Should You Charge Less Than the Minimum Wage as a Contract Bookkeeper?

Don’t attract interest in your services for the wrong reasons

RECENTLY I’VE WRITTEN about how your prices should be part of your business strategy and not your marketing strategy. I talked about Mark, the painter, who advertised a really low day rate but wasn’t able to carry out the volume of jobs he needed to make enough money (see Is Your Charge-Out Rate a Marketing or Business Strategy?).

A better strategy for Mark would have been to research the market and find ways to provide customers with savings elsewhere (Researching the Market is a Crucial Part of Every Business Strategy).

The same principle can be applied to contract bookkeepers charging less than the minimum wage. Although this may get you a lot of regular work early on in your business, you will soon learn that it’s unsustainable. And because it’s also really hard to increase your rates substantially, you’ll just find yourself back at square one if you do so anyway.

Check out the National Bookkeeping Rates of Pay to get indicative pricing for contract bookkeeping services.

Remember your entitlements

When you’re setting your prices, don’t forget to factor in your entitlements. As a full time employee of a business, you receive annual leave entitlements equating to four weeks’ salary, sick leave equating to ten days’ salary, public holiday pay, superannuation, and tax withheld on your behalf.

As a contract bookkeeper, you should earn the equivalent of a full year’s salary proportional to how many days or hours you work each week.

Contractor or employee?

As a contractor, your hourly rate will be higher than that of a full time employee, sometimes two times as high. If you have clients who don’t want to pay a higher hourly rate to hire you as an independent contractor, they might be better suited to employing casual staff instead.

If you’d prefer the life of an employee check out our Career Academy Success Program.

Increasing your rates

If you decide it’s time to increase your rates, you need to show how you provide value to your clients’ businesses, in order to discourage them from seeking the same services from another, cheaper bookkeeper. If there’s some extenuating circumstances, it may also be worthwhile explaining the reason for the increase — if your compliance costs have increased due to government regulatory changes, for example. (Note: Rising electricity, broadband or rent is best kept to yourself.)

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You’ll learn ways to increase your rates without losing your clients by enrolling in Research the Market module of our Business StartUp training course as a standalone mini course. Visit our website for more information or to enrol.  

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Why Aren’t The Phones Ringing or Leads Coming Through?

Researching the Market is a Crucial Part of Every Business Strategy

EzyStartUp business startup and admin training coursesIn a previous post, Is Your Charge-Out Rate a Marketing or Business Strategy?, I talked about Mark the painter, who charged a really low day rate that ultimately proved to be unsuccessful, because he couldn’t carry out the volume of jobs he needed to for it to be profitable.

When I asked Mark why he chose such a low day rate, he said it was because no other painter could possibly compete with him. Sure that’s probably true, but obviously, for good reason!

What Mark really should have done was to research the market to determine precisely what other painters are charging, and for which services.

Cost of bookkeeping for a contract bookkeeper using Xero, MYOB or QuickBooks OnlineDetermine the industry average

A good starting point is to determine the average price for your industry. Be diligent and look at as many businesses in your local and surrounding areas to ensure you’re getting a clear picture of what people are charging.

It’s really hard to justify charging much below the industry average, even if you’re trying to get new business.

As I mentioned in the last post about day rates, low prices is a numbers game. Unless you’re able to turn work around exceptionally quickly to justify taking a cut on your profit margin, then it’s probably not worth it.

In our work with National Bookkeeping we discovered that bookkeeper charge out rates fall into some distinct categories based on their knowledge, experience and how they prefer to work. These rates are a great guide to help you become comfortable with your own hourly rate.

Give customers savings in other areas

Rather than reducing your rates to get new business, try to give customers savings elsewhere. You can do this by providing something your competitors aren’t, which is why researching the market thoroughly is a crucial part of your business strategy.

If you determine that your competitors charge a call out fee or a fee to prepare walls, this is a good place to start reducing or eliminating those charges in order to make yourself more competitive.

How are people finding you?

If potential customers are finding you via your website, it’s important to have a good call to action that contains reasons for people to make contact with you. Then make sure you highlight the reasons to call.

Competitors copy so keep changing your offers

Believe it or not, one of the most challenging aspects of your market research and the OFFER you make to potential customers is that your competitors will also be researching what you are doing and if they feel it is a good offer they may copy it — so you may want to have a couple different offers and discounts and change them regularly to stay unique.

Use WordPress, a Blog and Social Media posts to keep your business looking fresh online and as well as attract the attention of potential customers — we cover all of this in our Digital & Social Media Marketing Courses.

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You can learn how to research the market by enrolling in the Market Research Module of our Business StartUp Training Course as a stand alone mini course. Visit our website for more information or to enrol.


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Is Your Day Rate a Marketing or Business Strategy?

Painting a house renovation of investment property in NewcastleI RECENTLY MET A PAINTER during a residential renovation I was involved with in Newcastle (an extremely valuable experience that will help us add to our property investment courses.)

We got talking about how he wins new clients and he said:

I advertise on social media that I’m available for $150 a day because no one can compete with it.

The price he chose is insanely cheap, and he knew other painters wouldn’t be able to compete with this as a day rate. However, there are downsides to this. Such a cheap day rate also means that he’ll be stretched financially and that he won’t be able to hire anyone else to do the work. He’ll need to be paid daily and likely can’t afford to provide any sort of credit (like 7 day terms etc).

It made me wonder whether it was such a good idea because cheap prices is a volume game. Companies like Amazon and Kmart are willing to lower their profit margins to undercut other retailers if it means they make up for it in the volume of product their shift.

In other words, rather than make $20 profit on an item, and only selling 200, they’re willing to make $5 as long as they sell 100, minimum. Otherwise, it’s just a bad business strategy. You may want to read more about blue ocean versus red ocean strategies.

Is trades and services ever a volume game?

Mark, the painter I was talking about, received lots of enquiries. In that respect, his social media campaign had been a success! But Mark wasn’t a big company; he was a one man band. Now he spent most of his days driving around and quoting for jobs.

This meant that when he was working for clients, there were often days where he could only work a half day or had to break the day rate down into an hourly one. Some days, Mark only earned $100. This was simply because he wasn’t doing the number of jobs he needed to in order to make his low day rate a profitable strategy for his business.

Focus on your business strategy first

virion Digital Marketing Manager What Mark had inadvertently done was prioritise his marketing strategy over that of his business. He’d generated lot of interest in his business by advertising his services at such a low day rate, but by not setting any terms or conditions around that rate, it makes it really hard to Mark to increase his rates next time those clients ask him to work for them again.

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Setting rates correctly is something we cover in our Business Start Up Online Training Course. In particular, we look at determining a business strategy for your business, before you start marketing your business and services.

The question of pricing and what we offer in our advertising is something we consider before ever going live when we help clients with their marketing strategies too. Hire a marketing manager to oversea all your digital and social media marketing for a low monthly fee. 


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