By C.J.Hayden
If you have enough clients to keep you busy, you must be makinga good living, right? Well, not necessarily. Some of the busiestprofessionals around aren't earning enough to pay their bills.On the other hand, there are some consultants, coaches and otherservice providers who have plenty of time on their hands butalso earn quite a bit of money.
The difference between the income levels of these two groupsisn't just because one group is better at marketing than theother. 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 youwill generate sufficient revenue to meet your expenses and earna profit. Unfortunately, many independent professionals don'tactually have a profit-making plan. And some of those who thinkthey have one are relying a bit more on magic than they are onstatistics.
For example, when you first hang out your professional shingle,charging $100 per hour may seem like quite a lot. After all, ifyou earned as much as $100,000 per year at your last job workinga 40-hour week, you were still only making $48 per hour. Soperhaps you think that doubling your former hourly rate shouldbe more than adequate to keep your net earnings at their formerlevel.
Let's do some quick math. If your business model is based onworking intensively for one major client for weeks or months ata time, such as many corporate consultants do, an hourly rate of$100 could indeed generate $100,000 per year. All you would haveto do is keep busy approximately half of the time. $100 per hourtimes 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 tofour 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 perweek, you'll need 20 clients at once if you see them for an hourper week and 40 or more if you see them for less time or meetless often.
In the first example above, you only need a handful of clientseach year and have large blocks of time left over to marketyourself. That's a sensible and realistic business model. In thesecond example, you need a constant stream of new clients comingin and the time you have available for marketing is likely to bebroken into small chunks between appointments. That sort ofmodel is more likely to lead to stress and struggle than it isto success.
The first place you might look in order to fix model number twois raising your hourly rate. You could charge $150 per hour,$200 per hour, or more, if your target market will pay it. Butrates 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 businessmodel. Both of the models we've been examining arefee-for-service models, based on an hourly rate. Instead, youcould choose a different type of model altogether. Here are someexamples:
Fee for Service Models
Day Rate - Instead of charging by the hour, you can charge bythe 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 corporateclients; a professional organizer serving home-based businesses.
Project Fee - Charging a flat fee for each project allows youto bill for time you spend planning, researching, or justthinking about your client's issues. Clients often prefer flatfees because they can budget their funds more accurately.Examples: A graphic designer creating a logo; a communicationsconsultant writing a company newsletter.
Monthly Retainer - When you ask clients to pay by the month inadvance, you can charge for your availability, not just servicedelivered. Your retainer can guarantee you a fixed number ofhours. If the client uses less, you still get paid. If they usemore, you can charge extra. Examples: A career coach offeringas-needed calls and e-mails in between sessions; a virtualassistant providing on-call customer service for a smallbusiness.
Product-Based Models
Flat Fee - A wide variety of items can be sold for a flat fee toincrease revenue to your business. "Products" can also includeservices delivered in a defined package. Your buyers may beeither existing clients, or others who can't afford to hire youindividually. Examples: A conflict resolution consultantoffering public seminars; an executive coach providingpersonality assessments; an image consultant selling a wardrobedesign kit.
Subscription - Providing products or services by subscriptioncan 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 monthlysubscription; a life coach hosting a membership-based onlinecommunity.
Bait and Hook - Also called the "razor and blades" model,Examples: A time management consultant offering a trainingprogram including day planners that must be re-ordered; a webdesigner providing proprietary modules under a license that mustbe renewed annually.
Any one of these models can be used to build an entire business,or you can combine different models together. For example, aconsultant could charge a flat fee for assessments, then a dayrate to deliver services. A coach could charge a subscriptionfee for group clients and a monthly retainer for clients workedwith individually.
If your business isn't earning as much as you would like, lookbeyond your marketing or the rate you're charging. The realsolution may be to choose a new business model.
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