Earn A Higher Return On Your Talent

Tim Williams on the Ignitions Consulting Group blog writes:

The agency business is severely limited by its inability to scale. […]

The problem with the agency revenue model is that agencies don’t actually have a revenue model; they only have a cost structure. A revenue model is a framework that identifies how an organization generates income, including specific offerings, pricing approaches, value classes, customer segmentation, pricing tiers, and more. An effective revenue model produces multiple revenue streams based on innovative pricing strategies. The billable hour hardly meets that definition.

If the agency model is this constrained, imagine how bad it is for solo professional services providers.

Being more strategic about your referral approach can boost your growth

Cultivating referral sources that send along quality leads on a regular basis is the ideal of all independent professionals. While a modest referral network can be built through good work, thinking more strategically about your referral approach can boost results greatly.

I've depended on referrals for more than twenty years. One commonality among my top recurring referral sources is that I help *them* do more business: I can help their customers overcome challenges that prevent the full utilization of the referrals source's products or services.

Example: I've enabled a web hosting provider to get their referred customers live sooner – with their offering – and the clients closer to getting the desired results from having a web site.

These referral sources are, in effect, clients too (that pay me via leads).

Or perhaps *partners* is a better descriptor: I help them look even better to their clients by helping smooth out kinks both during and after the sale and there are clear synergies between our respective offerings. (And often I'll refer customers their way from my client base).

By treating my top referral sources as de facto clients and/or partners I draw quality referrals more frequently.

I do this by helping my sources look good, achieve their goals, and grow their businesses.

Chances are you can harness more frequent referrals like this too. ⬇

Start by brainstorming where or how your offerings or capabilities might enable others' customers/clients to move faster or overcome challenges holding them back.

You may have already come across them during your work or market research – or even received a referral from them.

Next, identify the top candidates for potential key recurring referral sources: they're either already well established or rapidly and authentically growing.

They touch potential clients daily and you can help them speed up their sales cycle or intervene to head off problems.

Next, establish relationships with individuals in these organizations.

Start slowly if you need to because the dividends will be huge once a bit of trust is built up.

(There are many ways to start business relationships so I won't get into those specifics here).

Lastly, keep in regular touch with these people. Keep them at top of your outreach and relationship upkeep efforts. Remember, they're de facto clients or business partners. Interact with them. Learn about them. Care about them. Business doesn't mean it's not personal too!

By complementing a referral source's business activities you tap a lead channel that is more consistent and less haphazard.

These sources are NOT just passing your name along to a colleague they run across in happenstance once a year.

Their interactions with prospective clients for you on the regular, combined with intimate knowledge of their customer’s immediate needs and a shared mutually aligned interest in engagement success makes these situations an amazing high quality source of new potential business.

Good luck out there!

If you enjoyed this post feel free to share it where you think others might appreciate it too or simply hit me up on Twitter (@jtr) letting me know you liked it.

If you’re interested in more posts like this, you can also consider following me there.

Originally tweeted by Josh Richards (@jtr) on February 5, 2022.

There Are Different Types of Freelancers – and That’s Okay

Some freelancers are glorified employees.

Some are consultants.

Some provide specialized services that are productized.

Some sell their raw skills to anyone that wishes to apply them.

Others sell the application of their skills to specific problem areas or types of clients.

Some charge by the hourly, either because they’re glorified employees or because they charge so much hourly that it doesn’t really matter as long as the client is happy.

Others don’t have set fees – as each project is ad hoc and custom – and they focus on setting clear objectives and metrics with clients then setting clear expectations and investment choices.

Still others offer recurring services, either charging a monthly fee or some sort of retainer arrangement.

There are numerous ways of doing things.

Each market is a little different.

Each freelancer has different preferences.

My experience has been:

  • Try out different things
  • Don’t be afraid to evolve even if something once was what you were most comfortable with or worked best with a certain pool of clients
  • It’s okay to use more than one approach simultaneously
  • Keep things simple
  • Don’t lose sight of the bigger picture: generally something like a decent income and a decent labor-to-income ratio that results in a decent life balance and good mental and physical health

Don’t assume

Assumptions in business are often wrong, particularly those we make about our clients, customers, and prospects.

Assumptions can lead to our competitors doing better than us, our clients moving on, our referrals drying up, and new business inquiries not converting into new active business.

And they result in inefficiencies and expending time and energy in ways we can’t afford as small business owners.

