Selling a product/service to make a profit
The endgame in self-employment.
In the previous article ‘12 reasons to begin self-employed work’, we explored the reasons for retiring from an employed job to begin working for yourself. Just to reiterate “self-employed work is not easy”. Working for yourself can be rewarding and even though the pros can outweigh the cons, becoming self-employed can also be tough when deciding what services/products to provide to the world and how to provide them. The end-goals of providing these services/products are simple to identify as these are just desirable short-term and long-term achievements.
Strategy, a plan for achievement, and objectives, meaningful actions to follow, assist in achieving end-goals. Examples of end-goals include:
Customer Satisfaction: How well the business provides a product or service to fulfil the needs and expectations of customers. An end-goal example would be seeking to improve the percentage of customer satisfaction within a year.
Performance: The ability of a business to implement optimal organisation with the aim of offering a product or service that meets the expectations of consumers and customers. An end-goal example would be improving on longevity that a product lasts for the customer.
Projects: Intended to achieve defined objectives that are aligned with a business strategy. An end-goal example would be a business that seeks to complete construction with a set amount of months and for a set budget.
Efficiency: The ability to make the best possible use of current resources, maximising outputs from provided inputs and thus minimising expenditure. An end-goal example would be improving the quantity of units produced per hour.
Sustainability: Minimal negative impact or potentially a positive effect on the global or local environment, community, society, or economy. An end-goal example would be the removal of plastic waste from the ocean.
Reputation: Readily available information about a business, from customer experiences, commentary and reviews. An end-goal example would be focussing on perceptions of quality, luxury and style.
Quality of Life: A highly subjective measure of happiness that is an important component of customer decisions. An end-goal example would be the enjoyment of a higher degree of freedom.
Comfort: The absence of stress and striving for growth. An end-goal example would be job security.
Social Status: The prestige, esteem and respect that work colleagues receive. An end-goal example would be endorsement within your profession.
Revenue: The total amount of money earned from sales for a particular period, such as one quarter. An end-goal example would be a target revenue amount within a fiscal year.
A profitable business takes time to grow. Therefore, you will need the right skills, knowledge, and experiences along with plans, strategies and tools. Running a business is a commitment to a constant and never-ending improvement to learning how to generate a profit.
In order for you to sustain your self-employment and your life, you will need to achieve reoccurring sales and focus on the revenue end-goal. Specifically, your business will need to generate a profit so that you can pay yourself a wage, whilst covering businesses expenses. Simple, right? Well, this depends on a manner of factors.
Unfortunately, there is no one reason that can guarantee success for you and your business. However, there are some ways to increase the chances of developing an income. So, just how can you generate a profit from your work?
#1 - Financial discipline.
Understanding the basics of finance terminologies and financial business models is just like learning how to drive a car. You need to know how to get from ‘A’ to ‘B’ without being a risk on the road. You’re not expected to be a racecar driver but rather understand the fundamentals of driving. The same applies to running a business. You will need some knowledge of finance handling in order to maintain a smooth velocity and progress down the road, there may be some speed bumps but at least you can be in control.
Understanding how to generate a sustainable profit involves maintaining control of a balance sheet, income & cash flow statements or the ‘Three Statement Model’. The reality is that 100% of the money that you receive from providing a product/service will not go straight into your pocket. You will have to track payroll, taxes, supplies and other expenses. Therefore, what is left over is your profit margin. This value is the determining factor if your business remains active, experiences growth or requires dissolution.
The types of financial models that your business can experience include:
Three Statement Model.
Discounted Cash Flow (DCF) Model.
Merger Model (M&A).
Initial Public Offering (IPO) Model.
Leveraged Buyout (LBO) Model.
Sum of the Parts Model.
Consolidation Model.
Budget Model.
Forecasting Model.
Option Pricing Model.
