Is your business model costing you money?
Leveraging your expertise – Part 1
For many of us who are consultants, coaches or freelancers the method of delivery and pricing of your services is a crucial part of the business planning process. I’ll call this the business model for the purposes of what follows.
The role of professionals working from their home offices is diverse. You may be a part-time or full-time interim or consultant working for a single organisation. Alternatively you could be working on multiple projects for different clients during the week. This requires good time management and scheduling of tasks.You may be working solo or collaborating with one or more associates. These could be remote support staff or employees.
All these situations are versions of the time for money model.
In this article I’m going to:
- Consider the problems of working one to one with clients
- Look at the advantages of the 1 to 1 approach
- Provide some solutions to the problems
The main problems of undertaking a single project at a time or coaching/consulting with just one person or company can be divided into seven areas:
- Lack of Financial leverage
When you are working on a single project at a time the main problem is the lack of financial leverage. The ability to scale your expertise is limited. The question to ask oneself is ‘Have I simply replaced being employed by a company with being employed by my clients?’ In other words, have you switched from a job in an office to a job at home? Don’t get me wrong, there are multiple benefits to working from home other than being paid but we are considering the numbers here.
- Time consuming
Working with one or multiple clients is literally time consuming. The majority of consultants, coaches and freelancers who work from home are applying the 1 to 1 model and charging a day or hourly rate. It’s swapping time for money value proposition.
In my experience very few people in this situation are charging on a project basis or a results basis. An example of a results based consultancy is where you agree a fixed fee with a client for a certain outcome.
For example: a copywriter may be paid per article, a YouTube advertising consultant by the number of clicks and a sales consultant by the number of bookings. Although this model may provide higher fees, it does rely on you accurately forecasting the output you can create in a certain amount of time.
Optimism bias means we are likely to underestimate the amount of time a task will take and overestimate what we can produce.
Not only does the freelancer need to allow sufficient hours in the day to deliver revenue generating work but also time to do the non-revenue generating admin, bookkeeping and accounts, emails, social media, networking, marketing and sales. It is estimated that if you cannot generate your targeted revenue in 60% of the week then you should reexamine your prices.
- Scope creep
One of the main problems for consultants is that of project scope creep. This means that the client (or sometimes the consultant!) moves the goal posts midway into a piece of work. What started out as being a neatly defined project morphs into something much bigger. This frequently happens if the original agreement was thin on detail.
The warning bells should start ringing when a client says: “Could you just….” Well, yes you could but there’s a price attached to the extra work.
Starting out as you mean to go on by keeping accurate records of time spent on tasks can help the likelihood of not being paid extra for the ‘could you justs’.
As consultants, coaches and freelancers, we all like to be helpful and therefore when you suggest additional work which would be beneficial, ensure the payment terms are made crystal clear in advance of launching in.
This brings me on to the next related point that of over-delivering
Whether you spend more than you planned for on a piece of work or provide more than had been agreed, the issue of overdelivering is one which whilst beneficial to your relationship with your client, will in the long run wear you down.
If you have multiple clients then this can multiply causing you to burn the candle at both ends in an attempt to meet your high standards. Perfectionists will know the impact this has on their work-life balance. Everything can always be better.
The 1 to 1 business model, to be economic, needs to be financially worthwhile. Research shows that many people who work from home charge lower prices than their corporate counterparts but can earn more when expenses are taken into account. https://freelancinghacks.com/how-much-do-freelancers-make/ It isn’t a simple calculation – when you take into account some benefits paid by employers such as health insurance and pension contributions comparisons take some working out.
Some freelance and consultancy sectors can be highly competitive driving down prices. We’ve witnessed in industries, such as marketing where there are low barriers to entry, a drop in the hourly rate charged by social media managers. There are no industry standards in many fields and the advent of technology can put pressure on pricing. For example, fees for transcribing have been driven down by the availability of online services such as Rev www.rev.com.
- Lengthy proposals
Although many freelancers work on monthly retainers there are some who work contract to contract. Unless you have a stream of returning clients, there will inevitably be the need to write proposals. These take time and care and there is no guarantee of success.
- Feast and famine
The one-off full-time project can lead to feast or famine. Ensuring one project follows another requires planning in advance.
Do you have time to market yourself when you’re already working five days a week for an existing client?
Advantages of the 1 to 1 approach
The flip side to working one to one for multiple clients are that it offers variety, allows for the creation of bespoke solutions and, if positioned correctly, can be of higher value than when you were employed.
Many therapists and trainers get real satisfaction from seeing the transformations they provide their clients.
A time based model allows you to limit the number of hours you devote to work a week. This can help when looking after children or family members or if you want to have time for pursuing other interests. Giving yourself ‘permission’ to use that free time can be hard if you are used to working the traditional 9 to 5.
Solutions to the problem of 1 to 1 working
Here are some solutions if you are unhappy with your time for money business model.
- Raise your prices. Whilst this isn’t a perfect solution to the problem, it will go some way to alleviating the pressure.
- Take on help at a lower rate so that you can leverage your time. In the early days there will be a negative impact on your cash flow as you will need to gain more clients to fill the time gap created by having help. Outsourcing is a cost effective method for solving the 1 to 1 problem.
- Turn your expertise into a product. In a knowledge based field there are several opportunities for productising your expertise. One of these is to write a book or workbook.
- Alternatively turn your knowledge into a one to many workshop or course face-to-face. This has pros and cons but when successful it can be very profitable.
- Scale your business model by building an online membership programme. Teaching online via videos and downloads is the ultimate scalable product which can replace or enhance your earning power and when done correctly means you are making money while you sleep. An online course or subscription based membership program can be an additional offering which makes a significant difference to your revenue and a reduction in the number of hours you work.
In the upcoming series on leveraging your expertise, I’ll examine these options in more detail.
If you have any stories about this topic please add them in the comments.