The 9 Biggest Billing Mistakes That Costs Entrepreneurs Their Hard-Earned Profits

A critical measure for entrepreneurs who offer services and bill either by the hour or a fixed price is the amount they bill clients each month.  As anxious as many entrepreneurs are to raise their revenues, their daily activity often sabotages that goal with the same common billing mistakes.

In this article, I present you with a checklist so you can compare your behavior with the list.  I’ll give some tips on how to break the bad habit, and the rest will be up to you.

1. Forgetting to write down or log your time spent.

I can’t be the only one who has shorted themselves in this way over the years.  The answer is to muster up all the discipline you can and create a routine that you will stick to, come h*ll or high water.  Create a checklist for yourself when you start on account and literally write out the steps you need to follow. (Step one, write down the client name, step two write down the clock time, step three, etc.)

The real challenge comes when you go into “fire” mode for a client.  This is often when the time recording slips past everyone’s mind, but don’t let it.  Go back to your familiar checklist, and take a deep breath.  When an emergency occurs on an airplane, the first thing pilots do is fly the airplane, and the second is they go to the checklist.  So even when you’re in “fire” mode, the routine and checklist are your friends.

2. Doing tasks as they come into your inbox without batching work by client

I know you want to be responsive and fast for the client, but you’re cheating yourself and the client is getting a freebie.  You respond to that email quickly, and you think, that’s not enough time to write down.      The problem is, you don’t realize there were 20 emails form that client for the week, which took a total hour.  Multiply that by 30 clients, and that’s a lot of time not written down.

Slow down, and group the emails by client, to be answered all at once, using the checklist mentioned in #1.

3. Not billing for calls.

The information you give on the phone may be your most valuable information you give to the client on the whole project.  Why aren’t you billing for it?

This is an easy fix; simply don’t take unscheduled phone calls.  All calls need to be scheduled through an assistant, and logged on your bill.

Extra hint:  Don’t let the experts in your business answer your phone.  They tend to give away too much and lower your sales conversion rates.  Instead, train a non-technical receptionist or customer service individual to handle your incoming phone calls.

4. Not taking into consideration team time.

The more team members that are on the project (whether on your side or the client’s side), the longer the project will take, period.  If you’re billing at a fixed fee or preparing an estimate, be sure you add some time to the project based on team size.

A great classic book on this is The Mythical Man-Month.  I got my project management experience back when IT mainframe projects took several years and dozens of team members to complete.  The essence is that you get diminishing returns for each additional person you add to a project and at some point, you are just making the project go on forever.

5. Not billing for setup time or project management time.

As a coach, I’ve pointed this out to my clients and let them decide what to do.  Somehow, whether in your billable rate already or as additional hours, setup and project management time should be included in the estimate or billing as a part of the project or account.

6. Shaving time off the bill to meet your estimate or because you like the client.

Who do you *like* better, your client, the child you need to put through college, or your 90-year-old self in avoidance of eating cat food on your fixed income?  I believe this is your brain trying to keep you from any short-term argument you might anticipate with the client on billing, but this really doesn’t make any sense when you take a step back and look at it for the long term, does it?

7. Guessing without really tracking clock time because you forgot or got interrupted.

Discipline.  Enough said.

8. Doing work outside the scope of a fixed fee job or doing rework and not billing for it.

Even before you start the project, teach your client what will happen when they ask for work outside the project.  Hotels ask for a credit card for incidentals, and we’re all duly trained.  Show your client the change order process and how they will be billed so it’s smooth when (not if) it comes up.

9. Prices that are too low to cover costs.

I see this in the first year when an employee who has been laid off (and still has an employee mentality) and is just starting their own business.  They bill like they were paid as an employee.  Surprise!  It’s such a dramatic change in mindset to realize the enormous risks entrepreneurs make and the costs they have to cover.

Some of you who have seen rising gas costs and other vendors raise their rates but haven’t raised your own are giving yourself a cut in pay every year.  No self-respecting employee would stand for that, and neither should you.

Be sure to do your math, watch your margins, and price accordingly.

