What to Charge

Micro business owners struggle with what to charge for their services or products. If they charge to much they may never attract customers, but if they charge too little they may not cover their costs or make a decent profit.

Here are some tips for setting a price that you and your customer can live with.

• Market survey-Ask your potential clients what they are willing to pay. You may be surprised at what some people will pay for your unique service or product.
• Competitor price-Learn what your competitors charge. You can ask them directly or ask customers what they have paid in the past. A teenager giving piano lessons asked several other teenagers and parents about the going rate for beginning piano lessons to help her set her price.
• Cover your costs-You must know what your costs are and then add more to cover taxes and your desired profit. One unlucky micro business owner only charged enough to cover her costs and forgot about taxes and making a profit to grow the business, let alone paying herself.
• Don’t forget taxes- Work with an accountant to calculate what you will owe in federal, state and local income taxes. As a micro business owner you will also be paying self employment tax to cover social security and medicare. CPAs frequently tell small business owners to allow for 25-35% of their profit to pay for taxes.
• Value your time-Some micro owners charge by the hour they are with a customer (such as tutoring by the hour), but fail to realize that they spend many hours outside of customer time. Travel time and preparation time should be considered when you set an hourly rate.
• Adjust when needed-Adjust your prices if your costs increase, or if you find you are seriously under priced compared to your competitors. Also increase your prices if you find your product or service is in demand.
• Adjust as you gain experience-An experienced worker is more valuable than a new one. After a few years of doing bookkeeping, a micro business owner made a plan to increase her rates for current clients over a three year period, but she charged new clients the higher rates from the start.

Why a Business Might Fail

My virtual friend, Meredith Curtis (she interviewed me about my other website HomeschoolCPA.com here) has a blog series titled Focus on Your Finances

In this post, Starting Your Own Business Part 1, Meredith discusses why a business might fail.

Warning: She offers straight talk that some people may not like, but she speaks from more than 10 years of experience in running her own small business and backs up her observations with several verses form the Bible.

I have seen these three things cause businesses to fail.

Self-Government

“Like a city whose walls are broken down is a man who lacks self-control” (Proverbs 25:28 NIV).

A business owner without self-control will not be able to run her business effectively. Self-government is simply the ability to run your own life well, control your emotions, manage your time, manage your money, maintain healthy relationships, and follow through with personal plans and goals.Without the ability to manage yourself, you will not be able to manage a business.

Scheduling

“Teach us to number our days aright, that we may gain a heart of wisdom” (Psalm 90:12 NIV).

Hard work is required to get a business off the ground. Hours and hours of work must be scheduled into your life without taking away from the priorities of family, church, and time with the Lord. If you cannot prioritize and schedule your life, you might let important things in your life and new business fall through the cracks.

Administrative Abilities

“Let love and faithfulness never leave you; bind them around your neck, write them on the tablet of your heart. Then you will win favor and a good name in the sight of God and man” (Proverbs 3:3-4 NIV).

Bookkeeping, accounting, record keeping, and other administrative tasks have always bored me, but I realize their importance in a successful business. You not only risk trouble with the Internal Revenue Service  (IRS) and other government agencies, but you can find your self in trouble with customers, employees, and vendors if you are not careful.

How about you?  Are you self controlled, in control of your schedule and able to handle administrative tasks? You may not be perfect in all those areas, but running a micro business can be a great way to learn those skills!

The lessons you learn by running a micro business will help you  later whether you open another, larger business or work for an employer. So, don’t be afraid to start if you lack some of the skills mentioned.

You can learn while you earn with a micro business. You will not fail!

Why You Should Be a Sole Proprietor

Most books on starting a small business start with a chapter on deciding your business type. Sometimes they are called Choice of Entity chapters and they cover the major types of business structures in the United States today:

• Sole Proprietorship (one owner)

• Partnerships (more than one owner)

• Corporations including S Corporations and C Corporations (owned by shareholders)

Business guides tell you that making a decision on your business entity is a serious decision and must be made before you begin your business. You are told to do extensive reading and are advised to consult a lawyer. It can stop you in your tracks before you get started!

These guides are well intended, but are overkill for micro businesses. Micros are sole proprietorships (meaning one and only one owner) and here’s why:

• Quick to start

• No partnership agreements

• No corporation status needed. Corporations need to file with their Secretary of State, pay a fee and usually abide by some reporting requirements.

• Easiest to close. Partnerships and corporations are sometimes more work to shut down than to start up becasue of legal entanglements. But a sole proprietorship closes down when the owner decides he or she wants to move on.

• Easy to understand. Partnerships and corporations usually need a lawyer to draft contracts with legal language tp protect all the people involved.

• Simplest tax structure. A sole proprietorship uses a two page form, Schedule C Business Income or Loss (or the simpler one page form , Schedule C-EZ) and attaches it to their personal tax return. Partnerships and corporations require completely separate multi-page tax returns and additional forms added to the owners individual forms.

• No lawyer needed. Lawyers might be a good idea if you are signing a lease or applying for a patent, but most micros work from home and never invent anything new, so they can operate for years without needing a lawyer.

• No accountant needed (but recommended for an initial consultant and for tax preparation)

• You keep the profits. Partnerships and corporations distribute their profits to partners or shareholders.