Having a strong business discipline can allow you to separate yourself from your product/service pricing. There are three basic pricing strategies that you can implement within your business, including:
Cost-Based Pricing: Uses production costs as its basis for pricing and, to this base cost, a profit level must be added in order to come up with the product price.
Value-Based Pricing: Also known as customer-based pricing, this is the setting of a product’s price based on the benefits it provides to consumers.
Competition-Based Pricing: Also known as competitive pricing, consists in setting the price of a product based on what the competition is charging.
Even though you should have self-worth, it is also about the perceived value that your customer/client feels that they have received. This is a symbiotic relationship. Implementing value-based pricing concepts, such as providing a discount on volume or a timed discount on new products/services, can benefit both parties.
Just because you have defined your pricing model does not necessarily mean that you need to stick to it forever. Maintaining flexibility may assist you in piloting alternative pricing strategies and thus track performance, whilst creating engagement with your target market. Give your business some leeway in applying a range of prices.
Knowing your market can be key for allowing you to set à la carte priced products/services. This may be an effective strategy when displaying à la carte options and bundled packages that incentivize a discount. By stating a budget range you gain a larger sale opportunity.
#2 - Roadmap development.
Let us utilise the ‘car’ analogy from the previous point. When travelling to another country by car, if there are no roadsigns and if you have no map or no GPS, then how are you supposed to know where you’re going on your journey. Successful businesses have a planned business roadmap, which is more than travelling from point A to point B. It shows everything, from the small paths, to the single carriageways and to the motorway. These account for hypothetical instances that may require you to take alternative routes to reach the end-goal. Being prepared for the journey, knowing where the roads lead and where the petrol stations are can allow you to optimise the ride. In business, knowing the stakes and insights can allow you to make adjustments or refine a focus in order to make a profit day-by-day, week-by-week and month-by-month.
Profit is determined by effectiveness. Analysing all aspects and perceptions of your business and your competitor’s business can allow you to compare pricing and the cost-to-income ratio. You will need to be assured that you have priced your products/service in a way to account for value perception, competitor pricing and sales income that outweigh the cost of expenses. Therefore, you will need to consider the three C’s:
Company: Know the company (business) very well. Define the vision and the mission of your business, along with the culture that you want to develop. Display the core values of the products/services that you provide and carefully evaluate both short term and long term strategies.
Customer: Research and identify your target audience. Discover the type of customer, demographics, spending power, habits and needs. The focus should be on the customer/client and not yourself. You are not your target market.
Competitors: There will always be competitors between businesses in every industry. You will need to define who your competitors are and know all manner of information about them, including, typical operations, marketing tactics, partners, financial position, employees and customers. This can allow you to learn from their mistakes, models that can work for you and discover new opportunities that they may be missing out on.
Additionally, you will need to consider the 4 P’s:
Product: Understand the complete ins and outs of your product/service. Is it in demand for the market? You will need to research the life cycle of the product/service, understand the benefits, use cases, and technology/methodology. Also, you will need to identify what is provided and what is not.
Price: Define the pricing model and shape the perception of your product/service. There is a two-way street concept for product/service pricing. In one direction, when a new yet unknown business enters the market and sells at a high price then the target audience may be unconvinced and less likely to pay the price. Meanwhile, in the other direction, selling at a low price typically is connected to inferior quality and the audience still may be unconvinced and less likely to pay that price. Moving on, are the products/services subscription-based or instant purchase.
Promotion: This describes your marketing strategy and it mainly influences brand recognition and sales. There are various ways of promoting a product/service and an optimal strategy involves a mixture of promotions. Types of promotional strategies include traditional and online advertising, personal selling, direct marketing, public relations and sponsorships and sales promotions.
Place: This explains the model for distribution. You will need to be able to determine how to pass on the product/service to your target market. Is there a brick and mortar location, is it online or a mixture of the two.
The three C’s and the four P’s are a framework for your business and these will require continuous updating as your business grows and adapts. Once you have a firm path for your business, you will begin to become more organised and drive success with profits.
