Summary: It's easy to think that any
business can be successful if you work hard enough, but there are many situations where
this just isn't so. Unless you do the math to prove or disprove your assumptions, you may
be creating a business that can never succeed.
It's easy to think that any business can be successful if
you work hard enough, but there are many situations where this just isn't so. Consultants,
coaches, and other service professionals often start a business believing that all they
need to do is charge a "reasonable" fee and sell "enough" of their
time. But unless you do the math to prove or disprove your assumptions, you may be
creating a business that can never succeed. Here's what can happen:
Impossible Business #1
My client Molly was selling her services as an image
consultant to individuals who wanted an updated or more professional look. She charged $50
per hour, which she thought was the most anyone would realistically pay to work with her.
In most cases, she traveled to a client's home or went shopping with her client.
Including travel time and lunch meant that Molly could only
make two appointments in one day. The average appointment was two hours long. So the
maximum amount Molly could earn in one day turned out to be $200. But in order to earn
that amount five days per week, Molly would have to schedule ten different clients, all of
whose schedules were able to adapt to whatever times she had available.
This was hopelessly unrealistic. Even if Molly had been
able to make the scheduling work, when would she have had the time to do the marketing
required to land that many clients? It turned out that the maximum Molly could really earn
using this model was about $500 per week. After paying her taxes, she couldn't even cover
her monthly living expenses.
Impossible Business #2
Fred was a student of mine who worked as a software
consultant for midsize corporations. He typically charged $75 per hour, and when he landed
a contract, it often consisted of 20-100 billable hours.
Because Fred's earning capacity was so high and he disliked
marketing, he spent a lot of money on marketing himself indirectly. He purchased display
ads in industry journals and directories, mailed expensive brochures to large lists of
prospects, paid to exhibit at trade shows, and hired a telemarketer to prospect for him.
Fred also worked on contracts that came through agencies, who often took 20-30% of his
earnings as their percentage.
Fred was earning as much as $80,000 per year, but he was
losing about $10,000 per year in agency commissions, and spending $20,000 per year on
marketing. In return for all his hard work, he was earning considerably less than he had
at his last job.
Making the Impossible Possible
New consultants, coaches, and other professionals almost
always overestimate how much they can earn and underestimate the amount of time and money
required to successfully market themselves. They also forget that they will have to cover
not only their living costs and business expenses, but pay self-employment tax, buy their
own health insurance, provide for their own retirement, and allow for unpaid vacation and
sick time.
If Molly or Fred had taken the time to sit down with a
calculator before starting out in business, they would have quickly discovered that they
were on the wrong track. But both of these businesses were able to be rescued.
Molly began selling her time by the day instead of by the
hour. She offered her clients a full-day package that consisted of a wardrobe review and
consultation in the morning and a shopping trip in the afternoon. By charging $395 per day
and scheduling three clients per week, she could earn more than double than she did
previously.
She also began offering a monthly one-day image workshop as
a way of bringing in more income while giving prospective clients a chance to experience
her work. The workshop became her main source of new clients, and marketing the workshop
turned out to be easier than marketing her personal services.
Fred learned how to market himself less expensively through
networking, speaking, and writing articles. Instead of buying booths at trade shows, he
was showcased there as a presenter, and spent time networking with the other attendees.
The same publications where he used to run ads now ran his articles. Rather than paying a
telemarketer, he started picking up the lunch tab for people he thought could refer him
some business.
As a result, his expenses for marketing and commissions
dropped from $30,000 per year to $10,000. At the same time, his income rose to $100,000
per year, because as his visibility and reputation grew, his services were more in demand
and he could command higher rates.
If earning a decent living as a self-employed professional
sometimes seems impossible to you, start asking how it could be possible. What can you
change about how you are marketing yourself, how much you are charging, and how you are
packaging your services? While it could be that success will come if you just work a
little harder, it's more likely that you first need to start working a little differently.
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