You may find over time that demand for your therapy is seasonal or cyclical. Think of ice cream and summer sales. Most ice cream van drivers probably have a winter job! Is there a pattern to demand for what you do, and what will you do during the lean times?
Some additional ways of deciding your price are:
You add a profit margin to the break even
You compare prices in the market and charge accordingly. This can be dangerous as you may have higher costs than your competitors. You may also not be offering a comparable service. A hair cut can cost £5 or £60. If you are top end your prices can reflect this. A mini is not a competitor to a Rolls-Royce! Remember also that a price conveys a message to your client and being too cheap may well do you a disservice.
It is a fact that people are not that price sensitive when it comes to many therapies.People will pay full price if they need your services in a hurry - emergency toothache or the need for a physiotherapist for example.
Have a price range
You may consider what gyms do and have peak and off-peak prices and perhaps special cheaper days (when you are quiet anyway) for the unemployed.for the retired.
Alternatively you may have a target price and a walkaway price. Your best price and one you are willing to accept which is lower. You can then do special offers.
It really takes some genius to be able to accurately predict your sales when you first start a business. After the first year, it gets easier as you can see a pattern emerging and set goals to improve on the previous year by a percentage.
As a guide:
Year one-work on monthly projections and aim to improve each month by 20-25%
So if you aim to get 10 clients in month 1, you will aim to get 12 in month 2 and 15 in month 3. By month 12 you would have a full diary.
Year two-work on quarterly estimates
Year three-work on an estimate of income and expenditure for the year
Have a rolling plan
Once you have completed your first year, plan for a year and add a new quarter’s forecasts every quarter. So at the end of March you will work on the forecasts for the following January to March. That way you are always moving forward and focusing on improvements.
Every month you need to check your profit and loss accounts to see what progress you are making and adjust accordingly. It is unwise to leave checking your profit and loss any longer than that as it can lead to major headaches if not serious financial mishaps!
For a small business an accountant isn’t necessary to do this, but you may find it useful to have one help you get started in ensuring you are doing all the correct bookkeeping (recording all your income and expenditure into a spreadsheet or bookkeeping package) and to help you understand how to work out your profit and loss.
An accountant for your end of year accounts is really helpful as they will give advice on how to reduce your tax liability.
You should also look at your cash flow forecast every month to ensure your business can continue to trade by staying cash positive.
Finally, you should do you bank reconciliations. Checking that everything that you spend and earned maps across from your bookkeeping to your bank statement.
This will help ensure you notice a bounced cheque for example from a client or whether a large cheque that you have written has gone out of the account.
If you are disciplined to do your accounts monthly, you will have tight control of your business and won't get any nasty surprises at the end of the financial year.
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