Understanding Profitability: Analyzing Hourly Rates and Job Rates
It is crucial to have a clear understanding of how your hourly rates and job rates affect your profitability.
Without a solid pricing model and profitable rates, efforts to generate leads and increase sales will be ineffective. (You could be sending yourself into a financial hole - Even if you’re amazing at sales)
Importance of Numbers and Profitability
Develop a key understanding of the numbers that impact your profitability - Without them you’re literally running your business blind
This knowledge will serve as the foundation for success in other modules of the course.
Implementing a personal budget is the first step in managing your finances effectively.
Examine your personal spending habits to ensure they are not hindering your business's financial success.
A well-structured personal budget allows you to determine the profit you aim to achieve in your business.
Business Expenses/Template Projection
Obtain a projection of your next 12 months' business expenses, either from your accountant or using accounting software.
Include any costs that are not reflected in the profit and loss statement (PNL) and consider tax payments as well.
Add your “productive employees” and the hours they work per week to determine how many billable hours you have to be able to meet your desired profitability level - Try to be as accurate as possible here
Utilize the provided Excel sheet template to organize and track your financial information effectively.
This template will assist you in identifying areas where you may be overspending or not billing enough for your services.
The Impact of Personal Budget on Profitability
Analyze your personal budget to identify any discrepancies between your spending and the
desired level of profit.
Recognize how your personal financial choices may affect your business's profitability - Are you spending more than what you thought you were?
Business Template Evaluation
Assess your business template to ensure you are charging adequately for your time and services - You will be able to see where you “profitability” leaks are
Track your hours accurately and consider factors such as travel time and report preparation to avoid undercharging.
Valuing Your Time
Understand the value of your time and the importance of earning a certain amount for each hour worked.
Write down your 5 last jobs in each section of your niche
Analyse the cost of your materials compared to what you quoted
Analyse your ACTUAL time compared to what you quoted
Check the business profitability template to see where you sit as per your projected business model numbers
See were your gaps are. What can you improve? Are you actually charging enough billable hours per week compared to what you thought?