**

Be careful with your current, spoiled clients as you implement these changes if you have been materially guilty of any.  When their bill goes up, they are likely to notice and grumble a bit, so you’ll need to figure out what you’re going to tell them.

As you get new clients, you can *train* them right from the beginning, so they have accurate expectations of what their account will cost them on a monthly basis.

I hope your billings go up after you implement these tips; let me know which tip you like best.  You can post your comments, successes, and questions right here on my blog

Show Me the Margins

Many entrepreneurs I’m currently working with are anxious to hit the golden $100,000 mark this year.  Others are interested in growing their revenues steadily and incrementally.   Still others are focused on lowering costs, raising profits from that side of the equation.

All of these approaches are well and good to help you keep more of what you make, but there are far more options to grow your take-home dollars besides raising revenue and lowering costs.

Here are six more ways to get more profit out of your business.

1. Change your revenue mix.

If you offer more than one service, chances are one service or product is more profitable than another one that you offer.  If possible, look at ways you can increase sales of the more profitable service while reducing sales on the less profitable services.  When you do, you’ll instantly have more take home money than you do now.

2. Change your price.

Interestingly, increasing your price doesn’t always generate more revenue.

Rather than increasing your price, you might be able to actually lower your price, increase your volume, and make more overall revenue.  This technique is more effective for product sales than service sales, but you never know until you try it.  Experiment with this on a test basis to see whether lowering your price generates more profits for you.

If you’re working too hard with long hours, your price may be too low.  Raise your price to adjust demand, and you’ll be able to stop working so hard but still have just as much revenue coming in.

3. Change your customers.

If you have lots of different customers from varying industries and sizes of businesses, it might be fun for you but also exhausting.  The more different your customers are, the harder it will be for you to get up to speed to serve them well.

To increase your profits, attract a very similar customer over and over again.  For example, all lawyers or all hypnotists.  You’ll be better able to serve them because you already know their business and industry and the common problems they all have.  You’ll also become an expert and it will be easier to market to your new niche.

4. Change your volume.

If you’re constantly struggling to cover your overhead or reach your revenue goals, you might have a volume problem.  This means you’ll need to market more to get more customers or sell to existing customers and increase your revenue per client.

5. Change your measures.

Be sure your accounting system is delivering the type of reports you need in order to track your revenues, your costs, and your margins for each service, each product, and even each customer.  That’s the only way you’ll have the detailed information you need to act in a fiscally responsible way and fine-tune your business profits.

6. Change your mind.

If you haven’t taken a look at where you are now and where you want to be so that you can have a plan to bridge the gap, then you might be in denial about your business.  Taking action will get you out of “dream” mode where you might be wishing your take home pay was higher and into reality mode where you can make it happen.  Take action by planning and executing your plan, one change at a time.

Those six ideas will “show you the margins” and help you find some more summer income in your business.

Rev Up Your Revenue with These Two Rituals

There’s something special about the word ritual.  It sounds sacred, like you wouldn’t dare break it.  It sounds a little mysterious, as if there’s a component you can’t quite control.  And it sounds colorful, like something full of character that you would never get bored of.

We don’t think about rituals much when it comes to business, but I think we should.  What rituals could you create in your business that will rev up your revenues?  Here are three ideas to get your engines started.

1. Your Daily Question (the ritual of the raison d’etre)

Start every day with a question to put your mind in a big picture frame before you get too immersed in your daily grind.  The question can vary by the biggest need you happen to have that week or that day.  Here are some sample questions to try out:

• What is the top income-producing opportunity available to me right now, and do I have time allocated to work on it?
• What am I willing to give up that isn’t working?  (Sometimes we need to look up to realize the cheese has moved.)
• What skill can I get better at so I can serve my clients better?
• What 10-minute task can I do that will bring me the quickest cash?
• What can I do to bring my energy up today?
• What favor or compliment can I pay forward to my top referral source?

I’m sure you can think of more questions to ask based on your business needs, whether it’s revenue, cash, time, or inspiration.  You can work the same question for a week or a month, or have a different question for each day of the week.

