Hi, everyone, it’s Nishi Patel here from N-Accounting. I hope you’re having a great day. Today is my birthday, and what a better way to start a birthday than to film a video on business advice and pricing. Today’s video, I wanted to talk about one of the main things that entrepreneurs and business owners get wrong when it comes to pricing, and why it leads them to undercharging and ultimately their businesses failing.
Before I get into it, just remember, if you find any of these videos useful, remember to like, share, and follow. And if you want to talk about anything I discuss in these videos as well, then get in touch with me and book yourself in for a free strategy session. So I’ll get into it.
I often come across entrepreneurs and business owners, and sometimes self-employed people, who essentially had a job where they were getting paid an hourly rate, and they tell me about how happy they are, now they can charge double their hourly rate.
And I work it out. And ultimately, even though they’re charging double than the hourly rate they were earning as an employee, they’re still not making enough money to make their business viable. And I wanted to go into the two main reasons why, and the things that they overlook.
There’s two things. The first one is overheads. When you are an employee, you don’t have overheads. The chances are, your employers pay for your office, they pay for all of your stationary, your computer equipment, any training, and any other costs related to running that business. So when you’re an employee, the money you actually earn is just yours to keep, and nothing comes out of that apart from taxes, like it does for everyone else. So that’s the main reason.
And when you are a business owner or entrepreneur, or self-employed, you’ve got to cover all of that stuff. You don’t just have to cover all of that stuff, you’ve got to pay into your pensions. You’ve got to take other risks as well in your business that you wouldn’t have to as an employee. So this is why when people are simply just doubling the hourly rate when they had as an employee, it often still doesn’t work out. Because they just don’t understand the costs involved of running all those things, their own vans, all their fuel costs, all their marketing campaigns as well. So the overheads is a big contributor to that.
But, the second thing that people really, really overlook is, when you’re an employee and you turn up to work for eight hours or seven hours, apart from lunch, you get paid for that whole period of time you’re at work. But when you are a business owner, you have lots and lots of downtime. For example, you might actually only going to be working maybe three or four days a week. And then that fifth or fourth day in that week, you’re probably spending it doing admin related stuff, keeping your accounting software up-to-date, doing your banking. Looking at ways to grow your business, replenishing your sales. Because once you’ve done a job, you probably need more money coming in for the next round of work.
Ultimately, yeah, the two things are, the overheads as a business owner are much, much higher, and the amount of hours you can actually work are much, much lower. So that’s why quite often, when people start out in business and they take the view, well, I’m just going to double my hourly rate from when I was an employee, it still doesn’t work out for them, and their business ends up failing. Because they haven’t factored in actually… When you do all the other stuff, when you consider all the other stuff, you probably need to triple or quadruple your hourly rate as an employee, to make the same kind of money, and more importantly reward you for the risk that you’re taking.
So what I’d like to do is, if you are a business owner or entrepreneur, and you do think you’re struggling with your pricing, I’d love to offer you a free strategy session where we can talk about some of the solutions to that struggle. We’ve got some really advanced modeling capabilities in this business, so we can actually help people really get down to the details and understand how much they need to be charging to make their business viable and highly profitable. So please take me up on that, and I look forward to seeing you in the next video.