HAVE YOU CREATED AN IMPOSSIBLE BUSINESS?
C.J. Hayden, MCC
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.
Copyright © 2004, C.J. Hayden
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