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Making More Money Per Hour

time_money_balanceBigg success is life on your own terms. Today’s topic really covers two of the five elements of bigg success – time and money.

Specifically, we want to discuss charging for your time. If you’re a consultant, a coach, a freelancer or anyone who bills hourly, how do you determine what an hour is worth?

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One of the biggest reasons small business people don’t reach bigg success is because they don’t charge enough. In fact, in many cases, the business fails for this reason.

So pricing your service is very important. We can think of two primary methods to arrive at a price:

The Market Approach

This is probably the most common way that entrepreneurs arrive at a price. With this method, you simply look at your competition to see how much they’re charging. Then depending on your strategy, you charge the same, a little more or a little less.

The Cost Approach

Here you determine how much you need to charge based on your cost structure and your opportunity costs. By opportunity costs, we mean:

How much could you make working elsewhere?

Add your hard costs to your opportunity cost to arrive at your price per hour.

Limitations

The downside to just using the Cost Approach is that it ignores the market. For instance, your price may be a lot lower than the market but you wouldn’t know it because you haven’t looked at the market. You would be leaving money on the table.

Or it may be a lot higher and the market won’t compensate you what you the amount you need for your time. The result would be a failure that could have been avoided.

The Market Approach also has its limitations. We have a friend who looked at his competitors’ hourly rate to determine how much he should charge. He opened up his shop and started losing a lot of money every month.

He was perplexed, so he did a little more competitive research. He discovered that all of his competitors were losing money as well. Everybody was in a price war; nobody was charging enough to make money.

So he increased his price based on his costs. He lost some customers when he did this but he started making money.

Because of the limitations each method has, we recommend that you use both methods when you’re trying to arrive at a price for your service. Then you’ll have two reference points from which to make decisions.

The Value Equation

Now we want to move to making more money per hour. From the customer’s point-of-view:

Value = (Service x Quality) / Price

From this equation, you can see that there are three ways to increase the value to your customer:

  • decrease your price
  • increase your service level
  • improve your quality

Of course, decreasing the price will very likely hurt you in the long-term. Look at it this way – do you want to work just as hard to make less money? Of course not. Yet a lot of small business people do this first.

So you would prefer to increase the value to your customer by providing a higher level of service or quality.

Let’s focus on service since quality is more up to you. Think about these four D’s:

  • dirty
  • difficult
  • dangerous
  • designed

By designed, we mean customized but we had to have a “d-word”! Dangerous might mean “risky”. However, keep in mind that risk is a matter of perspective. The customer may view something as extremely risky but you know how to manage the risk so it’s not really risky at all for you.

Here’s the key to these four D’s: Find something that your customer
doesn’t want to do, doesn’t know how to do, is afraid to do or just simply can’t do.

When you can do that, your customers will perceive more value for your service. You’ll find it easier to charge a premium. That’s more money per hour. That’s bigg success!
 

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Thanks so much for checking in on us today. Please join us next time when we’ll talk about the downside of education. Until then, here’s to your bigg success!

 

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00422-062309.mp3

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How to Turn Down a Promotion

no.jpg Bigg success is life on your own terms. Last time, we talked about how to use the five elements of bigg success to determine if a promotion is right for you.

A lot of people are afraid to turn down a promotion even in the best of times. Now there is even more pressure with the tight job market.

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There may be fear that you’ll become more expendable if you turn down a promotion. You’ll be more likely to be let go should another round of layoffs occur. In some business cultures, this attitude is more pervasive than others.

You may fear that you’ll never be offered another opportunity – that passing up this promotion means that you’re not interested in moving up. You may be interested in getting promoted, but this just isn’t the right time for you.

You may even be concerned that it will change how your boss treats you in your current job. You worry that it will change the attitude your boss has about you.

A graceful decline

You want to live your life on your own terms. If that means this opportunity isn’t right, then you need to find a way to gracefully decline it.

You still want to be viewed as a team player. You don’t want to put your current job or standing in the company at risk. Of course, there’s no guarantee of that, whether or not you accept the promotion.

So let’s talk about your strategy. How should you proceed?

Genuinely thank them for offering you the position

It is an honor and you should treat it as such even if it’s not right for you. Express that to them.

Respect the agenda of your boss

While you’ve thought about your terms and determined this wasn’t a good fit, obviously your boss thinks it is – that’s his or her terms. Be respectful of those terms and try to help your boss fulfill them. How?

Focus on what you can do, not what you can’t do

For example, perhaps you’re willing to accept some additional responsibilities while they train the replacement. You’re willing to take these duties on in the short run; you just don’t want to do it for any lengthy period of time.

Point how it benefits them to keep you where you’re at

For example, your current position may really play to your strengths. You know your job well and you believe you can make a more significant impact by staying put.

Quickly follow up with one or two specific examples

How have you made a difference recently? By helping your boss see how you help the company where you’re at, he or she is more likely to agree that it’s a good idea to keep you there.

Now obviously, this is going to be a very important conversation. So before you sit down with your boss …

Practice. Practice. Practice.

Practice with your significant other or a friend. Practice in front of a mirror. Practice until these five steps and the words you will say are clearly mapped out in your mind.

Life on your own terms is important. It’s also important to help the key people around you live their lives on their own terms. That’s bigg success!

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Would you like more tips and tools to live your life on your own terms?
Subscribe to the Bigg Success Weekly – it’s FREE!