• No investors to keep happy. You, the micro owner, need to be happy with your business’ progress, not outside investors or partners.

So don’t get bogged down with deciding a business entity before you launch your micro business.  Simply start as a sole proprietorship.  If you become phenomenally successful, then look into S Corporation or C corporation status to see if it might be beneficial.

Teen T-Shirt Entrepreneur Wins $10,000

I love this story of a teenage micro business owner took a simple idea, screen printing T shirts, and made himself unique by putting catchy sayings on the T-shirts.

The T-shirt reads “Caution: Educated African American Male.” Kalief Rollins thinks it will be his next best-seller.

The 17-year-old from Carson, Calif., near Los Angeles, took home a $10,000 grand prize from the National Youth Entrepreneurship Competition this week for his business selling custom T-shirts with inspirational designs. Rollins competed against 27 finalists and 24,000 initial high school entrants for the award, given by the nonprofit Network for Teaching Entrepreneurship. (read the rest…)

There are a couple of things that micro business owner, Kalief Rollins, said that I think are worth noting:

Kalief has a business plan. He started small and manageable and is now expanding his business one step at a time:

In the next year, he says, “we plan to get our shirts into events like fairs, swap meets and farmers markets. … We want to get our shirts into different stores

He didn’t go into debt to upgrade his business. He waited until the money came in-in this case, $10,000 from an entrepreneur  contest!

With the $10,000, Rollins says he plans to make some business upgrades, including stepping up from a heat press to a silk-screen machine to improve the shirts’ quality.

He got professional help from his mother, an accountant. Smart guy!

“I hired my mom as my CFO,” Rollins says. “She worked as an accountant, so she’s good in that field of work.

Vanessa’s Business Plan

Vanessa Van Petten of  Radical Parenting.com shares her business plan for her website and writing business.  Her plan is pretty formal, but I like how she spells out in detail her business development ideas (at the end of her post).

My Business Plan and Mission Statement

by Vanessa Van Petten

I have talked about what it means to be an entrepreneur, the pros and cons of starting a business and why I decided to write a book, the next chapter in my Business Start-Up Kit book is about mission statements. I am in the process of becoming incorporated and trademarking my business name (my next post). While this is happening, I need to write my business plan. I have no idea how to do this, so, I did what I always do when I have no idea what I am doing:

1. Look-up business plan in Wikipedia:

“A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals”

2. Try to find free resource websites:

Oh, how I do love free templates, bplan.com has every kind of free business template you can imagine (including but not limited to: “template for tarot card reading business plan”…yes, seriously. There are 10 basic parts to any business plan, and I realized I would have to tackle them in steps with the tips included in the free template download:

Read the rest here.

Reading sample business plans can give you a ton of ideas for your micro business.

Carol Topp, CPA

Entrepreneurs can change the world (video inspiration)

Need a little inspiration? This is great little video that reminds you of the importance of starting something new (that’s the definition of an entreprenuer!)

17 year old author on self publishing

Vanessa Van Petten author of You’re Grounded! wrote and self published her own book when she was only 17. In this blog post she shares 8 steps to self publishing a book.

5 Tips for Serving Your Customers

When running a micro business, if your customers are happy, you’re happy. Here are 5 tips to providing great customer service as a teenage micro business owner:

1. Smile: Learn a lesson from Wal-Mart and greet your customers with a smile and a friendly “Hello.”

2. Dress well: Make sure your work clothes and hands are clean, even if you are hired to do dirty work like housecleaning. Wear dark pants that don’t show the dirt and change your shirt between customers if it gets dirty.

3. Say “Thank you” every time they hire you.

4. Follow up with a handwritten card to new customers. A card may seem old fashioned, but new customers will appreciate your thoughtfulness. Simply write, “I appreciate your business and I hope that you will contact me in the future.”

5. Be on time: Arrive a few minutes early if you can. If you will be later than 10 minutes, call and explain that you have been delayed.

More tips  to come…

The Best Advertising

What kind of advertising is best for a micro business?

The best kind of advertising is the one that costs the least and brings in the most customers. Many people say that word of mouth advertising is the best type of advertising because it doesn’t cost you, the micro business owner, anything.

There are a few problems with word of mouth:

• It’s unpredictable. You may not get any new customers if no one talks about you!

• Hard to get started

• You have no idea of what people are saying

One way to kick start word of mouth marketing is to offer your services for free. Then ask for the recipient to write a nice testimonial about you and to tell all their friends.

True Story: My friend, Dave Huff, started a Mac support business, Mac Home Support, (http://machomesupport.com). He’ll help anyone that needs help with their Mac or Apple products. We called him to help my daughters and I straighten out our iTunes library after I accidentally deleted all the music on my iPod.

We don’t have a Mac, but we did need help with iTunes. Dave spent an hour hour in front of our PC answering our stupid questions like, “What do the blue circles mean?” and “What do the checkmarks mean?” Then he showed us a neat feature called smart playlists to help get us organized.

When I asked what we owed him, he said, “I want you to tell everyone you know about my business.”  So I did. I put it on Facebook that evening and now I’ve told all of you about MacHomeSupport.com too. That’s how word of mouth works in the digital age.