Julia Bickerstaff at Flying Solo's Independents' Day

How
to
manage
your
business

for
proﬁt

Most
businesses

never

achieve
their

owner’s
proﬁt

expecta:ons

julia@thebusinessbakery.com.au

What
is
proﬁt?


Your
Business
Model
=
Your
Business
Recipe


If
you
want
to

pocket
more
proﬁt

you
have
to

change

the
recipe


Lots
of
:ps
but
aim
to
leave
with…

3
ways
to
change

your
business
recipe


At
the
start
life
looked
good

Work
40
hours
a
week,
48
weeks
per
year
=

1920
hours

Charge
$150
per
hour

Earn
1920*$150
=
$288,000


But
3
years
later….

Work
50
hrs
a
week
for
50
weeks=

2,500
hours

Earn

$100,000

That’s
an
average

$40
per
hour

Compared
to
plan,
work
an
extra
580

hours
to
earn
$188,000
less


I
guess
I
just

need
more

work,
groan


“You
don’t

need
more

work,
you

need
to
ﬁx

your

business”


Eh?


You
spent
70%
of
your
:me
on
client
work
but

only
invoiced
32%
.

You
lost
$143,750
of
revenue
through
your
pricing

decisions

You
lost
$37,500
of
gross
margin
because
you

were
ineﬀec:ve
and
made
mistakes

It
cost
you
$93,750
of
billable
:me
to
operate

your
business


Working
harder
is
not
the
answer

Hours
Dollars

Total
hours
2,500
375,000

Less:

Revenue
mistakes
-‐

(650)
(143,750)

unproﬁtable
pricing

Gross
margin
mistakes
(300)
(37,500)

Opera:ng
costs
(750)
(93,750)

Total
unbilled
hours
and
1,700
275,000

revenue

Billed
hours
and
revenue
800
100,000


Hours
%
of
total
hours
Dollars

Hours
billed
to
800
32%
100,000

clients

Hours
and
cost
of
650
26%
143,750

revenue
mistakes

Hours
and
cost
of
300
12%
37,500

gross
margin

mistakes

Hours
and
cost
of
750
30%
93,750

opera:ons

Total
hours
2,500
@$150
per
hour
375,000


1.  Revenue
mistakes

2.  Gross
margin
mistakes

3.  Opera:ng
cost


Charlie’s
revenue
mistakes

Cost
of
discounted
hourly
Hours
As
a
%
of
total
Dollars
@$125/
rate
client
hours
hour

(1450)

2500
hours
@$150-‐$125
62,500

Hours
you
didn’t
charge

because:

You
wanted
to
be
“cheap”
300
20%
37,500

You
did
stuﬀ
the
client
100
7%
12,500

didn’t
want
done

You
did
extra
stuﬀ
the
250
17%
31,250

client
wanted
but
you

were
too
cowardly
to

charge
for
it

Total
revenue
lost
650
44%

143,750

Pricing
for
maximum
proﬁt

How
to
‘set
and
get’
your
prices


Tips:
How
to
set
your
prices

Star:ng
point:
the
price
calculator:

Hourly
rate
X
Number
of
hours


How
to
set
your
hourly
rate

“Start
with
what
you
want
to
earn
out
of
the

business
and
then
design
the
business
around

that”


Selng
your
hourly
rate

What
does
proﬁtable
look
like
to
you?

1.  How
much
would
you

like
to
earn
a
year?

2.  How
many
hours

would
you
like
to

work
a
year?


Selng
your
hourly
rate

Es:mate
the
number
of
client
hours

you
intend
to
invoice
for
the
year

Tip
–
You
can
assume
50%
of

the
hours
you
work
will

not
be
billed
to
a
client!

Tip
–
You
are
beoer
oﬀ

aiming
for
a
higher
hourly

rate
and
fewer
hours
than

vice
versa


Selng
your
hourly
rate

Do
an
hourly
rate
calcula:on

Earnings
for
the
year
(+
cash
costs)

50%
of
hours

Earn
$200,000,
Work
2000
hours,

(assume
bill
1,000)

Hourly
rate
needs
to
be
200,000/1,000
=

$200


Selng
your
hourly
rate

Revisit
aqer
looking
at
the
margin

model
and
opera:ng
proﬁt
model


Tips
for
es:ma:ng
the
number
of

hours
for
a
project

1.  Keep
a
:mesheet
(properly!)

2.  Add
a
buﬀer

3.  Do
a
budget
for
each
job

4.  Keep
a
record
of
“extra”

work

5.  Check
in
with
clients
–
are

you
doing
addi:onal
stuﬀ

that
they
don’t
value?


You’ve
set
the
price….now
how
do
you

get
the
price?

5
strategies


1.
Posi:on
yourself
-‐
Aim
high

$9.66
/L
$3.65
/
L
$3.00
/
L
$1.15/
L

Super


premium
Premium
Everyday
Economy

2.
Three
talk-‐about-‐able
diﬀerences


Be
the
expert:
Act
as
if

5.
Let
your
price
tell
the
story

Price
helps
your
customer
buy

Three
:ps
to
make
pricing
more

palatable


2.
Power
of
three


Small,
medium,
large


Good,
beoer,
best

$4.98/100g

$8.70/
100g
$10.63/100g

Aaagghhh!
My
hourly

rate
just
won’t
work

Final
thought

If
you
think
your
pricing
is
too

high,
ask:

1. 
-‐
are
they
going
to
a

compe:tor
or
simply
not

taking
the
service?

