Being an entrepreneur can feel like a constant game of “Good News / Bad News”.
Good News: You made your first sale!!!
Bad News: After all the expenses you lost money.
Fortunately, your friendly neighborhood business coach is here to show you how you can create a profitable business structure before you even launch.
Today’s episode is...
Figure Out The Money Stuff BEFORE Starting! (Part 1)
What happens in this episode?
This episode will highlight, yet another important, step in the “No B.S. Start-Up Checklist”. I’m going to show you how to figure out ALL THE SPECIFICS related to your sales and delivery of your product or services. This is actually going to be a two part episode, ‘cause I don’t want to short-change you with just one episode.
Why is this episode so important?
Because you don’t want to do all the work of launching a business, only to go broke and end up back at your dead end job one year later. I feel like that’s a good enough reason to listen to this episode. LOL
Episode Highlights
- Sometimes it can be tough to know what to charge, but it becomes a lot easier to figure it out once you decide what your “standard service” is.
- If your business isn’t profitable PER CUSTOMER, then you probably have a bad business model.
- You have to price your product / services based on every activity you do, not just the ones that directly involve your customers. Otherwise you’re undercharging for your services.
IMPORTANT NOTE
Don’t forget to grab your copy of the No B.S. Start-Up Checklist + Guidebook at https://www.chrisellis.tv/checklist
As a good friend said in this episode I’m “Crazy for giving it out for free. It’s good”. LOL.
Also, please share this link with friends, family, coworkers, social media timeline, etc.
Help me with my mission is to make entrepreneurship a basic life skill by helping distribute this simple 7-step checklist far and wide!!!
Thanks for listening to Boss Talk and I’ll see you next episode.
P.S. Please remember to share this episode with a friend. I really appreciate you.
New to the website? Check out my about page to learn about my mission to help make entrepreneurship a basic life skill www.chrisellis.tv/about
This is, this is, this is Chris Ellis and I am a business startup coach.
My mission is to empower and I do that by showing everyday people how to turn any business idea into very real income. This show is for the creatively and financially frustrated dreamers of the world.
This show is for those of you that can't escape, the feeling that your life that you are living doesn't match up with the life that you are capable of having. You know, that you can do more and be more because you've been blessed with a burning passion or an undeniable talent or a game changing business idea that can change the world.
You just don't know how to go from dreamer to doer I'm here to let you know that you've landed in the right place and that this show is for you. I'm going to give you all the game when it comes to launching a small business with no unnecessary, expensive time consuming steps.
If you're ready to go from breakdown to breakthrough, let's get into this.
------------------------------------------------------------------------------------
Welcome back to Boss Talk and I’m Chris Ellis, your friendly neighborhood business coach. I’m super excited because this is Season 2, Episode 4… and it’s called:
Figure Out The Money Stuff BEFORE Starting! (x2)
This is actually going to be a two part episode. I’m excited because, again, this entire season is going to be devoted to highlighting specific sections from my No B.S. Start-Up Checklist.
As a reminder, the No PS startup checklist is something that I personally created as a free resource for anybody that wants it. Is a simple list of seven unskipable steps for starting any business super fast. I call it the no BS checklist because it only includes what I call true business building activities that most successful entrepreneurs and business coaches know, but don't actually share with the public.
Not only am I going to be going over a key recommendation from this checklist, I’m going to give you the opportunity to get this start-up checklist absolutely free. So stick around until the end of the episode.
So today we’re talking about Step 3 of the Start-Up Checklist which is to …
“Figure Out Sales Specifics”
What exactly happens in this step?:
You’re going to figure out ALL THE SPECIFICS related to selling and delivering of your product or services.
Specifically you're going to do 4 things.
1) --- Figure out how long it takes to make and deliver a product / service to a single customer.
2) --- Figure out how much it costs you to provide service to one customer.
3) --- Come up with a final price for your product / service.
4) --- Create a simple explanation (for customers) of the process of buying and receiving your goods or services.
If you do these highly recommended actions, not only will you have an easier time getting people to actually buy what you’re offering, but you’ll feel better about the transaction after you get the job.
