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Running a business without taking a wage is often not an alien concept especially when the business is a new start up however, this is not sustainable.
If you are contributing to the daily running of the business it is very important to consider the value of your time. It may be stating the obvious but its surprising how many business owners fail to include this in their business plan.
The problem is not that businesses open without the aim of making money but, when the owner’s passion takes over, it is easy to assume that the business will eventually make money and when it does you will get paid.
When you are starting a catering business you should consider what your time is worth, calculate how many hours you need to work and how much that will cost the company. Make sure that you and the business are a separate entity and consider yourself as an employee of your business, only then will you get a true picture of labour cost.
If you for example you are the head chef for your catering business, how much would a typical head chef earn? When you are pricing for a job whether you decide to take the money or not you have to factor it in. Its all very well making £100 after deducting the cost of supplies but, if it takes you two days to complete the job is £50 a day really what you would consider paying a head chef? In this case if you were to pay out actual labour costs then your pricing is incorrect and the company will actually be losing money not making it.
If you price the job correctly from the outset then, when the business does take off and you have to employ a head chef to take over your role, your pricing allows for your business to grow.
Once you have calculated what your earnings should be you also need to consider how many hours it takes to complete a job. As a business owner it is difficult to detach yourself from the business and you can probably work more efficiently than any employee, in other words be realistic when considering how much work load you can give one member of staff.
In essence be realistic about the cost of labour then, when your business is ready to grow the structure that you have built will be able to sustain it.
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