#3 - Obtainable goals.
Once again, let us use the analogy of driving a car. If the fuel gauge is nearing a quarter of a tank and there is an upcoming petrol station, do you take the exit off the motorway to refuel or do you push on for a few hundred extra miles and hope to reach another petrol station? It is likely that most drivers would stop off and top up the petrol tank to maximum just to be sure. This action has assisted in obtaining the end-goal, reaching the end of the journey, with no hassle to yourself, and plus you just took a small break at the same time.
Reachable end-goals can demonstrate the value of your organised work. Sometimes, those end-goals may not be as easy to reach as others and therefore you will need to ‘think outside of the box’ to complete the work. Everything that you do within your business, including back-office work, preparation, design, creation and delivery, add up together to form hours expended. You may not charge an hourly rate and instead, charge a project rate. Nevertheless, time needs to be accounted for.
Launching a business one day and anticipating generating one million Euros tomorrow is a high expectation to reach on your own, without any marketing and no existing customers/clients. With this kind of mentality, you may miss out on opportunities throughout the journey and quickly feel overwhelmed.
You need objectives that allow for Specific, Measurable, Achievable, Realistic and anchored within a Time Frame (SMART) end-goals that increment growth short term and long term. Improve your processes and systems and steadily increase profits over time. Quick fixes and intense competitive races can stress you and your business to the limits. So, how SMART do you have to be?
Specific: Instead of being vague, decide on the amount of money that you would like to earn per year. Set a clear track for progression. That way, you can better visualise your outcome and understand when you have achieved it.
Measurable: Progress does need to be tracked. Therefore, if the end-goal is not measurable then you cannot objectively say that you have achieved it. You can measure how much your business has earned and how much time has been spent on the work. This provides insight into how well you are developing the business.
Achievable: Create objectives that you can realistically attain. If it is too outrageous, such as earning €10,000 this year and wanting to earn €1 million next year, you are most likely going to fall way short of the end-goal. This ‘failure’ in not achieving the out-of-reach end-goal may hinder your focus on the business. Be SMART and set tangible progress and avoid setting yourself up for failure.
Realistic: Achieavbility coincides with having realistic end-goals, in that you are willing and able to work toward achieving end-goals that are based on your reality at this moment in time.
Time frame: Set a reasonable and clear time frame that allows you to accomplish your end-goal. This is essential for checking your progress in reaching the end-goal. Add a buffer for allowing to spend extra hours or days on the work if needed. If you end up completing the end-goal way before the time frame, then that is pretty epic. However, if you need to re-evaluate requiring more time for the work then do so.
Utilise the SMART system for keeping control of your work and maximising your profits. There is no problem with re-setting your end-goals, so long as you have clarity on why you did not meet them. If you are achieving your end-goals easily, you can most definitely ramp up your goal-setting.
#4 - Overcoming stagnation in progression.
To be able to progress in a career, not only should you have skills, knowledge and experiences, you must have confidence in yourself. We know where this is going. When driving a car, if you are not confident in your abilities to stir the wheel, shift gears, reach the maximum speed limit, know where you are going and understand how to mirror-signal-manoeuvre, then how will you have firm confidence in your ability to take a chance and push on outside of your comfort zone.
Sticking to the same routines, pricing model and products/services year by year may lead your customers/clients to begin feeling disinterested in what you are providing. This stagnation in progression can hinder your confidence. Your business will need to evolve and adapt. It is not a case of ‘survival of the fittest’, but rather amplifying attributes to enhance interest. This interest can allow you to set rates that provide you with the confidence to offer valuable products/services.
