Kasfia Rashid - “Money Matters with Kash the Bookkeeper”
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Hello! Welcome to Money Matters- Ask the bookkeeper series, the accounting show answering burning accounting questions! You know, the ones you would only ask your best bookkeeping buddy!
Welcome to show eight! Each show will have one main question from the audience with supporting questions from my various travels. Have a question to ask? Don’t be shy, step right on up! You can submit your questions directly to Hello@kashthebookkeeper.com! You may hear your question aired live across the globe!
We have covered questions on each part of the balance sheet, discussed ways to create and use personal balance sheets, and found new ways of leveraging all those wonderful numbers. Today we move forward to the Profit and Loss statement, starting at the top, with Revenue/ Income.
Today’s main question is: “How do I turn my service based business into products?” I am going to blame the pandemic for the rise in importance of this question. With retail stores, restaurants, hair salons and other in - person services being unable to operate, major shifts in the global market were necessary. Today we are going to explore how we can use our accounting records to find and track these new streams of income.
Show Objectives - The Why
Being an Entrepreneur can be a lucrative career with the right skills, marketing, and branding. Many freelance professionals earn six figure incomes and together with the benefits of working for yourself, a freelance lifestyle is not one to complain about.
One potential drawback is, your income is highly dependent on time. When you’re not working, you’re not earning. On average a typical business owner works upwards of 65 hours a week, a third of which is spent actually doing the work they are passionate about. The rest of the time is spent running the business : managing finances takes about 20% of the remaining time, while sales and customer service combined only account for 15% or about 10 hours a week. Sadly, there are only 24 hours a day and it becomes pivotal to spend your time more wisely than you spend your money since you can only take on so many clients at a time. Sure, you can raise your rates, but , there is eventually going to be an income ceiling you can’t break through.
So what can you do? One solution is to turn your services into products!
A great way to supplement, or even replace, your services is to create related products targeting the same customers.
Productizing your service business allows you to earn money 24 hours a day, even when you’re sleeping. When you transform some of your services into products, you not only gain unlimited income potential but also, in the long-term, free up more of your time. Creating products needn’t be difficult either. You’re taking the skills, knowledge, and experience you already use in your services to deliver similar value in product form. You’re basically teaching people how to do some of the things you can do, so they can do these things themselves, although perhaps not as well.
Unlike with your billable hours, once you’ve created a product, it can then be sold an infinite number of times. A well-developed product might sell for the same amount of money you normally charge a client per day.
As the famous saying goes: Give enough people what they want, and you will eventually get what you want. The demand for knowledge, ability, skills, or habits is what creating products allows a business owner to take advantage of.
What You Need to Know - The What
Depending on your industry there are so many choices when it comes to product creation. This is also the age of technology which makes product creation or outsourcing of that creation far easier and less expensive. Below is a short list of products to consider, add your own twist to them!
Courses: As an expert in your field you have the skills to teach other people. You can do this by creating courses and tutorials covering topics your target market is desperate to learn about. Courses can be small or large. They can cost anything from a couple of dollars to thousands of dollars, depending on the scope and the subject matter. Check out my QuickBooks Done for you Course here:
Paid Newsletters: A great way to create repeat revenue is by writing a premium newsletter people will be willing to pay for. The information contained within the premium version will be lengthier and more in-depth. You can share the strategies and tips you usually only share with your paying clients. Sign up for my (free) newsletter here:
Licensed Products: You can also sell licenses for products you create rather than granting exclusive access. Freelance designers, developers, illustrators, and other creatives have a lot of earning potential with licensed products. Even if you aren’t a creative, having branded sellable products can be an easy addition to your product line. Check out mine here.
Books: Books are usually the first item freelancers think of when deciding to create a product. Whether electronic or paperback, books are a highly popular and affordable way to discover new information and insights. A well-written book, in whatever format, can quickly establish you as a thought leader and expert in your field. Self-publishing platforms give you the potential to reach larger audiences when combined with intelligent marketing and branding. Download the IBGR free ebook here:
What You Need to Do - The How
Creating something is easy, creating something that sells is the goal. It hardly matters how many products we have, if no one wants them or can use them, but thankfully, we aren’t starting from scratch. If you are already able to provide services, that means you have SOMETHING that SOMEONE is willing to pay for. In a service industry, that SOMETHING is usually a goal with the SOMEONE simply wanting to achieve that goal. How they get to their goal and what they use is where we come in.
The Someone: List all of the customers you would typically service, and then really ask yourself, Why would they choose you? What made them purchase your service rather than the person across the street? Look at the demographics—age, gender, income. Can you see any patterns? Use this list to narrow down the content for your product and tailor it to your audience.
The Something: A “repeatable” part of your product is arguably the most important. Find an aspect of your service that not only is unique to your business, but something that can be turned into a “repeat purchase.”
The best way to start figuring out your productized service is to physically write down all the services you provide and score them based on the TVR system. “Write down all of the services that you provide today—all the different, discrete, unique services you provide—and then score them on the degree to which they are teachable to employees, valuable to customers and repeatable, meaning consumers have a repeatable need for them,” says Warrillow. Then score those services out of 10 on each of the TVR aspects, for a total possible score of 30.
“Then identify which of your services is the highest scoring, and that’s probably where you’re going to find the raw material for productizing your service,” he concludes.
Your books and records holds all of this information from your customer list to your services offered and pricing. As your product list starts and grows, add them to your accounting records and track the funds coming in from each category. If you are producing several different lines of products, use classes to create miniature profit and loss statements per income stream. Lastly, you can add sub-categories under the cost of goods section to track production materials. Once set up, be sure to review your product lines each month to make sure they are profitable!
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Next: How do I price my product/service?
Written by Kash the bookkeeper
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