Asking yourself your daily question will keep you focused by providing you with your anchoring thought of the day.   It will help you keep working on what’s important and not so much what’s urgent.

2. The Report Card Ritual

There’s nothing better than accurate, cold, hard metrics to set things straight, kill procrastination in its tracks, and create excitement about meeting or exceeding goals.  To practice the report card ritual, identify a number in your business that you are continually missing and are growing tired of falling short.  Here are a few options to get you thinking:

• Revenue (in total or for a particular line you are growing)
• Billable hours
• Total hours worked
• Net income
• Take home pay
• Number of customers
• Number of leads
• Revenue per client
• Revenue per employee
• Sales conversion ratio

Now, track it at the end of every day.  Your ritual should consist of measuring, recording, and analyzing this metric at the end of each day.  Make a spreadsheet and chart your progress over time.  Are you gaining on your goal or losing?

You can’t improve something until you measure it.  When you can spend time and attention on the metric you want to change, you’re already 90% there.

There are many more rituals to enjoy:  employee celebrations, client celebrations, signature rituals that are your own, seasonal rituals such as the company picnic or the annual Christmas party, a gratitude ritual, a peace and quiet ritual, and even billing rituals, collection rituals, and customer service rituals.

Take a look at where you can practice rituals in your business, especially the ones that will rock you revenue.

20 Tips to Find Extra Cash and Resources Right Now for 2011

Could you use a bit of extra cash each month? I think most people would say yes. Here are several tips to start your new year with a little more green in your pocket.

1. If you bill your time by the hour and sometimes forget to write your time down (I know I’m guilty), put in some extra procedures to capture that time. That’s a big cash drain in your business that needs plugging in 2011.
2. Check all of your insurance policies to see if you can raise the deductible. Check both your auto insurance as well as your health care, and for that matter, any other policies with deductibles. I bet you’ll find at least $50 in savings. Also, check with your agent to see if you qualify for any other discounted savings, such as low driving miles, good driver discount, customer loyalty programs, and more. I just picked up a cool $300 with one phone call.
3. Look for unused gift cards that might be lying around in a kitchen or desk drawer and cash them in for things you need.
4. Take a good look at all the memberships you belong to. List ALL of the benefits of each one. Are there some free benefits you could use to save time or money? For example, both my WIC and NAWBO-SV memberships allow me to send in a press release about my business. Taking advantage of that could likely bring me more exposure and more clients. One of my memberships offers discounts at the office supply store, and another allows me to bring a friend for free. All of these benefits will save me money.
5. Using your QuickBooks profit and loss report, scan your expenses for 2010. Is there anything you can do without (that didn’t pay back)? If so, take steps to cancel or not spend that money in 2011. If you don’t have the information to make the right decisions, take steps to better classify your expenses for 2011 so you can see where the money is going.
6. Get to know the programs that your friends and family are associated with, and see if you can help them for mutual benefit. For example, if your cousin’s work has an employee referral bonus of $4,000 and you have a friend who would be perfect for the job, make the connection. If you have a friend at HP who can get you a computer at a discounted rate (legally and morally), then go for it. Use social media to look for new connections where you both can profit.
7. Do you have thousands of unused air and hotel miles? Sell them or start using them on trips you have planned.
8. Does anyone owe you money from 2010? Give them a call and collect those old receivables.
9. Make a list of restaurants where kids eat free on certain days, and visit them on those days. You can do the same for 2 for 1 or BOGO meals. Eat at the “nicer” fast food restaurants instead of the more expensive sit down restaurants. We like places such as Baja Fresh and Chipotle for great values and healthy food.
10. Plan to bill faster for 2011 so you can get paid even faster. Better yet, offer prepay discounts and reward those who pay early with “fast-action scholarships” as they’re called in the internet marketing world.
11. If your grocery bill is getting a bit high, make some simple swaps. Choose frozen over fresh and regular over organic to save a few dollars every week.
12. Create a new program, product or service that brings in a whole new revenue stream for 2011. I created four new revenue streams in 2010: one-on-one private coaching via phone, four new information products, the Mind Body Style event, and my brand new program Accountant’s Accelerator.
13. Cancel memberships, newspapers, and magazines that you are not reading or no longer need.
14. Shop around for new vendors that you might not be getting the best service from. I continually get new web design clients who have had lousy service from their old web design company.
15. Make part of your business green. Allow employees to stay home one day per week to save gas, adjust the thermostat to save heating or air conditioning, or go paperless.
16. Participate in an affiliate program and sell someone else’s products. It’s easy money and you’ll be rewarded with cash commissions when the products sell. (If you want to get paid by Sandi, check out her affiliate program here: http://sandismith.com/affiliatecenter.html)
17. Look in your closet, car, garage, storage, or around your home to see if there is anything you can use, repurpose or sell for cash.
18. What do you need to finish that would bring in some cash if you just got around to finishing it?
19. Enter contests that will bring you good public relations exposure. One example is the Silicon Valley Business Journal’s Women of Influence awards.
20. Find events that are free in your area and that will teach you some new skills and sign up. You can find them through government agencies, the Small Business Administration, coaches and consultants, via social media Facebook and LinkedIn events sections.

