business comes from your brainpower, ideas and execution.
That said… you shouldn’t think of every internal process your business undertakes as having to be completed by you. That’s the mistake I’ve made.
Unless you want to work fourteen hour days into perpetuity and hit a heavy ceiling with your income potential, you need to scale up. And to do that, you need to stop thinking like a one-man band, even if you are a one-man band.
Let’s look at the numbers on this.
Stop Charging Like A Freelancer
If you say, run social media services, then you probably charge as a self-employed person.
So your rate might be $50 an hour, and you charge $50 an hour.
The problem with this is that you then can’t hand the task over to somebody else. If you take someone on at $50 an hour,, then you make no money and you have to deal with the training, welfare and management of your employee on top of that.
This is the trap a lot of freelancers and would-be business owners fall into.
It also makes you non-competitive, because an agency that does social media is a lot more expensive and thus can put more into client acquisition.
A lot of non-business people say “Why does everything cost so much when they don’t pay the workers anywhere near that rate?”
This is why… you aren’t paying for a social media person to tweet for you. You’re paying for the social media person to tweet for you, the overheads of keeping that employee and a ton of other stuff… all before the business owner makes a profit (which they’re obviously required to do in any circumstance.)
How To Fix This
I’ll be honest… I’ve thought about this on and off for a while, and never really got through to working out how to implement any of the strategies I found.
Then I read an email by friend of the blog Nabeel Azeez, who gave a really simple formula for working out how to price services.
For whatever the task, look up how much an employee would cost to hire for your business. (This can all be hypothetical.)
Take their monthly wage and multiply it by 14*.
*This number isn’t exact, but you want 12x their wage to cover the costs of their salary plus the aforementioned overheads.
Half the number of hours they work to get their billable hours.
So if they work 40 hours a week, 20 of those will be billable.
This gives you 2000 hours a year.
Take the first figure (the monthly wage x 14)
Divide it by the second figure (their billable yearly hours)
To get the hourly rate.
So, if you have someone who earns $5,000 a month then your first figure is $70,000.
Divide this by 2,000.
You get $35 as the basic hourly rate.
You then must account for the fact that their salary isn’t their only cost to you – so you might pay their pension, holiday time, time sick and training. So you maybe double that figure.
Then you add your profit in – remembering it is gross profit. So you double the figure again.
$70 becomes $140.
That is your hourly billable rate for a social media client.
None of those numbers are fixed and you can juggle them around. In fact, you should based on your location, the work you’re thinking of doing and the legal stuff in your area.
Also, you’re billing for expansion.
In short, you need to charge a lot more than you do as a one-man freelancing-band, because you’re not always going to be that. And you have to pay to expand.
So use the above formula. If you need to hire, then with those figures you will be able to hire and not worry about it.
This is the process I will be using in the coming years, give or take.