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Business Management Tips
11 years ago
General
Since the beginning of this year, I have been searching for a new job. I considered the option of even starting my own business. But... where do I start? How do I manage things? How do I set a reasonable price for my goods and services?
The first step is finding out the cost of doing business. Some things that are really important to consider:
What assets do you need to do your job?
What services are required for you to perform your work? ( IE: electricity, internet, rent, etc )
So, I decided to create a budget for myself. I started with the large costs for me to survive. The largest on the list are my school loans. It costs me $650 a month. It costs me about $300 a month to live here in the apartment. Everyone has to eat, so I have allotted $200 for groceries. For me, I have a lot of medical issues, so I have budgeted $100 for doctors visits / health care. $100 for transportation. I have electricity to take care of, so I took the average cost for how much it could be which is about $100. I have medications to deal with, so I budgeted $100 for pharmacy costs. I have a mobile phone, so that's another $50. I have a credit card payment I need to make so that's $50. I'd also like to be able to have a little fun, so I decided to put about $100 a month. And lastly, and probably one of the most important things, Savings. This is REALLY important to budget for. I have decided to put $150 each month. Things break, people get sick, life happens. Having a buffer for emergencies is very important.
There's one more thing that is not necessarily needed right now, but will be in the future. That's getting a car. To save for a down payment on the car, I found out the cost of the car, how much I wanted to pay per month, and figured out what the down payment should be. In my case, I need to try and save $898 / month. This may seem kind of high, but keep in mind... After I buy the car, I will have to have money to pay for the monthly loan payment, gas money, taxes / tabs, car insurance, and anything left over can go to savings in case something on the car breaks down.
Once I added all these things together, I found out that I have to make $2,798 a month to operate. I multiplied that by 12 to get what I would need to make each year which is $33,576 / year. So that means I can just charge a fee based off that number, right? nope. You have to account for taxes. So I started with a best guess number. I tried charging $20 / hour. Assuming this is a full time job, I did some math and came up with these figures:
$20 * 40 hours a week = $800 / week
$800 * 52 weeks a year = $41,600 a year
Now, with taxes, I decided to charge 40% of the annual income. This comes out to be $16,640.
I then take the annual income and remove the taxes which comes out to be $24,960. Oops! Looks like that's not enough for me to operate. Let's try $25 / hour.
$25 * 40 hours a week = $1000 / week
$1000 * 52 weeks a year = $52,000 a year
Taxes @ 40% = $20,800
Difference = $31,200
It's close, but still not quite enough. Let's bump it up by $2.
$27 * 40 hours a week = $1080 / week
$1080 * 52 weeks a year = $56,160 a year
Taxes @ 40% = $22,464
Difference = $33,696
Hey look! We're just over our required yearly cost! This means that in order for me, personally, to operate... I need to be making $27 / hour at a full time position.
The next step is to look at the market. What are people currently charging for the goods or services you are dealing with. In my case, I deal with art and web development. I originally went to school for animation because I really liked it and I thought it would be a fun and exciting job. But I realized that the market for animators, especially in my area, was not that good. I was hearing a lot of stories about my animation buddies graduating and not getting a job. I am also fond of web development and the market in that area is booming big time. I made a business decision to go into web development. "But Alkora, if it's what you really want to do, why are you abandoning it?!" Just because I make a business decision doesn't mean I have to give up my dream of doing animation. I have allotted 40 hours a week to doing web development to make my income. I can use my spare time to pursue my passions. It's also good to note that it's a good thing to have things you are passionate about available for personal interests to keep you inspired. So now that I have decided what I want to do to make my money, I need to look at what others in my field are charging. I want to make my prices competitive, but try not to go under my budget too much. If it's not doable with my current budget, then maybe some thought needs to go into revising my budget to make sure it will work. In my case, the standard contractor's rate is $35 / hour to $40 / hour. On my current budget, I can easily justify my service's costs and it will make me competitive.
