If you’ve priced your goods and services appropriately, revenue leads to profit and if you are interested in increasing your profit, there are only four ways to do it:
1. Increase your revenue by selling more products or booking more business (this may require you to work more than you currently are)
2. Increase your fees or prices (which may not be possible if you’re an independent direct sales consultant)
3. Reduce your expenses (but not to the point that you compromise your effectiveness)
4. Develop new revenue streams
For the past two years, my goal has been to work less and make more. It’s not that I’ve gotten greedy. I just want to make sure I’m getting a fair return for my labor. And, if I’m going to take time from my family, I want to make sure that I’m adequately compensated.
Sometimes we underestimate our value as work-at-home moms because of lack of confidence or gratitude that we get to work flexibly when others don’t. A friend challenged my thinking in this regard when she flippantly said, “Just because you work in your pajamas sometimes doesn’t mean you work is worth less than someone who gets dressed every day.”
She’s right. That’s why we need to periodically take a look at our income and expense statement in order to insure we’re earning what we’re worth and maximizing our profit. Here’s how to measure your success in this regard:
Determine the minimum you have to work to cover your overhead. My profit was lean the first years of my home-based business because I was caring for a toddler and an infant and I wasn’t able to do much else! Yet I still had overhead expenses such as a second phone line, internet connection fee, and office supplies. When you know how much you have to work each month just to cover your expenses, it is easier to determine how much you’ll have to work in addition to make the profit you desire.
Identify the market value for your line of work. If you were employed by another company doing what you’re doing, what would your salary be? Another way to think of this is to determine the “going rate” for your type of work—and then compare what you currently charge. Though you may be making somewhat less due to the fact that you are not based in an office outside the home, may not be working full time, and have flexibility that many employees don’t have, your income should still be comparable. If it’s not, it’s time for an adjustment. A graphic designer I know increased her fees by 30% when she realized she was under-charging for her services. No one balked. If you’re not a sales consultant whose prices are set by someone else, make sure you’re getting what you’re worth.
Be realistic. Though you may wish to see more products or book more business, doing so will require you to work more than you are, unless you can find a way to handle the increase without additional effort. If you're a network marketer, you might choose to focus on building a bigger team underneath you. If you're an independent service professional, you might decide to market more aggressively but pass the increased workload along to subcontractors instead of handling it yourself.
As you set your goals each year, be sure to recognize your limits in terms of time, energy, and capacity. If you choose to increase your income, be aware that doing so requires other increases as well, including the possibility of increased stress. If you don't want the anxiety that may accompany increasing your current sales levels, reduce your income expectations or increase your fees instead. Keep in mind there may be a point at which the market will no longer bear fee increases. If this is happening to you, consider developing new income streams for your business.
Financially Yours,
Mary Byers
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