There is no need to undercut yourself and do be wary of allowing your self-doubt to dictate your product/service rates. Do keep in mind that ‘spitballing’ price tags are not a good idea and you will need to evaluate the competition. This being said, there are two methods of providing cheap rates:
Mass-produced / Assembly line: Mass-produced products have the ability to be made in high batches. Therefore, profit is generated by the quantity in production. Quality can be included with quantity, although the focus is on high yielded items per hour. Assembly lines can play a role in mass production. Efficiently organising how to reduce expenses can drastically improve profitability. Assembly lines can be applied to services, in that having a team formed from different departments can allow individuals to focus on certain aspects of a project at the same or relatively near time frames. A self-employed business owner can utilise 3rd party individuals to assist in completing work in an organised manner.
Bare basics: This is the absolute basic product or service that you provide. There is nothing fancy and less quantity of work involved. It is just the bare necessities.
At this point, we should define the difference between cheap and affordable. These two terms are not so different from each other. They both suggest saving money. However, one term carries more weight in cost-saving compared to lacking in quality.
Cheap: This is a statement that defines low/reduction in price. Cheap is often objectified by an individual’s socio-economic circumstances or lack of awareness of quality. Cheap may cost less short term, although it yields fewer results in the long run. What are some examples of cheap business:
Small initial cost.
Little or no results.
May face negative connotations that can penalise the business.
Impersonal, cookie-cutter tactics.
All talk and no show results.
Affordable: This implies low cost but you retain a measure of quality. This has a connection to budget, in that a value is deduced and thus allows an individual to determine what products/services may have optimal Benefit-Cost Ration (BCR). What are some examples of affordable business:
Higher initial cost than ‘cheap’.
Higher-quality product/service with a better Return Of Investment (ROI).
More customized for your business's strengths and goals.
Sets realistic goals and there is more communication involved.
A focus on a niche market rather than generic traffic.
By providing an affordable product/service you are more likely to attract an audience that respects you. This can bolster your confidence and self-recognition. But, let us take a subjective look at you. Let’s say that the products/services that you provide are great, you are super confident, the pricing model is just right and you have an awesome target market, but maybe you are experiencing some mental stress.
This can be a reality when working for yourself, and by gosh “do I know what I am talking about”. A potential reason why there could be a lack of progression in your business could be attributed to mental health. Just to be clear, “I am no expert on this subject but I am willing to talk about it if someone out there who is reading this article right now needs some assistance”. Even if you are confident, you may be struggling with:
Poor communication and management practices.
Limited experience in decision-making or low control over one’s area of work.
Low levels of business support.
Harsh working hours.
Unclear tasks or organizational objectives.
A lack of physical fitness.
There is nothing wrong with asking for help. Whether you are asking a family member, a friend, a professional or a total stranger, beginning the conversation can start your journey in course-correcting your life. Begin making change within yourself first and then focus on your business. If you need assistance, check out this mental health support website.
The Futur (thefutur.com) - Pro Group video call about self-respect.
#5 - Creating value.
No more car analogies. Value has been mentioned a few times in this article, but let us define value.
Value: Principles or standards of behaviour. An individual’s judgement of what is important in life.
As a business owner, you must value your skills, knowledge and experiences. These can be woven into the products/services that you provide, which in turn can provide value to your customers/clients and thus generate profit from sales. Perceived value fills the needs of a target audience. That is why they love purchasing your product/service.
Place yourself in your target audience’s shoes. What would your typical preferences be, what compelling innovations would you want to see and how much would you pay for it? Prioritising market research can allow you the understand habits, lifestyles and ideologies. You can then develop solutions and track customer/client responses. Keep in mind, strategies can be adjusted if required.
Typically, customers/clients, equate value with price. Pricing yourself too low may reduce the value that others perceive that your business brings. Although, charging too much and they will be off-put. There is a fine balance between the value provided and the charge exceeded.
Developing a pricing strategy can be key in deciding just how valuable you are. Consistently implementing a strategy can produce realistic rates.
#6 - Strategic innovation.
