How to Maintain a Service Business

If you have a service business and you charge by the hour, don’t assume you will be able to bill 40 hours per week, especially if you work alone. Realistically, if you bill 25 to 30 hours per week during your first year in business you’re doing very well. In or­der to do this, you will have to work more than 40 hours a week, for you need time for planning, accounting, traveling, and mar­keting. Most new business owners, especially those in the ser­vice industry, tend to underestimate the amount of time they will have to spend on marketing.

If you charge by the hour, you have to make sure that your hourly rate covers your expenses. For example, if you charge $10 to $15 per hour and are only billing 20 hours a week, your average income will be $200 to $300 per week. If you factor in all the hours you spend in your business that are not billable, you may be earning only $6 to $10 an hour for every hour you work. Will this cover your expenses? If not, you may have to raise your hourly billing rate in order to meet expenses. And if you offer a service, not a product, and are very good at what you do, the market will often allow you to charge more than your competitors.

Remember: The current market today is very competitive, and customers are more price conscious than they have ever been. If you are going to charge more for your service than your competition, you have to research and test to identify a group or market niche that will pay more for your service.

Supplier financing is an ideal way to run your business because it will greatly help your cash flow. The idea here is to sell your products or services so fast that you can get your customers to pay you before you have to pay your suppliers. Many suppliers and wholesalers provide delayed billing, enabling you to collect from your customers first. Smaller suppliers are more likely to do this than are larger ones. Supplier financing will enable you to build a closer, more personal relationship with the supplier, enabling you to work out more favorable payment terms on your supplies.

It is important to remember to negotiate the longest possible terms in paying your suppliers and the shortest possible terms in collecting from customers. You can give your customers in­centives for paying earlier. For example, you could offer custom­ers a 5 percent discount if they pay for your product or service within 10 days of purchase.

The purpose of any business is to create and keep customers. It should be no surprise then, that the success of your business depends on your developing a loyal following of customers who look to your company first whenever they are thinking about buying a product or service in your area. If your business is to succeed, your policies have to make it easy and pleasurable for customers to buy from you.

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About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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