| In a recent survey of independent
professionals, almost 50% of the consultants, coaches, and other professionals declared
that they were currently not earning enough to meet their expenses. This result shouldn't
be surprising, since according to the U.S. Small Business Administration, more than half
of all small businesses fail in the first year and 95% fail within the first five years.
But it made me curious. How can that many professionals be operating businesses that are
not turning a profit?
Looking into the issue a bit further, I made an
enlightening discovery. Many of these businesses ARE profitable -- the business revenues
exceed their costs. The businesses are operating in the black, but there isn't enough left
over for the owner to pay their living expenses. The business owners are living off their
savings, working an outside job, being supported by family members, or going into debt.
So these independent professionals are doing something
right.
They are reaching clients, making sales, and turning a
profit. But it seems that what they have left out of the picture is earning enough to pay
themselves. Without enough of a profit margin for an owner's draw, these businesses are
ultimately going to fail. Can they be saved? Perhaps, if the owners are willing to make
drastic changes of the most difficult kind -- changes in themselves.
If you are one of these struggling professionals, you must
ask yourself what you are willing to do to make your business succeed. To break out of
under-earning, you will need to do more, learn more, or charge more, and it may not be
easy.
Doing more may mean working more hours.
The average small business owner works more than 40 hours
per week in their business. You may feel like you are working hard, but have you actually
kept track? Many entrepreneurs are surprised to discover that they are putting in fewer
hours than they thought. It's usually unrealistic to expect a full-time income from a
part-time business.
Or you may be putting in plenty of time, but not putting it
in the right place. How many hours per week are you spending on marketing? And is some of
your marketing time devoted to actively reaching out to clients and referral sources
through networking and phone calls, or are you limiting yourself to more passive
strategies like building a website and placing ads?
Doing more about your business or about marketing may
require not only a change of habits, but a change of attitude. You may be avoiding a
full-time commitment to the business because you are afraid of failing, or holding back
from marketing because you fear rejection. If these thoughts sound familiar, notice that
your fear of failure may be causing you to fail!
Successful entrepreneurs take risks.
Many small business owners fail multiple times before they
eventually succeed. Successful salespeople hear "no" many more times than they
hear "yes." If you want to follow in the footsteps of people who succeed at
business, you must be willing to risk failure to get there.
Perhaps doing more is not the answer in your situation. You
may be working hard already in your business and marketing actively. But you may need to
learn more. Almost half of new business owners say they did no prior investigation or
learning about business ownership before they started.
You may know everything you need to about delivering the
professional service you offer, but there is plenty left to learn about not only marketing
and selling, but pricing, negotiating, contracts, financial management, and more.
In fact, one of the biggest gaps between success and
failure may lie in these not-so-minor details. You may need to charge more. Do you know
exactly how much you need to charge in order to earn a decent living from your business?
Not the amount you believe your clients will pay, but what you really need to earn?
Total up all of your regular living expenses, including
housing, food, clothing, health care, family care, transportation, and entertainment. Add
to that required payments for your debts, income tax, and self-employment tax, and an
allowance for vacation, sick time, and emergencies. Now include a budget for savings and
your eventual retirement.
What do these numbers tell you about how much you should be
charging for each hour, day, program, or project?
If you're not currently charging this much, don't wait
until your business becomes successful to raise your rates. Unless you start earning a
living, your business will never succeed. If you find that the people you have been
marketing to are unable to pay more for your services, it may be time to focus on a
different market.
This is where more learning comes in. There must be other
professionals with businesses like yours who are succeeding. What can you learn from them?
Who are their clients? What marketing strategies are they using? What business practices
of theirs can you emulate? Whatever challenges you are facing, it's likely that those who
have gone before you have the answers.
But you have to be willing to listen to the experience of
others and act on it. Your business isn't going to improve without help from you. You need
to make changes now in how you are working, marketing, or pricing yourself in order to
avoid failure. If your business isn't earning enough to sustain you, the business itself
isn't sustainable.
Copyright © 2007, C.J. Hayden |
