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Here is a subject I know PLENTY about. I was one of the first people (maybe THE first) in Berkshire County Western Massachusetts to open a business similar to yours (apologies to Janet, I beat Mike Nolan by about 8 years). I started doing the same thing in 1980, and went through several generations of hardware and software, before making major changes a few years ago. I started with CP/M and MP/M systems and when PC's came along sold/supported those too. My number one piece of advice is to make sure you have an absolute handle on your cash flow, particularly your receivables. The problem with dealing primarily with small businesses is that many of them take a very, very long time to pay, and some never pay at all. If I went through my outstanding receivables, I am sure the balances would approach $100K, and that will KILL a small business. It only takes one or two late (or NEVER) paying accounts to destroy the profitability of many, many good accounts. Do not deal with clients who are not profitable, period! Either figure out how to make them profitable or drop them like a hot potato, and tell them why. Advice number two: Look very closely at what is and is not profitable and what is not in what you are doing. I realized, after about 10 years, that selling equipoment, particularly equipment that could be purchased in any mail-order catalog below my cost was just crazy. I stopped selling computers and most other equipment because I was always having to compete from a price standpoint, with "invisible" forces like mail-order, the internet, and the guy in his garage. That has a psychological effect on you as the seller, because you feel an obligation to compete but still support what you sell, usually for free, since you sold it and are "responsible". Given the amount of work it takes to put a simple PC together, software installed, etc, you cannot possiby sell one for $200 over cost and be profitable. My approach was to change my whole approach from the mentally of selling "things" to the mentality of selling "knowledge". One example is that for computer sales, I informed my clients that I no longer sold equipment. Since I wanted to make sure their needs were met, I act as a consultant in helping them determine what they need, specing out hardware and software needs, get the best value for the price, etc. Ordering stuff for them, etc. I always recommend that they buy systems which include on-site service from the manufacturer. The client issues a check directly to the equipment vendor, (oh yes, no more hassles with the state re: sales tax since labor is not taxablle in Mass) and I get a check for EVERY MINUTE I spend, including installing any software, including unpacking the boxes and setting the PC on someone's desk if the client wants this. Using this approach you are guaranteed to make more than $200 per pc, and you will have a happier client. Previously I considered much of the time determining what the client needed as "sales" time, and felt it was not ethical to charge for it. If you didn't actually sell the equipment, it became lost time. Now, although I do the same thing, it is "consulting" time and if the client determines that the solution is too expensive, etc. I still get paid, since my services no longer depend on consumating the sale. Advice number three: Develop an area of expertise that is not common but for which there is a demand, or for which you can create a demand. The point here is to eliminate the number of people you are competing against. I became a novell CNE and a Novell Gold dealer ten years ago, because there was no one else around who could, or was willing, to develop the expertise. Advice number four: If your time is worth $75 an hour, charge $75 an hour. I don't understand why web page design or repair should be charged at a different rate. What they are buying is "you", not a web page. Advice number five: Closely monitor labor costs and productivity - despite what contractors on this board may say, you cannot pay employees more than 30 to 40 percent of the billing rate and be profitable. As an employer, you have a whole lot expenses that may not be apparant to your employees, but are a component of your costs of doing business. Rent, advertising, taxes, down time, training, your own administrative time and costs, etc. If they are strictly contractors to you, it's a different story. I like to look at the local automobile dealers as an example. The posted labor rates are approx $50 an hour and the mechanics get paid $15 to $20 per hour. They know what the ratios have to be in order to be profitable. (their actual labor rates are higher, due to the "book rate/actual time, whichever is higher" policy most have). Advice number six: If possible, farm out work and take a cut as a referral fee. Be your own bork. This can be profitable, particularly for some types of projects and if there are people you can work with and trust. Advice nuber six: manage client expectations. before doing a job, let the client know EVERYTHING that is involved, what might go wrong, whay may increase the project time, etc. That way YOU won't feel obligated to perform services for free. Advice number seven: See if there are services you can contract for on a regular basis. Maybe a monthly fee for a limited list of webmaster services, or telephone support, etc. When I took a close look at my own business, I was astounded at the telephone support time we spent that was not being charged. Pay attention to the little things, they will eat you alive. Because I am happier doing technical things that administrative stuff, I also tended to let these slide, customer demands usually came first. I did not actually do this, but I seriouslyI considered hiring someone as a "manager" (My own PHB) to manage even me and deal with all the business and administrative stuff, so I could concentrate on the technical stuff. This person would have been essentially non-technical so there would be no temptation to send them on technical misisons in a pinch. There's probably a lot more I could suggest, but I'm tired of typing. Contributed by drink2much |