How to Plan for Your Profit Before You Quote

When we start out in small business, many of us commence as sole trader consulting businesses. Often  a business will come about because we have decided we can do it better than our employers.
Quite often we look at the profits our employers are making and decide we would be far better off working for ourselves. Every business owner starts out with the best intentions, yet 75% of sole traders return to full time employment within 12 months of starting their own business.

One of the greatest downfalls in small business is not factoring in every expense before quoting a job. It is simple enough to calculate the expense of products required to complete a project, however it is the indirect expenses that often get lost in the budget, especially the expense of your very own time.

STEP ONE -Do Not Say Yes Without All the Details
One of THE biggest errors business owners make (particularly start ups eager to accept new projects), is saying yes and quoting a price before they have gathered all of the job details from the client.
Once you have given that magic number it can be very difficult trying to explain to the customer that they owe you extra as you failed to quote correctly.
SOLUTION: The best process is to thank the customer for the enquiry, tell them you would love to assist them and the first step (to enable you to provide the best possible service) is to speak with them and obtain clear details about the job.

STEP TWO - Have a Customer Questionnaire Ready
Something we do in my business is have client questionnaires ready for every type of project. Whether it be a new website, small business financial plan, marketing project or small business analysis, we have a very precise set of questions a customer must answer. This method not only shows the customer we are interested in getting it right, the answers provide us with the best foundation possible to provide the right quote.
SOLUTION: Make sure you have a set of questions you email or ask that cover every area you will be working on. Survey Monkey can be a great way to do this online.

STEP THREE - Don't be Scared to Say No
I can absolutely guarantee you, we all have clients we should have turned down. Should a customer ask you for a service you do not provide, or something you know is best completed elsewhere, be honest and turn the job down. Accepting jobs you know you cannot complete to the best of your ability will damage your business and cause you stress.
SOLUTION: This is where building a network is invaluable. Linkedin is the perfect place to find business contacts who are more than happy to offer their skills to compliment your services beautifully.

STEP FOUR - Factor in All of Your Expenses
A common mistake by business owners is overlooking indirect expenses; then wondering why a job makes a profit yet they have no money in the bank. In fact, the job has not made a profit as all expenses were not considered. You must factor in your time (what is your hourly rate?), overheads such as utilities, phone and internet connection(even if you work from home), travelling time, computer consumables and more.
SOLUTION: The best way to manage this is to cost your job (include materials and staff/contractors) then add 20% on top. This will cover your profit and your overheads.

STEP FIVE - Do Not Discount Unless There is an Advantage For You
If a customer asks you for a discount, what is in it for you. Will they refer more customers? Are the loyal customers? Will this contract lead to more work? If there is no benefit for you other than making you a people pleaser then do not offer a discount. Every discount is a reduction in your profit.
SOLUTION: Offer fast payment discounts or discounts for referrals, not just to make someone, other than yourself, happy.

STEP SIX - Are You Really Making a Profit?
Many business owners employ bookkeepers for taxation reasons. More often than not, as an accountant, I saw clients who had absolutely no idea whether they were making a profit, what those figures were, and which services were more profitable than others. This is a huge mistake and if this sounds like you, or you are one of those business owners who claim to know exactly how they are doing (because it is all in your head), then sit down asap and really analyse your figures. Unless you know your bottom line, you are not running a successful business and risk losing the lot.
SOLUTION: Ask your Bookkeeper for an hour of their time to explain the figures to you. If they are unable to do this, get a new bookkeeper.


For your business to be the success you hope for, you must ensure you plan for your profit before you even consider accepting a new job; without doing so you may make a loss every time and sooner or later, there will be nothing left in the bank.