Another important thing is advertising. People need to know you. You need to stand out and get attention. For me, I have learned that it would be a good thing to look around and actively pursue work. Sending emails to companies with suggestions as to why I could help them improve their business. Emailing is the best method as it does not take up their time on your schedule. In my case, I would benefit by offering a free consultation. Even if that consultation doesn't bring in business for that person, it creates a business connection. There's a chance they could talk to one of their connections and bring you business that way. Word of mouth advertising is a big thing, that's why social networks are such a large interest with the general public.
And the last thing is creating a schedule. It's important to set a schedule for yourself. It sets goals for projects, reminds you of upcoming events / meetings / deadlines. Working from home can be difficult as you may feel more comfortable and lazy. It's important to keep yourself professional and on task to accomplish your goals and make that money you really need.
As a result of all of these things I have learned, I realized that if I am going to do commissions for people I need to be charging $27 / hour. So I may be creating a new guide at a later point to reflect these changes. I may also be opening up for other web-based services for the fandom.
If you have any questions or comments, or feel I goofed up on something, please feel free to post your opinions below. I'd love to hear back from you, especially if you have found this helpful for you!
The first step is finding out the cost of doing business. Some things that are really important to consider:
What assets do you need to do your job?
What services are required for you to perform your work? ( IE: electricity, internet, rent, etc )
So, I decided to create a budget for myself. I started with the large costs for me to survive. The largest on the list are my school loans. It costs me $650 a month. It costs me about $300 a month to live here in the apartment. Everyone has to eat, so I have allotted $200 for groceries. For me, I have a lot of medical issues, so I have budgeted $100 for doctors visits / health care. $100 for transportation. I have electricity to take care of, so I took the average cost for how much it could be which is about $100. I have medications to deal with, so I budgeted $100 for pharmacy costs. I have a mobile phone, so that's another $50. I have a credit card payment I need to make so that's $50. I'd also like to be able to have a little fun, so I decided to put about $100 a month. And lastly, and probably one of the most important things, Savings. This is REALLY important to budget for. I have decided to put $150 each month. Things break, people get sick, life happens. Having a buffer for emergencies is very important.
There's one more thing that is not necessarily needed right now, but will be in the future. That's getting a car. To save for a down payment on the car, I found out the cost of the car, how much I wanted to pay per month, and figured out what the down payment should be. In my case, I need to try and save $898 / month. This may seem kind of high, but keep in mind... After I buy the car, I will have to have money to pay for the monthly loan payment, gas money, taxes / tabs, car insurance, and anything left over can go to savings in case something on the car breaks down.
Once I added all these things together, I found out that I have to make $2,798 a month to operate. I multiplied that by 12 to get what I would need to make each year which is $33,576 / year. So that means I can just charge a fee based off that number, right? nope. You have to account for taxes. So I started with a best guess number. I tried charging $20 / hour. Assuming this is a full time job, I did some math and came up with these figures:
$20 * 40 hours a week = $800 / week
$800 * 52 weeks a year = $41,600 a year
Now, with taxes, I decided to charge 40% of the annual income. This comes out to be $16,640.
I then take the annual income and remove the taxes which comes out to be $24,960. Oops! Looks like that's not enough for me to operate. Let's try $25 / hour.
$25 * 40 hours a week = $1000 / week
$1000 * 52 weeks a year = $52,000 a year
Taxes @ 40% = $20,800
Difference = $31,200
It's close, but still not quite enough. Let's bump it up by $2.
$27 * 40 hours a week = $1080 / week
$1080 * 52 weeks a year = $56,160 a year
Taxes @ 40% = $22,464
Difference = $33,696
Hey look! We're just over our required yearly cost! This means that in order for me, personally, to operate... I need to be making $27 / hour at a full time position.