Let me give you a scenario…
- You get a potential customer excited about doing a job
- They ask you a price and you give it to them. Ya’ll shake hands and the work starts
- Cost overruns… don’t wanna go back to the customer to ask for more…so you eat the charges
- Now doing finishing this job has become a chore.
- By the time you’re finally finished, you realized you actually lost money taking that job, because of all the extra time and out of pocket expense.
- Now instead of feeling grateful for having the opportunity to work in your field.
- You feel burned out and bitter.
This is what happens when you’re not clear on ALL THE SPECIFICS related to your sales and delivery of your product or services. You undercharge for your services. Now you’re stuck finishing a job you know you’re not gonna get paid enough for.
So today we're going to talk about two important things you should know about your business…
--- How long it takes you to deliver a product to a single customer..
--- How much it costs you to provide services to one customer.
----------------------------------------------------------------------------------------------------------
Like I said earlier, one thing you have to know BEFORE starting a business is, “How long it takes you to actually deliver one product to one customer.
That means you need to make a list of literally EVERY step in the process of creating or providing this service.
Let’s say you’re a massage therapist that travels to customers. You might think to yourself, that your services begin once you’ve started a massage. But in reality your work starts before you even leave the house. You gotta prep and pack your supplies, load everything into your vehicle, drive over to the customer’s location and then drag your massage table and everything else into their house. That’s before you even begin the massage.
Accounting for this time gives you a more accurate picture of how much you should be charging.
But also, this will give you the ability to create a “standard offer” for your services, because you understand the parameters that dictate how much work you have to do. If you’re an artist and you know it takes roughly 5 hours for a typical painting, it’ll probably take twice as long if you do it twice the size. Knowing that is extremely helpful… and I’m talking from personal experience.
I was an illustrator and freelance graphic designer. One of my business issues is that everyone I met wanted different jobs done. And I never wanted to turn down a job, because technically I could do all of them… but I never knew what to charge. So I was always guesstimating how much each job would be.
Plus, I didn’t know how long a job would take, so that bit me in the ass too. Because, if I was wrong and a job took way longer than I anticipated, I couldn’t accept more jobs. If I would’ve known how much time I had to spend on certain jobs, I’d have not only charged more for the time, but I would’ve added a fee that accounted for the fact that this client was monopolizing my time.
Plus when you don’t know exactly how long your turnaround time is to deliver a product, it’s really frustrating for the clients. I’d be like, “It should be done in a week”… but it took two weeks. And that was a sucky experience for both the client and me.
Writing down all of the steps of my creative process and how long each step took, would’ve made my life way easier.
-----------------------------------------------------------------------------------------------------------
“The second thing you MUST DO before you start a business is…figure out how much it costs you to provide service to one single customer.”
This is similar to the last recommendation I made but more math is involved. Yes I said math. You’re going to need to do math at this stage of planning a business. Nothing crazy… you just need to know how to add, subtract, multiply and divide.
Let’s stick with the massage therapist example. Since you’re including travel time in your cost, any expenses related to travel should be considered. That means the price of gas and the cost to generally upkeep your car should be included in your calculations.
So if you’re doing the math you’d begin with how much time you spend clocked in. So if that’s 30 minutes of travel, you multiple that plus your hourly rate. Then you add the cost of gas, massage oil, and any other supplies you need to do the job. But even above and beyond that, you’d charge for the marketing budget you had to spend to get customers. You’d even charge for the subscription to that app that books your massage therapy appointments.
All of your expenses should be accounted for when you set the price for your product / service.
With that said, there is a reason I said you need to figure out the cost for providing service to ONE SINGLE CUSTOMER.
If what you charge per customer isn’t higher than what it takes to work with them, your business fundamentally operates at a loss.
Your business bleeds money.
I’ll use myself as an example. I’m basically a consultant that offers my services primarily online. So my expenses are fundamentally very low. Everything that I use to make this podcast, create online courses, etc. cost me zero dollars. And to the degree that I even have monthly expenses… I can just sell one consultation package… that’s literally 3 hours of my life and that one one sale pays all my expenses for a single month.
