you have enough clients to keep you busy, you must be making a good living,
right? Well, not necessarily. Some of the busiest professionals around
aren't earning enough to pay their bills. On the other hand, there are
some consultants, coaches and other service providers who have plenty
of time on their hands but also earn quite a bit of money.
The difference between the income levels of these two groups
isn't just because one group is better at marketing than the other. The
difference is in their business models.
Simply put, your business model is the answer to the question
"How do you intend to make money?" It's your plan for how you
will generate sufficient revenue to meet your expenses and earn a profit.
Unfortunately, many independent professionals don't actually have a profit-making
plan. And some of those who think they have one are relying a bit more
on magic than they are on statistics.
For example, when you first hang out your professional shingle,
charging $100 per hour may seem like quite a lot. After all, if you earned
as much as $100,000 per year at your last job working a 40-hour week,
you were still only making $48 per hour. So perhaps you think that doubling
your former hourly rate should be more than adequate to keep your net
earnings at their former level.
Let's do some quick math. If your business model is based
on working intensively for one major client for weeks or months at a time,
such as many corporate consultants do, an hourly rate of $100 could indeed
generate $100,000 per year. All you would have to do is keep busy approximately
half of the time. $100 per hour times 20 billable hours per week times
50 weeks per year equals $100,000.
But what if your business model is based on working only two to
four hours per month for each client, like many coaches, therapists,
or healing professionals? Now if you want to earn $100,000 per year, in
order to bill those same 20 hours per week, you'll need 20 clients at
once if you see them for an hour per week and 40 or more if you see them
for less time or meet less often.
In the first example above, you only need a handful of
clients each year and have large blocks of time left over to market yourself.
That's a sensible and realistic business model. In the second example,
you need a constant stream of new clients coming in and the time you have
available for marketing is likely to be broken into small chunks between
appointments. That sort of model is more likely to lead to stress and
struggle than it is to success.
The first place you might look in order to fix model number two
is raising your hourly rate. You could charge $150 per hour,
$200 per hour, or more, if your target market will pay it. But rates like
these may be out of reach for many potential clients, and difficult for
you to justify.
But rate increases aren't the only way to fix a broken business
model. Both of the models we've been examining are fee-for-service
models, based on an hourly rate. Instead, you could choose a different
type of model altogether. Here are some examples:
Fee for Service Models
Rate - Instead of charging by the hour, you can charge by the
day or half-day. This imposes a minimum on your clients, avoiding short
appointments that fragment your work schedule. Examples:
An on-site massage therapist calling on corporate clients; a professional
organizer serving home-based businesses.
Project Fee - Charging a flat fee for each project allows
you to bill for time you spend planning, researching, or just thinking
about your client's issues. Clients often prefer flat fees because they
can budget their funds more accurately. Examples: A graphic
designer creating a logo; a communications consultant writing a company
Monthly Retainer - When you ask clients to pay by the
month in advance, you can charge for your availability, not just service
delivered. Your retainer can guarantee you a fixed number of hours. If
the client uses less, you still get paid. If they use more, you can charge
extra. Examples: A career coach offering as-needed calls
and e-mails in between sessions; a virtual assistant providing on-call
customer service for a small business.
Flat Fee - A wide variety of items can be sold for a
flat fee to increase revenue to your business. "Products" can
also include services delivered in a defined package. Your buyers may
be either existing clients, or others who can't afford to hire you individually.
Examples: A conflict resolution consultant offering public
seminars; an executive coach providing personality assessments; an image
consultant selling a wardrobe design kit.
Subscription - Providing products or services by subscription
can provide a steady source of income and reduce marketing time. A sale
made only once can continue to provide revenue. Examples:
A sales trainer selling an educational CD series by monthly subscription;
a life coach hosting a membership-based online community.
Bait and Hook - Also called the "razor and blades"
model, Examples: A time management consultant offering
a training program including day planners that must be re-ordered; a web
designer providing proprietary modules under a license that must be renewed
Any one of these models can be used to build an entire business,
or you can combine different models together. For example, a
consultant could charge a flat fee for assessments, then a day rate to
deliver services. A coach could charge a subscription fee for group clients
and a monthly retainer for clients worked with individually.
If your business isn't earning as much as you would like, look
beyond your marketing or the rate you're charging. The real solution may
be to choose a new business model.
C.J. Hayden is the author of Get Clients NOW! Thousands
of business owners and salespeople have used her simple sales and marketing
system to double or triple their income. Get a free copy of "Five
Secrets to Finding All the Clients You'll Ever Need" at http://www.getclientsnow.com
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