2. 
-‐
what
is
the
compe:tor

doing
that
you
are
not

(bet
it’s
not
all
about

price)

3.  What
can
you
cut
out

(they
aren’t
valuing
all

that
you
do)?

Charlie’s
Gross
Margin

model

Hours
Dollars

Total
hours
2,500
375,000

Less:

Revenue
mistakes
-‐

(650)
(143,750)

unproﬁtable
pricing

Gross
margin
mistakes
(300)
(37,500)

Opera:ng
costs
(750)
(93,750)

Total
unbilled
hours
and
1,700
275,000

revenue

Billed
hours
and
revenue
800
100,000


Charlie’s
gross
margin

model

Hours
As
a
%
of
total
Dollars
@$125/
client
hours
(1450)
hour

Hours
you
couldn’t

charge
because:

You
were
reworking
100
7%
12,500

mistakes

You
were
ineﬃcient
200
14%
25,000

Total

300
21%
37,500


What
are
gross
margin
mistakes?

“Unsellable
stuff”

The
hours
you

spend
on
client

work
which
are

unbillable

because
you
have

been
ineffec:ve

or
inefficient


Gross
Margin
Recipe

Tips
for
Boos:ng
Margins
and

produc:vity


Tip
1:
Produc:ze

1. Frameworks

2. Clear,
consistent

deliverables

3. No
reinven:ng
the

wheel

4. Easier
to
price

5. Quicker
to
sell

6. Creates
valuable
IP
in

your
business


Tip2:
Process

1.  Turn
everything
you

do
into
a
repeatable

process

2.  Keep
your
eye
out

for
ways
of

elimina:ng
the

unnecessary

3.  Perfec:on
is
over

rated


Tip3.
Get
on
with
it

1.  Internet
oﬀ,
phone
oﬀ

2.  Keep
a
‘no-‐cheat-‐
:me
sheet’

3.  Be
organised,
cluoer
free,
process
driven

4.  Stop
clock
–
work
in
bursts

5.  Cap
your
:me


Retail
Tip

-‐
gross
margin
model

1.Cura:ng
your
collec:on

is
your
skill

2.
Fail
fast

3.
Balance
your

“porxolio”
of
risky

things

4.
Risky
stock
must
have
a

margin
that
makes
it

worth
while


Charlie’s
Opera:ng

Cost
Model

Hours
Dollars

Total
hours
2,500
375,000

Less:

Revenue
mistakes
-‐

(650)
(143,750)

unproﬁtable
pricing

Gross
margin
mistakes
(300)
(37,500)

Opera:ng
costs
(750)
(93,750)

Total
unbilled
hours
and
1,700
275,000

revenue

Billed
hours
and
revenue
800
100,000


Charlie’s
opera:ng

costs
model/recipe

Hours
As
a
%
of
total
Dollars
@$125/
hours
(2500)
hour

Hours
you
spent:

Selling
250
10%
12,500

Marke:ng
250
10%
12,500

Admin
250
10%
12,500

Total
37,500


No
marke:ng
miracles

“Marke:ng
is
the
price
you
pay
for
lousy

products”

OUCH!


Tip1:
Get
the
basics
right

Top
3
reasons
why
you
are

spending
too
much

:me
marke:ng:

1.  You
are
a
‘me-‐too’

business

2.  You’re
not
marke:ng

at
all
–
you’re
just

having
fun

3.  You’re
“marke:ng”
to

the
wrong
people


Tip
2:
Referrals
are
your
marke:ng

engine


The
Ul:mate
Ques:on

“How
likely
is
it
that
you
would
recommend
this

company
to
a
friend
or
colleague?”


Selling

Cost
of
acquiring
a

customer
is
the
#1

underes:mated
and

unbudgeted
cost


Tip
1:

Easy
ways
to
keep
selling
costs

down

1.  Keep
a
record
(on
your
:me

sheet)
of
all
‘selling
:me’
so

you
can…

2.  Budget
for
‘selling
:me’
and

price
it
in

3.  Develop
a
selling
process

(mee:ng
agendas,
proposals

etc)
don’t
reinvent
the
wheel!

4.  Find
a
quick
way
to
uncover

tyre
kickers


Tip
2:
Repeat
purchases


Admin


Cash
model

You
are
not
a
success

un:l
you
turn
your

proﬁt
into
cash

You
lend
your
:me

not
your
money


Tip
1.
The
race
to
invoice


Tip
1.
The
race
to
invoice

Gold
medal:
Invoice
before
performing
the

work

Silver
medal:
Invoice
while
performing
the

work,
frequently
and
regularly

Bronze
medal:
Invoice
as
soon
as
work

completed

Middle
of
the
pack:
All
invoicing
once
a
month

Wooden
spoon:
invoice
when
you
have
:me


Tip
2.
Unambiguous
fee
structure

Invoicing
is
a
process
not
a
pricing
decision


Tip
3.
Chase
your
cash

1.  Set
aside
a
regular
:me
to
call
your
debtors

2.  Keep
notes
of
conversa:ons

3.  Make
friends
with
Accounts
Payable
clerk

4.  Be
the
squeaky
wheel


Julia
Bickerstaﬀ

Julia
@
thebusinessbakery.com.au

www.thebusinessbakery.com.au


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