You’re struggling to make a sustainable, full-time income in the WordPress market. Why? Why is it so difficult to advance and grow your business? Let’s rethink how you are doing your business.
I’m going to burst your bubble. Ready? It doesn’t matter how awesome you think your business is. It only matters what the market thinks of the solutions you provide to them.
Ouch, I know that was harsh. But it’s necessary to frame the conversation you and I are going to have.Make your business about your market and not about you.
In business, it’s about the market you serve and not you. Write that down and pin it on your wall. It’s all about them.
Why is this statement important? Hum, think about it for a moment.It doesn't matter how awesome your product is. It only matters what the market thinks of it. Click To Tweet
Know Your Market
The reason you are in business is not to make money. Rather, it’s to deliver something of value to the market. Yes, you want to make money and need to in order to be sustainable. But the market decides if it wants what you are offering to it and if it’s willing to pay for it.Position your business for what the market wants, needs, and is willing to pay for it.
You can have the best solution on the market, something revolutionary that you think will change their lives. But if they don’t see the value for themselves, i.e. the perceived value, then you’re wasting your time.
Therefore you have to know your market and its segment. You have to know their pain points are, what they want, and what they’re willing to pay. Then position your business to tick each of these boxes.Know your market. Tick all the boxes to solve their pain points. Know what they will pay. Click To Tweet
Be Your Customer
It’s vital that you evaluate your company through the eyes of your customer and the market.
Let’s do a visual exercise. You are your customer. Answer the following questions as your market.
- Does your solution reduce my pain points?
- Will it give me a competitive advantage?
- Can I make more money (or do more) if I use it?
- Why would I buy from you rather than someone else?
- What makes you unique?
Take the time to truly evaluate your business as a customer. You will be surprised at what you see, but it will help you to better position it.
You need to position your business to the market. Period.
When discussing how to be more sustainable, many times the conversation moves to increasing prices. However, the market will only bear so much for what you are offering. If you are already at or near that threshold, then the discussion about price increases is not valid for you.Position your business to what the market will pay.
The fact is the WordPress market expects solutions at a lower price point. The market will only pay a certain amount for custom websites, plugins, themes, education, professional services, and hosting.
This means your pricing models are limited. You can only charge so much.
You must know what the market will pay. Then position your business to that threshold.
Profitability comes from the money that is left over after all of your costs. Your total cost of doing business is what drives your profitability. This key component is where you need to put your attention and not on pricing.You need to control your costs including actual labor costs.
Focus on controlling costs. That starts with understanding your real (actual) costs.
For most businesses, labor is the main driving cost in the equation. That means each and every single hour you put into your business and projects counts as labor costs.
Are you tracking all of your time? Seriously, do you know how many hours you are putting into delivering the solutions to your clients? You have to know these costs in order to grow and be sustainable. Period.
Your Labor Rate
First, establish what your projected labor cost (rate) is. You have to know what this number is in order to measure and plan. Walk with me on this journey as it will help you.Set the minimum amount you need to live the life you want.
I want you to think about your life. How much money do you need to make in order to pay all of your bills and live comfortably? Let’s say you need at least $4,200 a month.
On average, how many hours per week do you work? Again be very honest here and count every single hour that you give to your business. Let’s say you work 50 hours per week.
That means your hourly labor cost (rate) is $21 per hour, i.e. $4,200 per month divided by 4 weeks divided by 50 hours per week.
Does that make sense? Adjust your numbers accordingly for what your reality is.
Your Actual Labor Cost
Next let’s compute what your actual labor cost is.
I want you to think about the last client you had. They paid a certain amount of money. Let’s say you are a custom website agency and your client paid $1,500 for a website.
Okay, how many hours did it take you from the time they first approached you until you completely delivered that site to them? Be honest with yourself. Write down the following:
- Proposal time
- Discovery time
- Design time (even if you worked with a designer, you spent some time)
- Converting the design into a code
- Building the site
- Testing the site
- Showing the site to the client
- Setup and delivery
- Collecting payments
Every single hour you spent on your business and project costs you money.Total up all of the hours. It will probably be a pretty big number. Let’s say it took you 100 hours.
Using your hourly rate of $21, your labor cost was $2,100, meaning your hourly rate dropped to $15 per hour.
Your Actual Profit
Now take the cash you got minus your actual labor cost. This number feeds your profitability. Obviously, you have other costs to factor in too such as taxes, fees, hosting, licenses, etc. But your time is typically the largest contributor to your costs.
Back to our example. You sold it for $1,500 which means you had a maximum of 71 hours in the budget ( $1,500 / $21 ), i.e. not factoring any other costs. But it took you 100 hours at $2,100. Therefore, you lost $600 or $7 per hour.
I want you to stop right now and do this experiment. You need to understand your labor cost in order to see the effect of the problems.
You will likely find that your labor costs are upside down, meaning you are losing money.
Upside Down Labor Costs
Why are your labor costs upside down? What’s the problem?
You are not considering how valuable your time is and how it directly impacts your bottom line. Every single hour you put into a project and your business has a cost.
You are a fixed cost. You can’t clone yourself or stretch the day into 30 hours. No, your time is fixed. It has a cost. And you can only do so much.You are spending too much time which is costing you money. It takes you too long.
Every hour you give to a project takes you away from another opportunity. Therefore, you can’t make it up in volume. You are depleting your labor pool.
If your labor costs are upside down, then you’re just taking too long to do the work. Listen to me, that is a huge clue that you’re doing something wrong.
You need to first make sure that the market wants what you are offering. If no, you have to fix that by adjusting your services or products for the market.
Once you do that, next work on lowering your actual labor costs. How? How do you drive costs down?
As we said, labor is your biggest cost. You need a certain amount of money per hour in order to live the life you want. That’s fixed and you can’t change that unless you want to lower your cost of living. Let’s say you don’t. You need a strategy of reducing your time.
Did you hear me? You need to decrease your time. Period.
Decreasing Your Time
I want you to map out your time and look at where you are spending it.
Are you searching on Google, forums, or Slack for code snippets and how to do stuff? That time adds up and increases your labor costs. Then ask yourself why you are searching for these answers. Why? Proficiency and efficiency drive down costs.
Fix the problem.
Proficiency and efficiency are both vital to every business. Increase both of these along with aligning to what the market wants and you have a formula for success.
Be proficient. If you need more training, go get it. Hire someone who has that skill set and can do it more efficiently and faster. Learn from them.
Have a quality codebase. If you build code solutions, you must have a well-tested, modular, and high quality codebase that’s all your own. It will reduce your overall costs and time.
Use professional tools and pay for them. Tools should do their job quickly and easily and then get out of your way. If you are spending too long getting a local server up and running, debugging your environment, formatting code, or whatever, that slows you down and raises your time and labor costs. Get efficient.
Value your time. If you want the market to value your time, then you need to value your time first. Tweak everything. Get as efficient as you can and then keep tweaking and measuring it.
Don’t take on too much. Stretching your abilities a bit is fine, but too far and it will take you too long to deliver. Also the solution you provide may not be as high quality as it should be.Increase proficiency and efficiency + Deliver what the market wants = Success Click To Tweet
Wrap it Up
If you want to make more money and be sustainable, you need to tweak your operational costs which includes your time. Every single hour you spend counts. Every tool you use counts. Know your costs and keep driving them down while making yourself more efficient.
Now with that said, you may think “Well, I won’t spend money on xyz in order to save money.” That’s the wrong approach if that “xyz” makes you more in demand and/or more efficient. Be smart.
I want you to be successful. Stop struggling and take the reigns. Go tweak your business and position it to make money.