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Please join us next when we talk about what your choice of car may say about you.

Thanks for spending your time with us. Until next time, here’s to your bigg success!

 

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00375-041709.mp3

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10 Danger Signs for Business – Part 1

danger We’ve heard that diagnosing a medical condition early greatly increases the chances of successful treatment. The same is true for our businesses – we want to spot the minor issues so they don’t become major problems.

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Cash to a business is like blood to our bodies. It has to continue flowing or we won’t survive. As a small business owner, the bottom line is that you can’t run out of cash. So you have to know how to diagnose and treat the source of the ailment before it spreads. With that in mind, here are ten signs that your business may be heading for trouble:

#1 – Lost market share

Your sales may be growing, but your share of the market may be falling. Are they up because you’ve increased prices? Is the growth of your sales keeping pace with the growth of the markets you serve?

Market share is precious – among other things, it provides leverage to raise prices as your costs increase. As competitors enter your market, you have to work even harder to maintain (and hopefully increase) your share.

#2 – Declining customer counts

Your sales may be holding steady, but fewer and fewer people are making purchases. Your remaining customers are spending more, possibly because of price increases. There’s nothing wrong with that, but you have to find a way to attract new customers because a certain amount of customer attrition is natural.

We don’t want our customers to leave because they’re unhappy. But you can’t make everyone happy all the time so even that will happen. We’ll also have customers move away, pass away, grow out of our product or service, and the like.

#3 – Low repeat and referral business

Many businesses actually lose money to get a customer for the first-time. If they break-even, they’re very happy. It’s the follow-up purchases that make a difference to our bottom line.

A healthy percentage of repeat and referral business also shows that your product or service is still meeting the needs of a core base of people. And these people are the ones who will refer other people to you, which is much less expensive than depending totally on advertising to grow your business.

#4 – Declining sales

Right now, a lot of businesses are experiencing this. It may have nothing to do with you – it may be your industry that is experiencing trouble. So you have to ask yourself … is this a long-term trend or is it cyclical? That’s the first thing you have to determine.

Next, ask yourself, will my industry recover? Some industries were facing challenges even before this recession. It’s only accelerating the long-term trend. Other industries will do just fine coming out of it. You have to know which one applies to you.

Once you’re satisfied that your industry will survive, you have to look at your own business. A lot of shake-out is happening even in healthy industries. Isolate whether it’s a problem with your business or the industry as a whole to know your best strategy.

#5 – Disproportionate sales to a small group of customers

Picture this extreme situation – all of your sales come from one customer. You’re totally at the mercy of that customer. It’s like being an employee without the safeguards that go with employment!

Generally speaking, if more than ten percent of your sales are to one customer, you may face trouble at some point. Five percent is even better. Bigg customers are great. But serving a bigg number of customers leads to bigg success.

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Get the tips and tools you need to be a BIGG success.
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Thank you for reading our post today. Join us next time when we talk about five more early warning signs of trouble ahead in your business. Until then, here’s to your bigg success!

 

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00348-031109.mp3

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Seth Godin on Tribes: Part 3

tribes
On The Bigg Success Show, we’ve been talking with Seth Godin about his incredible new book, Tribes. So far we’ve discussed:

Part I: what a tribe is, what the leader does, and why quality trumps quantity

Part II: why Seth became a leader, the power of one, and the importance of leverage

Today we wrap up our conversation. Let’s get to it!

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Change and chaos creates opportunity

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When A Saver and a Spender Become a Couple

opposites_attractWe’re told that opposites attract. We also hear that money is one of the most frequent things couples argue about.

In a lot of relationships, there’s a saver and a spender. Or maybe both people are spenders, but they spend differently. One likes to buy bigg ticket items infrequently while the other spends a little bit of money on daily extravagances.

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marylynn We’re both pretty frugal, but I have to admit I do like my gadgets. We were at a conference recently and there was a microphone I just had to have! And of course, I do like my clothes.

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georgeAnd I like to go out for dinner more often than Mary-Lynn. Do you suppose that has anything to do with the fact that I’m the one who usually cooks dinner?

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How to come to an agreement on the family finances

We’ve found a good way to reach an agreement, on how your household saves and spends money, is to hold a summit! Heads of state do it; why shouldn’t you?

This summit has a three-fold purpose:

#1 – Values
You each need to fully understand where the other person is coming from. What’s important to him or her? By knowing each other’s values when it comes to money, you’ll be more flexible in your own financial decisions.

For example, a saver may value being debt-free. A spender may think it’s important to “live a little” now. Both positions can easily be defended. If you understand why it’s so important to your spouse, you’ll be more willing to accommodate his or her desires. You’ll find that you’re more flexible in looking for solutions.

#2 – Goals
Now that you have a good grasp of your respective values, you can discuss mutual goals. Only now you can both work to help each other get what’s important. So the spender will try to find ways to reduce debt. And the saver will see that buying a toy once in a while makes the spender more committed to saving. It’s win – win!

#3 – Strategies

You can’t stop now. With your goals in mind, develop specific strategies. For example, you may each set aside a certain amount from each of your paychecks for debt reduction and that certain toy. You’re working together to get more than you could get working alone!

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Get the tips and tools you need to be a BIGG success.
Subscribe to the Bigg Success Weekly – it’s FREE!

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Next time, we’ll talk about the energy crisis … only it has nothing to do with oil. Until then, here’s to your bigg success!

 

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