5 Ways to Stop Underearning in Your Small Business

5 Ways to Stop Underearning in Your Small Business

Small business owners don’t need to be underpaid to be “underearning”. It’s possible to be paid well yet still bring in less money than you want or need for your small business. In fact, it’s estimated that one in three small business owners are underearning…and most are women!

small businessThe following strategies ensure you’re earning what you desire:

1. Establish an accurate pricing model for your small business. Don’t just throw a dart at the pricing dartboard to determine your prices, use common best practices for pricing. One pricing model is discussed in THE FORMULA TO OVERCOME UNDERPRICING YOURSELF & YOUR BUSINESSIf this isn’t a good fit for your small business, make Google your friend to identify other pricing models to get you started or contact your CPA for help.

2. Develop a procedure for dealing with “scope creep”. “Scope creep” is a common term used to describe work that exceeds a predetermined range deliverables for which a price has been agreed upon and approved. A small business policy on how you handle “scope creep”, including how and when the policy will be communicated, ensures you are paid properly for your expertise and time.

3. Decide your “free or discount” policy. It’s easy to develop close relationships with clients when you run a small business. Sometimes these friendships cause small business entrepreneurs to give away their services. Small business owners are generous people. If you want to provide complimentary or discounted service, decide what % your small business can afford. Then stick to it! You might be surprised how your earning potential increases when you reduce the gaping hole of “free, client courtesy, discount” services.

4. Document your billing/accounts receivable policy. Cash flow is critical for small businesses. Although “conventional wisdom” dictates a standard accounts receivable time frame of 30 – 60 days from time of invoice to payment due date, for many small businesses this is the difference between struggle and survive. Throw “conventional wisdom” to the wind and consider a 15 days accounts receivable policy to keep your cash flowing.

Remember to include your policy for late payment fees and/or interest. You’re not your clients banker and/or credit card. Don’t let cash flow for your small business suffer because your clients mismanage their cash flow.

5. Communicate billable time early and often. It’s nice to “throw in” an additional small service for a client, however, this sets up unrealistic expectations for the client. The client develops a false sense of the deliverables and financial arrangement agreed upon. It soon becomes a vicious spin that’s challenging to pull out of.

Communicate your billing policy early and often for services not included in the original agreed upon scope of work. It’s as simple as, “We’re happy to do that for you. I anticipate that it will take X amount of time for X cost. Is that okay with you?”

Are you ready to put the brakes on “underearning”? Let me know if I can help you develop the kind of policies that keep your business flush with cash.

Related Blog Topics:

5 Signs the Price is Right for Your Small Business

Overcomg Underpricing, & its Evit Twin, Underearning in Small Business

5 Things to Fear in Business

The Small Business Pricing Conundrum: Underpricing

Solo Entrepreneurs: Better & Smarter But Maybe Not Richer


  1. Thank you! This was so helpful. I sometimes find myself obligated to friends and family to give them a good deal, and then my pocket wishes I had done otherwise. Great post.

  2. […] not the cycle, these tips might help you to earn more and avoid the downturns. This article at Project Eve, has some great tips to help you ensure you are earning what you are […]

  3. […] article over at Projecteve.com is interesting because it discusses options other than price. When you only focus on price as the […]