Jonathan Stark’s Post

View profile for Jonathan Stark, graphic

The Ditching Hourly Guy • I help solo consultants make more and work less w/o hiring • Get pricing tips by subscribing to my mailing list (see featured section for a link)

Most freelancers and solo consultants I meet don't have a good intuitive understanding of business profits. 👇 They confuse their pay (i.e., as the sole EMPLOYEE of their business) with their profits (i.e., as the sole OWNER of the business). Why? **Because they always forget that their pay is an expense.** Think of it like this: If you landed a project with a new client and then paid someone who was just as good as you to do the project while you did nothing, how much money would you have left over? My guess is very little. Let's use some made-up numbers to make this a little more concrete: 💲 Price that the client agreed to: $100k 💲 Cost to hire someone just as good as you to do the project on your behalf: $90k 💲 Profit left over for you as the business owner: $10k With all this in mind, let's return to the idea of agreeing to a discount... If you discount your price, the _discounted amount comes straight out of your profits_ but does NOT decrease your costs. So, in the $100k project scenario above, giving the client a 10% discount COMPLETELY ERASES YOUR PROFIT! And guess what? A business with 0% profit is not a fun business to run. ---- 🚫 Don’t let an algorithm decide what you read! Join 10k+ readers who get my daily email tips ⬆️ Click "Visit my website" under my name to subscribe ♻️ Please repost if this was useful

  • No alternative text description for this image
Matthew Dupuis ⭐️

Data Analytics CEO | Turn Your Data into Decisions

4mo

Something that's working for me is ROI based pricing. Does success of this project increase your revenue by 10% YoY? Great... The price to implement this project is only 2% of that added revenue. Would you spend $200,000 to return $800,000 in a year from now? Yes. Yes you would. Suddenly the price tag doesn't look so expensive. PS: Add in milestone pricing to remove risk from upfront costs.

Ryan Anthony

Bridging the gap between brand, marketing, and sales, helping fast-moving companies sell more and maximize profit.

4mo

A couple things here that stand out - Yes, we need to bill ourselves out as an expense as well - so that profit can be made for the company, rather than take-home for the owner (it's your cash though - do what you want). And the idea of discounting is something a lot of us can play with. The word does minimize the value and worth of what it is you're selling - but you can look at an alternative price or long term partner price - which is still the same thing. You create the margin, lol, remember that and utilize it accordingly.

Like
Reply
David Wippel

Operational and Technical Transformation for Industry-Specific Software Providers ‧ No-Code/Low-Code ‧ SaaS ‧ Hasura ‧ Guardian of the Legacy ‧ Digital Chef

4mo

A Cashflow management system like "Profit first" can help to shift the mindset. It helped me to think about my profit first (phun intended) and revealed how small my margin was back then.

Lars Engstrom

Roofing companies come to me when they want 3 new projects a month.

4mo

It can help solo consultants if they operate more like agencies. A good agency should try to make the sales process as similar as possible between all clients to be able to scale without unnecessary complexities. Adding different discounts and conditions to each deal is a recipe for huge headaches as your client roster grows.

Eleanor Mayrhofer

Agency of One | Host: The Germany #Expat Business Show #podcast | #singlesourceofyou #digitalstrategy #squarespace #branding #onlinemarketing

4mo

As dumb as it sounds, a spreadsheet is really helpful with this!

Arlene Hutchinson

I am the UNBREAKABLE YOU Life Coach. I help FOUNDERS and SOLOPRENEURS, beat the 90% failure Startup odds. UNBREAKABLE You Founders Coaching Program 360 Day Program to turn the odds in your favour.

4mo

You left out painful fixed and variable costs... The 90k was for the 🧠 🤯 brain Then there are the electric, medical, computer upgrades, print jobs, adverts....ON AND ON #SIGH

Like
Reply
Kevin Riedl

Some Engineers that help you achieve Product-Market-Fit ▪ Most Web3 Projects fail, don't be one of them 💻 More than Developers, we help you focus on the Right Stuff ▪ Web3 Product Studio Owner 🍪🐌

4mo

Know your value.

Alejo P.

Sketchnote artist • Live Visual Notes for conferences • Engage your audience and make your content unforgettable (Visual notes = aka Scribing, graphic recording, live illustration)

4mo

You know, I've never thought it that way before. I guess it's because I don't sub hire that often. But I'll apply it by thinking "I'm paying another person to do the job. That person is called Alejo." Thanks for that!

Karen McConomy, MBA

Bookkeeper | Empowering creative agencies with financial clarity and confidence | Founder of Your Numbers Person Bookkeeping Service

4mo

I love the theory but the minimum acceptable profit in a business should be 20% - yeah after paying yourself.

Steven Waddell

Accounting, Grants & AI - Helping Non-Profits Have More Impact

4mo

Good advice!

Like
Reply
See more comments

To view or add a comment, sign in

Explore topics