A guest post by Elaine Pofeldt, author of The Million-Dollar, One-Person Business.
Many entrepreneurs wish they could come up with a hot idea for a toy like Squishies to get to $1 million in revenue.
What’s harder is finding a way to get to $1 million in a tiny service business—the kind that many small business owners run.
Most service businesses, whether they serve other firms or individuals, are built around selling time for dollars. An accountant, for instance, will charge an hourly rate for advice. A salon will charge $60 for a 30-minute facial. Operating that way places a ceiling on their revenue because there are only so many hours to sell.
It doesn’t have to be that way. In researching my book The Million-Dollar, One-Person Business (Random House, Jan. 2, 2018), I found that there are several ways that owners of service businesses can scale their revenues without simply multiplying the hours they work—even if they can’t yet afford to hire full-time employees. Here are three ideas to help you grow your business in 2018.
Expand your market.
Many business owners price their services based on what competitors in their area charge, assume that’s the going rate. If you’re using that approach, consider expanding to a wider geographic area where you can charge more.
By marketing your services on a platform like Upwork or Freelancer, where you will get exposure to a broader marketplace, you may be able to charge rate higher than is common in your geographic region. For instance, if you’re based in a state with a low cost of living, such as Mississippi, you may be able to earn more than you do right now by cultivating clients in states where customers are accustomed to paying more, such as California, New York or Massachusetts. Of course, you will need to do some research to find out the going rate for services like yours in the states where you plan to operate.
Charge more.
If you offer a service that does not lend itself to remote work, take a look at the value you are providing to determine if your prices match the benefits customers are receiving.
Let’s say you are a talented hair stylist who is almost always fully booked three or four weeks in advance. Given the existing demand for your services, it’s very likely that some customers might be willing to pay you a little more for a haircut so try adding a small price increase in 2018 or add a new add-on service that customers can buy when they come in for a trim. If you’re worried you may lose clients who are on a tight budget, offer a senior citizen’s discount or a lower price to those who come in during hours when you tend to be less busy. Even a small price increase for most of your customers can greatly improve your revenue over the course of a year.
Consider deliverables-based pricing.
If you are really good at what you do, you may be able to accomplish in one hour what it takes a less-talented or inexperienced competitor to do. In that case, charging by the hour does not work to your advantage. You are not being paid an amount that reflects the value you are actually providing to the client.
In 2018, consider giving your clients the option of paying you by the project, instead of by the hour. For instance, if you do marketing work, charge a flat fee for a press release that reflects the value of the press release to the client, rather than the three hours it took you to write it. Many clients will welcome a flat fee because they know the maximum they will owe you. Your best clients will want to pay you a fair rate because they will want to know you are there when they need you and aren’t overbooked just to keep ahead of your bills.
If you’re really talented at what you do and deliver unusually good results, you may be surprised at how much you can command for your services. For instance, I found in researching The Million-Dollar, One-Person Business that consultants and coaches who consistently deliver great results for their clients can charge day rates that make it very possible to get to $1 million in a year. Of course, if you charge premium rates, you need to deliver something that’s better than everyone else and show a real impact to clients’ bottom line. Once you can do that, you’ll be well on your way to a higher revenue business.
ABOUT THE AUTHOR
Her work has appeared in FORTUNE, Money, CNBC, Inc., Forbes, Crain’s New York Business and many other business publications and she is a contributor to the Economist Intelligence Unit. She is the author of The Million-Dollar, One-Person Business, a look at how entrepreneurs are hitting seven-figure revenue in businesses where they are the only employees, tapping automation and other technology to scale their efforts (Random House, 2018).
As a senior editor at FORTUNE Small Business, where she worked for eight years, Elaine was twice nominated for the National Magazine Award for her features and ran the magazine’s annual business plan completion. During her time at FSB, she ran the magazine’s website, fsb.com, for four years, building its traffic from two to five million page views a month.