25 Sep

Communicating Your Worth to Customers for Small Business Owners

I recently read a superb article about communicating your value by Carrie Foster.  Carrie is a management development coach and writes insightful articles about how to get the best out of individuals in an organisation, and this article was aimed at employees who want to get more out of their jobs.

I got thinking about how the same principles apply to small business owners, skilled people who are learning how to turn a skill into a steady, healthy income.

“Surely that’s just called sales?” I hear you saying…

The most striking thing about Carrie’s article is that it doesn’t mention the S word. This is important because you are not a sales person – you’re a designer, a programmer, engineer, teacher, consultant, plumber, joiner. Read More

13 Jul

Three Dirty Secrets of Pricing for Web Design, Graphic Design and Software Development

There is some risk in writing an article like this.  It discusses pricing for professional services; getting it wrong in either direction can cause problems for the supplier, customer or both, and the risk is that the problems and solutions outlined are misunderstood.  However, the principles I’ll describe below ultimately benefits the end customer, and so I hope it will educate and inform, and so in turn benefit more end customers.

This all starts with a few assumptions.  Based on 8 years of quoting for and delivering fixed-price creative work, I have found that customers who buy design (eg. web design, graphic design) or development (software development, web development) work for a fixed price think that most or all of the following are true:

  • the quote reflects a specific number of hours work
  • reducing the requirements will reduce the price
  • all of the hours charged for are spent actually doing the graphic design, programming, or whatever skilled work is being charged for
  • the price is equal to number of hours multiplied by a fixed hourly rate

Many web designers, graphic designers, developers and consultants start out in their business also believing that these things are true.  However, within 1-2 years it becomes obvious (usually when the bank account is empty) that these things are not true.

Let’s work through a few examples and find out where this model breaks down, and why so many creative professionals struggle to build a viable business.

Why Price is not related to Time

Meet Danny.  He’s a graphic designer who’s just bought a shiny Mac, picked up a 2nd hand copy of Photoshop from eBay, printed some business cards, and built himself a flashy website.  Let’s walk through a few example customers at various stages in the life of Danny’s small graphic design business. Read More

27 May

Get Your Spark Back; Do Something Completely Different

A very perceptive lady once told me, at a difficult time in my life, “If things aren’t going the way you want them to, change something.” It sounds obvious, but those words stuck with me – the key point being that I needed to change something, not just mope around hoping something would change.

I recently had, thanks to that wedding and a few bank holidays, an 11 day break from work. It was great to stop and relax for a while, but I hadn’t properly planned for it work-wise. Although I was able to keep my customers happy, I still ended up with a mountain of overdue tasks. Worse still, I felt unable to tackle the mountain and completely lacking in inspiration and drive, despite being in the most rewarding and exciting time ever in my career. Read More

18 May

Speak Your Customer’s Love Language

Or, How to Fail at IT Service Delivery

I recently read a book aimed at improving relationships and began to wonder how the same theory could be applied to business.  I’ll briefly summarise the book, and then examine how the theory (I will call it a theory even though it’s reasonably well proven and makes a lot of sense) could benefit a typical relationship between an IT services company and one of its customers.

After getting over some skepticism, I read “The Five Love Languages“.  It’s aimed at improving long term relationships and I can’t recommend it highly enough.  In essence, the author boils down his years of marriage counseling into the theory that there are five primary “languages” that humans use to demonstrate love for another human:

  • Words of Affirmation
  • Quality Time
  • Acts of Service
  • Giving Gifts
  • Physical Contact

The premise of the book is that most people prefer to “speak” one, perhaps two of these languages, and that in a relationship, if you are speaking a language the other party doesn’t understand, you’re wasting your time.  It’s wonderfully practical, easy to implement, and gives rapid, measurable results, which is exactly the kind of technique that appeals to a busy person looking for an easy way to differentiate themselves from the competition.

Business relationships are often jokingly likened to marriage, but behind the jokes are more than a grain of truth – “people buy from people”.  Any business relationship involves a human customer making a decision to purchase something from a person or company they can identify with in some way.  Several studies have shown that adding a “human touch” or otherwise personalising a product or service can boost sales.  For an ongoing relationship, after the initial “spark” has passed, there needs to be a mutual need and appreciation in order for the relationship to continue; in business, the initial spark is the first purchase a customer makes, and then later in the relationship, we see customer services issues, complaints, new products, upgrades, contract renewals and all the other day-to-day running of a business relationship. Read More

17 Apr

Web Designers, Marketers and Software Developers, how efficient is your business?

In this article, I’ll have a go at explaining a measure of business efficiency which I heard described by Nic Rixon (if you ever get a chance to see this guy, do it) in a business growth seminar, which he calls a “Run Rate”.  The term Run Rate is normally used to describe a company’s revenue extrapolated over time, but as I can’t find another term for this measure I’ll use Run Rate for now.

Imagine if everything was running at maximum efficiency.  If you charge by the hour, this means every employee who does chargeable hours is working all day every day.  Enough sales are being made to keep everyone busy, client expectations are managed so they don’t keep calling, maintenance is low because quality is high, cash flow is easy because prices are right, and staff are productive because they know what needs doing, and have the tools to do it.  Perhaps you’re purely selling time, in which case imagine you could work chargeable hours every day. What would your sales figure be?  Put a realistic number on it.

Now, what are your sales currently?  Take the past 6 months, for example.  Perhaps discount any abnormal windfalls or writeoffs, unless they happen regularly.  Divide that by the previous figure for the same time period.  For example, if you did £50,000 in the past 6 months, but you could potentially be doing £15,000 per month, then you could potentially have done £90,000 in the same time period.  £50,000 / £90,000 is 0.55, or 55%.

Read More

28 Mar

Selling a small Web Design or Software Business

How often have you seen “Dragon’s Den” hopefuls putting ridiculous values on their fledgeling business?  They are trying to put a real number on all the passion, blood, sweat and tears that have gone into fulfilling their dream.  They’re trying to turn something they’re 100% devoted to into a real number, and naturally the numbers that come out are enormous.  But as we’ve seen, that’s not the same value that others will apply to it.

“Value” is a relative term – it really means “Value to a specific person in a specific set of circumstances”.  Many years ago, after one of life’s inevitable down turns, I found myself completely skint; owing cash to a local thug and buying food with rubber cheques that, thanks to a wonderful invention called a cheque guarantee card, the bank would honour.  As you can imagine, a five pound note had far more value then compared to now.   Read More

15 Mar

Practical Guide to Setting Up a Business in the UK

There are thousands of “how to set up a business” guides out there, but most of them focus on the intangible things – planning, marketing, sales and growth.  Having been through the process a few times I wrote myself a small procedure or checklist for the more practical aspects of setting up a new company – what actually needs to happen.  It’s not difficult, but first time around I missed a few of these steps and suffered extra admin work and in some cases costs as a result.

So here’s what I’m going to assume you, being sensible, have done before you even think about forming a company:

  • realised you have a product or service that can be sold for money
  • checked that there are enough people who would actually buy it
  • worked out how you would deliver it, and how much it will really cost to do that
  • worked out an agreement with any business partners
  • checked that any suppliers are in place and what their prices would be
  • you understand the basics of accounting – invoicing, profit+loss sheet, balance sheet

So here is my checklist, with notes:

Read More