How to Instantly Increase Your Income by 20%
You should always focus in bringing in more clients, but don't neglect your finances and taxes.
Entrepreneur has an affiliate partnership with Hurdlr so we may get a share of the revenue from your purchase.
We want to let you in on a little bit of a secret: did you know that you can turn your expenses into more profit?
And it doesn’t require any sort of magic or trickery to do so.
Follow these three simple tips to increase your business income by 20% or more.
1. Maximize your applicable tax deductions.
Taking the appropriate tax deductions is crucial to boosting your profits (to tell you the truth, this is not really a secret, but not enough people know to do this!). While this may sound complicated, it’s really pretty straightforward. Here’s how deductions can help you boost your bottom line.
Use the home office deduction
Let’s say you have a dedicated home office or drive a considerable amount for business. You qualify for two valuable deductions: the home office deduction and the mileage deduction. And it’s really easy to get these savings!
To take the home office deduction, the IRS allows you to use a “simple” method, which is a $5 tax deduction per square foot of your dedicated home office up to 300 square feet. For example, if your office measures 200 square feet, then your deduction would be $1000 (200 x $5). That’s an easy way to increase your profit by hundreds of dollars!
What about the mileage deduction?
Now, if you drive a lot for business, then you can also take the standard mileage deduction, which you calculate by multiplying $0.535 (the IRS rate for 2017) for every mile you drove for business.
This rate includes built-in estimates for fuel, repairs, maintenance, insurance, and depreciation - which means you don’t have to figure these out yourself, but you can’t ‘double-dip’ by separately deducting auto expenses.
Not too bad, huh?
With these straightforward ways to increase your profit, there’s no reason you should be leaving money on the table at the end of the year.
To get credit for these expenses, keep track using a free business finance app like Hurdlr. Then, when tax time rolls around, you can claim deductions on your tax return to pay less in business taxes (which equals more profits for you!).
As always, there are a few exceptions and additional details on the above deductions, so you should definitely consult an expert if you have more questions about your personal tax situation.
2. Cut all unnecessary expenses.
Review your bank statements and take a good hard look at all of your business expenses. If they’re non-essential and not directly contributing to your revenue and business growth, then you should consider canceling the service or, at the minimum, avoiding these types of expenses in the future.
Ideally, your business expenses should contribute to future revenue, i.e., they should be strategic.
3. Charge what you’re really worth.
As Jason Swenk, Digital-preneur at JasonSwenk.com says, “If you constantly say you’re too busy; you're not charging enough.”
This may seem like a no-brainer, but many, many freelance professionals don’t charge what their skills and experience are actually worth.
The key is instead of competing on price, focus on competing on value.
If your work is considered to be highly valuable, then you will be able to charge a higher rate (higher perceived value = higher price).
How to raise your rates
So how do you go about raising your rate so that it matches your skill-set and experience level?
Start by implementing a tiered pricing system that offers your products, or variations of your product, at different levels. Include a starter/basic option (the most inexpensive version of your product), a standard option (moderately priced) and a premium option (most expensive). Ideally, this middle option should be your desired price point. And you can apply this model to services as well.
We spoke to Ann Handley, CCO of MarketingProfs and author of our favorite book, Everybody Writes: Your Go-To Guide to Creating Ridiculously Good Content (a WSJ bestseller) about how she would raise her rates and here’s what she had to say.
“The best way to raise your rates is to articulate your value to both existing clients as well as new prospects — on your web site, on your social media channels, in your bio.
Instead of describing yourself as a ‘writer,’ articulate the value you offer your clients through your writing.
Don’t tell people what you do; tell people why it matters to them.”
How to calculate your freelance rate
If you’re not sure how to price your services, you can calculate your freelance rate in reverse.
Simply write down your target income, and then divide that number by your price per unit — this result should give you the number of sales you need per year in order to hit your goal.
Then you can consider whether you should charge more per project and getting fewer sales or charge less per project and get more sales.
The key point to keep in mind, summed up by Brennan Dunn of Double Your Freelancing is,
“Ultimately, you need to realize that clients aren't paying you for anything tangible. They're buying a better tomorrow for their business.
It's up to you to figure out how to deliver that better tomorrow by delivering what they need.
This means understanding what needs to be done, and the best way to deliver the maximum return-on-investment to your clients. Deliver a better product, and charge more for it.”
Using online calculators
At the end of the day, if you find this process to be confusing and you’d rather have someone else figure it out for you, you can also use online calculators to calculate your ideal rate.
Start with a freelance tax calculator, which will help you estimate your 1099 income by week, month, quarter, or year by configuring how much and how often you plan to work.
Then use this freelance hourly rate calculator, which will help you determine how much you need to charge in order to reach your income goals.
In the end, you’re in charge of setting your rates to fit your needs and lifestyle, and there’s no need to shortchange yourself, given your experience level and skills.
Disclosure: This is brought to you by the Entrepreneur Partner Studio. Our goal is to feature products and services that we think you'll find interesting and useful. If you purchase them, we may get a small share of the revenue from the sale from our commerce partners.