How much did you save? I’d love to read your blog posts about what you did to keep more of what you will be making in 2011.

3 Money Leaks that May Need Plugging in Your Business

Everyone is looking on the income statement to find places to cut their business expenses. But the best place to look is not on a report; it’s in the habits, processes, and procedures that you and your team do through your work day. It’s also in the mindsets, the inner game you bring to your work. When I go there with my coaching clients, we find thousands of dollars of savings and improvements, far more than what we can squeeze out of an already squeezed income statement.

Here are my top three money leak sources for you to look at and see what you can find:

1. Indecisiveness or saying yes when you should really say no. This manifests in a number of ways: slow hiring or firing processes, saying yes to projects that do not have a high return on investment, and getting stuck in ambiguity or uncertainty and delaying the unavoidable, to give a few examples.

   Why we do it and sabotage ourselves: We don’t want to hurt anyone’s feelings. OR We get caught up in the emotion of the moment and think we can be Super-entrepreneur. OR We don’t do the planning or analysis before we make a decision, we just act. OR we’re really stuck and don’t know what the next step is, but are afraid to reach out and ask for help. OR We want to be liked.

   Action tip: Take a look at where you’ve said yes or maybe in the past and change to a more decisive action that better supports your business and personal growth.

2. Underpricing, overserving, and giving too much for free. Everyone is so scared to raise prices in this economy and millions of businesses have been discounting like mad. Why not turn it on its tail and raise value along with price instead? It’s all about the perceived value your client believes they get from your service. When you start discounting, they start questioning. Don’t get sucked into that cycle. Build huge trust instead and you won’t have trouble.

   Why we do it and sabotage ourselves: Fear, pure and simple. Money is tied to survival (which is the biggest myth on the planet). The economy has sent millions of people into a scarcity tailspin, and a huge percentage of this black hole is completely emotional overreaction.

   Action item: Get your groove back. Find confidence, be assertive, and get on with your life. Run from clients who are nickeling and diming you and find clients who value your smarts and expertise.

3. Reinventing the wheel. Where could you further leverage and systematize your processes via checklists and how-to guides so that you are not continually reinventing the wheel? Everyone could take a look to discover where they could tighten up their processes a bit more. When you do, your business will run smoother, more proactively, and more efficiently.

   Why we do it and sabotage ourselves: Entrepreneurs are so creative we like to create, create, create. We don’t like to get fenced in which may be the attitude you have toward systematizing. The paradox is systematizing is total freedom. Without it, you can’t delegate and grow your team, so that you can have even more time to create.

   Action item: Look for processes that are sloppy and get them documented, systematized, automated, and delegated so you can free up your time to be more strategic in your business.

Take a look in your business for these money leaks and let me know what you find and fix, so others can benefit from your stories and we can all prosper.