This is how profitable my business was / is… I had a buddy whose business made significantly more than mine like… by like 60K a year… and we both had to do our taxes. I had a really slow year and I was literally making 400 bucks a month in my business at the time. However, when we did our taxes, I had made 3 grand in profit and he had lost $15,000.
Why?
Because I’m a business coach and I knew better.
I knew that I had to charge each individual enough to …
--- Market to new customers
--- Cover the cost of materials and overall business expenses
--- Restock all the material I used for that job.
--- And still have enough money to reinvest back into the business so that I can start marketing to new customers all over again.
My buddy didn’t charge like that. His math worked in such a way that he needs to have a minimum amount of customers to cover the cost of his monthly bills. But he wasn’t pulling in enough customers monthly so he ended up having more expenses than sales.
So don’t be fooled by how much money you can potentially make…IF YOU GET CUSTOMERS. It’s more important to be profitable per customer.
That being the case, as a hard rule, I tell people who’ve never started business this… if the math doesn’t work per customer DO NOT OFFER THAT PRODUCT OR SERVICE. Instead, Offer something less expensive that serves the same basic purpose.
For instance, If you’re in education: You may not be able to create and manage an online academy and develop an app… but you can create ebooks, webinars and even individual courses online.
Do the math… and offer the services you know you can actually afford to offer.
=================
So let’s review…You need to figure out ALL THE SPECIFICS related to selling and delivering your product or services BEFORE actually getting into business.
Two activities involved in this is to…
--- 1. Write down the whole process of you getting and working with customers, step by step… along with how long each step should take.
--- 2. Then take all the supplies necessary to provide that service and figure out the exact monthly cost.
This information will give you enough insight you can use to create a standard offer with an exact price.
This is great for multiple reasons:
--- 1. It allows you to easily set expectations for the client and walk them through the process of what it’s like to actually work with you.
--- 2. You don’t undercharge customers. Even if you looooove your business, undercharging can leave you burnt out, like owning your business is too much work for the effort. You never wanna realize that not only do you NOT make enough in your business, when all the calculations are done, you were making more hourly at crappy day-job your quit.
That’s a horrible feeling… Knowing that you gotta go back to the same environment you escaped from because your dream has left you desperate and in debt. That’s bad business.
No one should have to go through that. Do yourself a favor and make sure you’re being thorough with your pricing.
-----------------------------
This is why I say that “Figuring Out Sales Specifics” is an unskippable step in creating any business.
Again, this is part 1 of this episode. I can’t wait to release the second and final part in a few weeks. I’m gonna be dropping a lot of knowledge, so you don’t want to miss it.
------------------------------------------------------------------------------------
Going forward, we’re gonna keep covering my favorite parts of the No B.S. Start-Up checklist, but you don’t have to wait for all the episodes to come out to get all the steps. The No BS Start-Up Checklist is available right now on my website absolutely free.
Go to chrisellis.tv/checklist, sign up for the mailing list and the first message you’ll get will have the checklist attached. In fact, not only will you get the checklist, but for a limited time you’ll get The “No BS” Start-Up Guidebook that explains all the steps in detail.
Again it’s absolutely free and everybody that has a passion they want to turn into a career should have a copy of this.
Shameless Plug For This Season
I’ve decided this year that I’m going to treat you listeners as partners in a mission I have… to make sure that skill of making money becomes a basic life skill available to everyone.
Covid, this recession, job and housing shortages, etc. has proven that everyone needs the ability to make money on demand, especially in a financial pinch.
So here’s what I’m asking… don’t just grab a copy for yourself, please SHARE THE LINK… with friends on your social media, etc. This is something I really care about on a personal level.
I know so many people that are looking for real information about becoming an entrepreneur and there’s a shortage of information that actually walks people through the process in the same way that real entrepreneurs actually do it.
So… please, please, please help me get this information out to as many people as possible this year.
www.chrisellis.tv/checklist
I’ll be back with a new episode very soon. This is Chris Ellis, your friendly neighborhood business coach. Thanks for watching and listening.