Independent Contractors: Assessing Your Value in the Market
Take an honest look at your business
There are many important details associated with being your own boss, and one of the most important is evaluating yourself and the viability of your business. As an Independent Contractor, you will continually face the issue of assessing your own value. To know continued success you must frequently analyze your knowledge, education and skills to determine your place in the business community you serve—whether your market is global or based in your own home town.
The market for your products or services must frequently be evaluated to maintain a viable business. Competition, economic factors and changes in technology can all affect the market and hurt your bottom line if you do not practice vigilance. In corporate America, even the smallest companies typically conduct a market analysis every 6-12 months. For most businesses, it is an ongoing task.
For the Independent Contractor or small business owner, assessing your market value becomes something more personal--you must evaluate your own worth within your field. You must compare your knowledge, skills and experience to your competitors to see where you stack up. It can be a humbling experience to perceive yourself as your customers see you, but it is vitally important to the success of your business.
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Five criteria for assessing value in your market
Listed are five criteria for assessing your value as an Independent Contractor or small business owner. They require an understanding of your industry and the factors affecting it. Your own analysis will likely be far more detailed than the list offered here, but this represents a starting point for determining your place in the market.
1. What is the current demand for your product or services? Is there a high demand for what you offer? If so, you can follow the laws of supply and demand and charge a higher price for your services—within reason. Do not price yourself out of business. If your product or service is crucial to life in your community, someone else is likely trying to meet the same need you are. Conversely, you must charge less if what you offer is nice or helpful but not essential. People will get by without something (even if it is extremely helpful) if it is too expensive. Economic conditions can quickly affect what consumers consider essential.
2. What trends will affect your market in the future? Will this market exist five years from now? Can your business survive tough economic times? Will technology make your services obsolete or superfluous? How is your work affected by a global economy? All entrepreneurs ask themselves these questions, and the answers often determine the course of their business future. For example, a look at job opportunities for Virtual Assistants demonstrates that many are willing to accept a job for pennies an hour—just to get the contract. Competitors essentially working for free will profoundly influence any market.
3. Who is your competition? Who else provides the products or services you offer? Is your competition local (a “bricks and mortar” operation) or global (online)? Do their cumulative backgrounds, skills and experiences allow them to provide similar services in a superior or inferior manner? Determine the number of competitors you have and your place among them. Compare your strengths and weaknesses with theirs. If you are the best in your field, charge accordingly. If you insist on a line of work where you are worst among your peers, it is logical to charge the cheapest prices for your services.
4. How well do your skills, background and experience mesh? Are you an expert or a beginner in your field? Does your experience match your skills? A talented illustrator might be as skilled as an advertising executive for a major corporation, but without a documented history of successful advertising campaigns, the beginner must charge less for their services—their experience doesn’t yet match their skill level. Occasionally the “superstar” appears out of nowhere and dominates a market without “paying dues” or gradually earning respect in their field over time, but these rare individuals are not the norm (and you know who you are).
5. What value must you place on your time to succeed? The answer to this question is vitally important in service industries. For example, if a barber takes one-half hour to cut someone’s hair, the barber won’t survive working four hours per day and charging five dollars per haircut. The maximum earning potential for this business model is $40 per day. The barber has three options: 1.) working longer hours; 2.) cutting hair more quickly, or; 3.) asking more for a haircut. Charging $30 per haircut can earn $240 in four hours, but only if the barber is good enough to get customers while asking that much.
How does your business stack up against the competition?
How do you stack up with your competition? Are you prepared to fight for your share of the market? Perhaps you need to improve your skills to be competitive. Even if you currently dominate your field, it is always prudent to look ahead and “expect the unexpected”. That superstar might be preparing to burst on the scene, or technological advances could change how your industry operates overnight—it might even eliminate it entirely! When four Harvard students worked together to create Facebook, who could have imagined how much would change with their creation? Mass communication transformed with the success of their web site, and many businesses (small and large) adjusted their strategies in recognition of the potential this product held.
No one can predict the future, but it is important to place yourself in a position to succeed to the best of your ability. Without diligence you might not even notice the competitor or trend that could undermine your efforts to build a thriving business. The key to success or failure is not out there to be found, however—it is inside you. Watch for changes in your industry but focus on improving yourself. Increase your value in the market you serve. Even if your field of endeavor rapidly changes, you will grow and change with it. You will notice challenges sooner and even anticipate them. You will see further ahead, and adapt your skills to match trends.
When you focus on improving yourself, any assessment of your place in the market will seem much brighter.
Best wishes for continued success.
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