Expanding on existing ideas can be a successful way of generating profit. Identify a niche audience and identify why they need your product/service. Strategic innovation can allow successful concepts to demonstrate their usefulness and appeal to customers/clients. Some innovations can be small and practical, while others can be big and industry-changing.
Do not feel that you have to create grand innovations from the very beginning. The reality is, most self-employed business owners do the work themselves and only have so many resources at hand. You are able to ‘think big’, but acting ‘SMART’ can allow you to progress effectively. Therefore, focusing on obtainable end-goals can lead you onto bolder projects that require a team of professionals.
Innovations can be the result of leveraging connections. A profitable business can benefit from building fruitful and collaborative connections. Relationships within a business is a network filled with a collection of strategic alliances. Complementing other businesses, inside and outside of your industry, can be a partnership that allows for referrals in work. The more people that know of you and your business, the more street credit that you can build. Leveraging connections can increase your scope and ability to generate a profit.
Another method to generate a profit within your business is to survey potential stakeholders, investors who applly their actions in determining the lucrative outcomes. Search, discover and connect with individuals and organisations who align their principles with yours. Do they understand the value of your business and the products/services that you provide? Stakeholders can be important in defining the future of a business, as well as its day-to-day workings. Relationships do take time to build and it is easy said than done to claim this valuable assistance.
Crowdsourcing market insights can assist you with determining what are the current marketplace trends and rates. This is a two-way street though. It is nice for other professionals to share their data with you, but you will need to do the same in order to cultivate a respectful relationship. Be willing to share your observations. Recognise and embrace that markets do evolve over time, along with your skills, knowledge and experiences. By identifying typical price formats from real data, you may realise that some of your products/services do not have to be priced the same and therefore offer unique value to your customers/clients.
#7 - Massive action with trackable progression.
Unfortunately, there is no one-size-fits-all when it comes to sales and marketing strategies. You will have to research, plan and engage with a customised strategy that fits into your business model, the clientele and with the products/services that you provide. Engaging with your target market can induce profit growth. Nowadays, we have quick and streamlined access to our audiences through modern technology and the popularity of social media. Outreach is about immediacy. The quicker and easier that customers/clients can learn about your business and the products/services that you provide through a website and social media, then the more engaged they can be.
Remember to prevent stagnation in progression and develop a system or platform to create massive action that can be tracked. Such as, cross-selling, a product/service that complements existing products/services, or a sales model, a general framework that defines an organization's high-level approach to selling, that creates repeat customers/clients. Knowing the results from the effect is key for determining what tactics are working and which are not.
Tracking valuable data and insights on social media can allow you to discover what people are talking about in regards to your business and products/services. If a particular style of social post is excelling more than others, then it may be worth exploiting this success and apply a budget to increase your chance of generating profit from sales.
Developing a massive action plan, which includes a timeline and a series of roadmap phases, can push growth and strategic innovation. Thus leading to increased profit margins. Launching a new marketing campaign or undergoing business mentorship can assist you to be better equipped in leading your business.
Actions are not set in stone. As your plan progresses, make sure to monitor results and course-correct if needed. Reevaluate progression with planned intervals, this could be on a weekly or monthly basis. If a sub-section of the work or a method in generating a profit is not working as well as you have hoped for, then refine the strategy. Feedback can be an important factor for identifying inefficiencies.
A flexible concrete plan with modular achievable end-goals is a recipe for profits.
The starting point for self-development.
We have been through a lot in this article. The point of this was to demonstrate that there is no one reason for not be able to generate a profit with your business. So many factors can coagulate together. Growing a sustainable business will take time to flourish. Believing in yourself and understanding the fundamentals of business can improve your chances for self success and in generating a profit.
The crux of business is that you turn a profit. But, do not forget to truly enjoy what you are doing, through the good times and the hard times.
Trust your dreams and believe in your in yourself.
References
Information was collected from this source, this source, this source and this source.
Thank you for taking the time to read this article. Hopefully, this has provided you with insight to assist you with your business.