The next step is to look at the market. What are people currently charging for the goods or services you are dealing with. In my case, I deal with art and web development. I originally went to school for animation because I really liked it and I thought it would be a fun and exciting job. But I realized that the market for animators, especially in my area, was not that good. I was hearing a lot of stories about my animation buddies graduating and not getting a job. I am also fond of web development and the market in that area is booming big time. I made a business decision to go into web development. "But Alkora, if it's what you really want to do, why are you abandoning it?!" Just because I make a business decision doesn't mean I have to give up my dream of doing animation. I have allotted 40 hours a week to doing web development to make my income. I can use my spare time to pursue my passions. It's also good to note that it's a good thing to have things you are passionate about available for personal interests to keep you inspired. So now that I have decided what I want to do to make my money, I need to look at what others in my field are charging. I want to make my prices competitive, but try not to go under my budget too much. If it's not doable with my current budget, then maybe some thought needs to go into revising my budget to make sure it will work. In my case, the standard contractor's rate is $35 / hour to $40 / hour. On my current budget, I can easily justify my service's costs and it will make me competitive.
Another important thing is advertising. People need to know you. You need to stand out and get attention. For me, I have learned that it would be a good thing to look around and actively pursue work. Sending emails to companies with suggestions as to why I could help them improve their business. Emailing is the best method as it does not take up their time on your schedule. In my case, I would benefit by offering a free consultation. Even if that consultation doesn't bring in business for that person, it creates a business connection. There's a chance they could talk to one of their connections and bring you business that way. Word of mouth advertising is a big thing, that's why social networks are such a large interest with the general public.
And the last thing is creating a schedule. It's important to set a schedule for yourself. It sets goals for projects, reminds you of upcoming events / meetings / deadlines. Working from home can be difficult as you may feel more comfortable and lazy. It's important to keep yourself professional and on task to accomplish your goals and make that money you really need.
As a result of all of these things I have learned, I realized that if I am going to do commissions for people I need to be charging $27 / hour. So I may be creating a new guide at a later point to reflect these changes. I may also be opening up for other web-based services for the fandom.
If you have any questions or comments, or feel I goofed up on something, please feel free to post your opinions below. I'd love to hear back from you, especially if you have found this helpful for you!
Not to mention, especially considering your health issues, you need to think about sick days and vacations. How realistic is it that you will be able to work 40 hours a week consistently without having to take time off from work for doctor visits, treatment/recovery, just getting sick now and then, or heaven forbid, taking time off to do something fun like a convention or two? Savings for emergencies are a must, but foreseeable health expenses (which includes R&R) shouldn't be coming out of emergency savings.
I've found that if you undercut by too much, you start to lose business by virtue of companies getting uncomfortable. When I was doing graphic design on my own, I would run into this all the time - companies know what the going rate is, so they used to ask me all the time, in a roundabout way, "why are you so much cheaper?" Even when you have a solid answer like you do, based purely on math, every company assumes that everyone is greedy like they are. So (in my opinion), they immediately or eventually start to think "What is wrong with this person, or their services, that they feel like they need to charge that much less than the market window?"
This happened again when I started contracting for 3D product design to land the job I have now...but I know the rules change a bit when you have someone else also getting paid off your wage, working for a firm. I already had a job in the field, but it was terrible, and I was looking for a better one.
I remember this conversation well. The contracting firm asked me "What do you make right now?" I told them, and they said "Nope, you now make 70% more. That puts you at the low end of where everyone else with your skills and experience is at. You wouldn't even be competetive or looked at with the other rate."
Just something to consider.
Man...there has to be a percentage of deviation that someone has figured out that this sweet spot should be, some genius who wrote an MBA textbook. I'm just glad I don't work for myself anymore. I never had the head for it.
Anyway, good luck. Sorry if all I did was add confusion and second-guessing to the mix.
I'd agree with you, then...you probably wouldn't get a whole lot of work within the fandom if you charged more than $27/hour, and you did a great job of breaking down the logic behind coming up with that number. Some artists can and do make more than that. I know I never would - even if my works were commission-worthy, I work very slowly.
Again, good luck.