Work Smarter, Not Harder: A Simple Guide to Actually Staying in the Black

Let’s be honest. Most of us didn’t start a business because we had a burning passion for tax returns and profit-and-loss statements, unless you’re an accountant... You started it because you’re great at what you do—whether that’s building houses, designing brands, or buying and selling goods and/or you love it!

But there’s a trap a lot of us fall into. We’re working ourselves into the ground, our calendars are packed, and yet, when the weekend rolls around, the bank account looks...bleak compared to the hours you’ve put in.

1. The Big Number vs. The Real Number

It’s easy to get excited when a big chunk of money hits your account. But that money isn't yours yet. It’s just "passing through."

• The Big Number: This is your turnover. It looks great on paper and sounds impressive at the pub/networking events etc.

• The Real Number: This is what’s left after you’ve paid for your materials, your software, your insurance, and that extra-large coffee that keeps you going on a Tuesday. Not to also forget the VAT and setting aside money for your company and personal tax!

If you aren't careful, you can spend £95 to make £100. At that point, you aren't running a business; you’ve just bought yourself a very expensive, very stressful hobby.

2. Beware of "Work-Leak"

This is the silent killer of profits. It usually starts with a client asking, "Could you just have a look at this one extra thing while you're at it?"

Because you want to please clients, you say yes. But those “quick tasks” add up. If you do that continuously throughout the week, you’ve just given away hours of your life for free and worse, your clients expect that moving forward.

The Rule: If the job gets bigger, the bill gets bigger. It’s not being "difficult"—it’s being a professional. If you went out for food and asked for an extra course, you wouldn't expect it for free, would you?

3. You Are Not a Free Resource

This is the one most people forget. When you’re calculating how much a job costs, you have to include your own time.

If you’re pricing a job based on the cost of materials but forgetting that it’s going to take you three days of your life to finish it, you’re essentially working for £0 an hour or the little amount of profit made on those jobs. You need to pay yourself a proper wage. If your business can’t afford to pay you, it’s time to look at your prices.

Assess what you feel is a reasonable hourly rate based on a full year’s target remuneration and work back to your rate by dividing that figure by the hours in the year (Roughly 1,750 hours if you base it on 7.5 hours, 5 days a week).

4. How to Fix Your Prices (Without Scaring Everyone Away)

If you haven't touched your prices in a year, you’ve basically given yourself a pay cut, because the price of everything else—from electricity to your Netflix sub—has gone up and will always go up.

• Stop guessing: Don't just look at what the person down the road is charging. They might be struggling to get the trade they want. See what’s common within the industry for expected margins, discuss with others in your industry if you’re not direct competitors and see how clients respond to their pricing.

• Charge for the result, not the hour: If you’ve spent ten years learning how to fix a problem in ten minutes, you shouldn't be paid for ten minutes of work. You should be paid for those ten years of expertise. People pay for the ease of services, not the exact time it’s taken you to complete a task, that’s becoming more important with the use of automation and AI!

The Bottom Line You don't need a degree in accounting to see if you're making money. You just need to be honest about what’s going out vs. what’s staying in.

Next time a new lead comes in, don't just think "What’s the lowest price I can do this for?" Ask yourself "Is this worth my time?" If the answer is no, it’s okay to say no or to quote at a rate which makes it worth your time.

When was the last time you actually sat down and worked out how much you’re making per hour after all your costs are paid?

If you feel like there’s areas in your business which could do with a review but you’re not sure where to start, then why not get in touch.