Whether your small business is part of the vast direct sellers industry, in the creative arts or out on your own, you need to understand how your compensation plan will work if you want to succeed.
Direct sellers are given a long document when they sign up with the company, but not everyone takes the time to read it all. As each check comes through, the money goes into the bank but there is little analysis of where each segment of cash comes from. But by paying attention to the whole package, you will know where to put your energies in any given week.
The same will hold true for writers who have their book published. Royalties can be calculated under various methods, from a percentage of the cover price to a set amount per book after the advance has been realized. If you can buy a number of books and resell at a greater profit than you’d get from having your publisher or local book store sell the books, do you go for the quick return or build a better relationship?
The small business owner who sells products needs to know where a better price break can be realized, whether determined by quantity or quality. If a manufacturer over produced, you may be able to stock up at a reduced price and sell at a better mark-up than your competition. And check out suppliers you aren’t currently buying from – a special promotion could cause you to make the switch.
I’m not ignoring the service provider in this blog. Your challenge is time. And you need to calculate hours whenever you perform services under a package price. Getting a chunk of change might sound good at the start, but if it takes you three times the hours because you didn’t read the fine print on requirements for meetings, special products or other issues, you might find yourself working for $3.00 an hour by the end of the project.
Bottom line – watch your bottom line and know where your compensation comes from.