When trying to grow your business, finances play a central and important role in all stages of the business cycle. You may be starting a business and looking for finance to get off the ground or a start-up who requires steady cash flow to maintain sales as well as grow, or an established business who would like to have liquidity to grasp opportunities and safeguard and protect assets. Whatever stage you are at, here are the ultimate business tips for the self employed and your finances and how to make them work for you.
How much should I charge my clients?
Whatever stage you are at, how much to charge your clients or customers should always be front and centre of mind and as your business grows, you should expect your fee structure to also evolve.
There are of course considerations on your own experience and your expertise in your business field which will determine where you sit amongst your competitors. Doing research on your competitors, both online and speaking to existing clients or your business community, is a great way to compare how much you charge for your services as well working out what makes your business unique and different.
Another process to consider is to look at the level of income you would like to generate and work your way backwards from there. For example, if you are self-employed and have a little experience and know that initially you would like to earn around £25,000 whilst also gaining more experience, you can calculate your daily charge or hourly charge rate, backwards. If you wanted to work 5 days a week and take bank holidays and say, 28 days holidays per annum, that would equate to 225 days per year, and your day rate would therefore be £133.33 and your hourly rate would be £3.33 per hour if you worked 4o hours per week. Obviously, this calculation does not consider your overheads and business expenses, tax and accounting costs, but you can start to see how, by making simple calculations, you can start to build a picture of your finances and what you need to work towards to achieve your financial goals.
Also, by looking closely at your desired level of income and how this would breakdown to a daily or hourly rate for billable work, you will need to consider which method of charging – hourly or per project – would work best for you and your business. Some types of work will result in different types of charges. For example, if the client needs someone to write some blog posts for them, are you better off charging per word or per hour? With written content, think about what will benefit you the most. Can you reel off 1,000 words on a topic inside a couple of hours? Charge per word. Will the project take many hours or days to complete? Charge per hour.
Whether you charge clients per day, hour, or project is entirely dependent on the scope and detail of the project. Think about what your work is worth to the client and value your own work in the process.
If possible, speak to people in your network about what they charge, but remember they might not always be keen to reveal their actual rates.
How to get a raise from an existing client
As you become established or if you are already established and are taking the sensible approach of reviewing your charges, which we advise you to do annually at the very least and increasing your charges by inflation, you may also think you need to raise your charges or fees with existing clients because the industry has evolved and dictates it or you believe your services are worth more.
In either case, we strongly recommend you put together a business case for the increase in charges and this doesn’t need to be a formal written document, but a well thought out strategy delivered to the client, so they know exactly why you are putting up your fees. All clients appreciate honesty and transparency and if your case is justified, you will be surprised how easy it can be. Of course, you may have clients who will be resistant to such change and in these cases you could bring in a phased increased in fees, showing your loyalty and dedication to the client.
Startup Funding and Business Loans – what are your options?
This is a really important part of raising cash flow and could mean the difference between success and failure. We have written a separate article on how to raise finance for your business here.
One of the most attractive aspects of being self-employed is that you have the flexibility to work where and when you want, including working from home and enjoying all the benefits and tax reliefs available to you. Furthermore, working online offers you many opportunities to land projects from clients across the globe. Here are a few things to consider before you take up international clients:
Different time zones
Seems obvious, but you’d be surprised how easy it is to assume your client is awake just because you are. Restrict yourself to emails where possible, and schedule calls and Skype only when necessary.
Take note of currency exchanges when charging a price for your work, and consider the acceptable rates in your client’s home nation.
Method of payment
If your client pays you via an international bank transfer, remember to budget your finances to cater for the standard 3-5 working day processing.
Talk in plain English with non-native speakers to lower the risk of a communications breakdown. Remember that each nation will have its own standards and methods, so keep an open mind.
Make sure you understand the tax implications
We can help
We strongly recommend you speak with a tax and accounting specialist like Mirandus Accountants, who can help you set up in business and support you as you develop and grow. We are an accounting company in London and Edinburgh who are tax accountants for the self-employed and offer accountant services for small business. You can contact us to offer a tailored solution to your unique business circumstances.
Mirandus Accountants, supporting local businesses in the City of London and Greater London area and City of Edinburgh, providing accounting and tax services to SMEs and OMB clients. As strong advocates of cloud accounting and a QuickBooks Pro Advisor Practice, we offer access and training on QuickBooks as standard to all our clients, whatever stage of your business cycle.