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Electrology Tips - Why I Became Self Employed!

Electrology Tips - Why I Became Self Employed!

Eventually every Electrologist will ask, "How do I raise my rates without alienating clients?" and "Am I charging my true worth?" Evaluating your true worth is subjective. In fact “worth” is a loaded word that can cloud your mind with emotions. The word worth can lead to meaningless comparisons to other Electrologists and keep you from an honest evaluation of your rates, which is one easy way for you to control your work life.

In fact, the way to determine what to charge is straightforward. It's beneficial for you to have your latest monthly and last annual financial statements nearby. That information is always a great reality check. If you don't have up-to-date financials, get them BUT don't let that get in the way of doing your assessment NOW. Waiting for financials that may not appear for 3 to 4 months shouldn't be an excuse to avoid this evaluation. Make a Note to Self: Get financials regularly, at least every two months. You don't want a yearend shock like, “I haven't been paying enough in quarterly taxes” or conversely, “I really need to regulate my expenses!” (As an aside, yes, you need to be mindful of your marketplace but this article assumes that you're in the same ballpark as others in our profession who are practicing nearby. We are not dealing with marketing in this article.)

Now, take a look at your business today as it truly is, not as you think it is or as you'd like it to be. 1) Inflation, though it's been somewhat tame for the past 5 years or so, it is still an annual factor. Google annual inflation rate for the year in question. Google the past 5 years too. 2) Have your taxes increased? I'm referring to business taxes, what you pay your city, your state and the IRS. 3) Do sales taxes impact the cost of your services? Has there been an increase? 4) How about rent? Did your last rent increase for your office get passed along to your clients through a rate increase? Ditto the cost of supplies, insurance and utilities. 5) Were there any unusual expenses in the past year such as a capital cost, new additions or modifications to your leased space, the acquisition of new and improved equipment? 6) How about your personal costs of home rent or mortgage, home and car insurance? How about fuel used to get back and forth to work? Did you move father from work since your last rate evaluation? You know the monthly demands on your available cash. Calculate them into your equation too. Add up the changes in operating costs and see where you stand today versus a year ago.

And finally, 7) ask, are you consistently in demand across the year? If so, you're probably going to have an easy time with a rate increase.

The truth is, you should probably raise your rates a little every year to 18 months, just to keep up. Why? If you don't, you'll be paying yourself less per service hour delivered than you did in years past. Another way of looking at this question is, "does my business serve me well?" Tally up your increased costs and see if your hourly rate based on the average hours worked per month across the year is covering your costs and leaving behind profit, also known as your personal compensation.

Dealing with your clients

With information in hand and your new rate in mind, let all clients know well in advance that you will be raising your rates as of a certain date. Your regulars, those who return and who refer others to you, won't think twice about your price going up. They recognize your worth. It won't matter.

It then comes down to those who you think may resist your increase. View these clients differently. Carry them in your plan to increase your rate as your "two-step" customers. When you get resistance, you can let them know that because they're returning customers you view them as special and that you'll keep their current price in place until the end of the year rather than the date you stated. Obviously, pick a target date in the future that makes them realize that they're benefiting from your consideration based upon their worth to you. Tell them that the arrangement is just between the two of you and it’s confidential. This softens the news for these select clients and makes them feel appreciated. At the same time, it will awaken them to the reality that all costs are moving up for everyone including you, and that in the future their price will change.

The value of this "rate to time spent" exercise is the reality check that all financial snapshots provide. Do it often enough and there won't be any surprises. In fact, doing this often will give you the ability to know your business "intuitively" and you will have mastered one aspect of running your practice, that of matching revenues to expenses. And you'll sleep better. You'll always have a sense of how you're doing. The intuitive "feel" you'll get does not mean that you can skip the actual calculations. It does mean that by doing this a couple times a year, year after year, you will develop a good business habit that will serve you well. Raising your rates and delivering the news to clients will also become routine and you will be training your entire client base as to how you operate your practice so that you'll be there in the future to serve them to your standards.

Your Soft Costs

When you've evaluated your current cost of doing business, spend some time considering the soft costs that the business imposes on you. By that I mean, does your business allow for enough time for family and friends, hobbies, travel and all those things that are important to you? Are you working more hours per week than you want, more hours than is good for your body so that you will endure over time? Should you be clumping clients into fewer days so that those days are more full and you have some free days for yourself?

In the final analysis...

You'll know if the juice was worth the squeeze? You have to feel that your career is fulfilling not just personally but financially. For those of you who are more altruistic minded, at the end of the day remember that Uncle Sam has his hand out for more as does your city, your state, your landlord, insurance providers and anyone who may extend you credit. Life comes with costs so regularly assessing your business in terms of your rate charged for hours worked is just one effective and necessary way for you to exercise the control over your work life that you wanted when you decided to become a self employed small business owner / Electrologist.

This evaluation is in fact only one “Benefit of Self Employment”. Embrace it, do it frequently so that the process becomes routine and be thankful that a boss isn't doing this for you and giving you an annual 2% raise at the end of your employee evaluation!

Posted on: July 17, 2019

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