When we break through our assumptions we may uncover opportunities for growth and refinement of our business models. And in solo consulting those improvements directly result in improvements to our financial and personal lives.

What assumptions are you making about why your clients do business with you?

  • Is it because you’re the only game in town?
  • Is it because you’re an expert in a narrow niche?
  • Is it because you’re one of the cheapest?
  • Is it because of your reputation?
  • Is it because of your sales approach?
  • Is it because of your contracts?
  • Is it because of your availability?
  • Is it because they couldn’t find anyone else on such short notice?
  • Is it because others that could have done it just as well aren’t known to your client (but do exist)?
  • Is it because they know you?
  • Is it because they liked you before even conversing with you? Or maybe after conversing with you?
  • Something else?

Don’t assume you know why.

Don’t assume you’re going to like the answers.

But there is actually one safe assumption you can make: going through this exercise will be educational.

Scary questions can be helpful

Scary questions can open you and the person you’re talking to up to some big collective insights.

Or at least that’s been my experience in my own consulting activities (and life generally really), when I’ve been bold enough to speak up.

I encourage you to ask your clients and prospects the scary questions. Ask them things that seem counterintuitive to getting the project.

Don’t assume anything. e.g.

  • Why is this project important to the organization?
  • Are you sure you have budget to pull this off?
  • Will anyone else be involved in the decision?
  • How will you know success?
  • What will you do instead if this is too costly?
  • Is there a reason you haven’t done this already?
  • Why do you think you need me?
  • How did you arrive at that budget figure?
  • If this were to fail or be impossible, what’s your ‘Plan B’s?
  • Are you married to this particular path for achieving your underlying goals?
  • Which of the discussed objectives are ‘soft goals’ and which are ‘hard (firm) goals’?
  • What resources do you have internally to dedicate to this project?
  • Of your top ten priorities, where does this project rank over the next quarter or two?
  • What are your top three priorities right now and if this project isn’t one of them why are we talking right now?
  • What is the real basis for that timetable?

The scarier the better. It’ll improve your consulting work. The answers may surprise you. And they may surprise the person giving them as well. You’ll gain better insights. You’ll be able to be more helpful.

And, counterintuitively, the scarier the early questions are … The easier and more productive you’ll be when it comes time to get to work on the project.

A business is a ship at sail

My business is a ship at sail in the water. It needs to be constantly navigated against the currents, the winds, and other elements around me. And as my goals evolve it needs to be turned in the appropriate direction. And sometimes I need to do whatever is necessarily simply to be able to live through and fight another day.

Things I’ve done to get through challenging times in my consulting business:

  • Contacted repeat clients that were inactive to check in with them
  • Contacted reliable referral sources to check in with them
  • Offered special prepaid or recurring retainer arrangements
  • Set aside cash reserves (both inside and outside my business)
  • Arranged for borrowing capacity (both inside and outside my business)
  • Borrowed capital (both inside and outside my business) to remain liquid during highly unusual times
  • Written and then shared useful things with my mailing list
  • Checked in with other consultants and freelancers to compare notes, share ideas with, and learn from
  • Temporarily accepted smaller engagements than normal
  • Temporarily accepted larger/ lengthier engagements than preferred
  • Gotten more disciplined about including optional, value enhancing upgrades in proposals
  • Temporarily offered unusually high discounts for 100% prepayment
  • Taken a regular job, gained new experience, bought time to reflect & regroup, and added new people to my network
  • Updated my mailing list / contact database with new folks since the last time I did maintenance on it
  • Written and shared something else useful with my mailing list in a different format than the previous mailing
  • Done something “on spec” for a long time client
  • Switched to invoicing biweekly rather than monthly
  • Made requiring payment upfront customary for doing business with me
  • Invested personal savings in myself: in my business, in my consulting business education
  • Cut unnecessary overhead
  • Deferred necessary overhead temporarily
  • Dove deeper into things my mentors had been repeating over and over, but that I’d not yet fully attempted or grasped
  • Gathered more testimonials from inactive clients and past colleagues
  • Repeated any of the above

The funny thing is that everything noted above is useful not just during the tough times, but also when things are going well.

I’ve also learned that while it’s key to always be tweaking and optimizing the business, it’s also just as critical to be pragmatic and in the moment. There is theory, there is long-term stuff, and there is “oh crap, my house is burning down right now so what can I do about that immediately?” Then after that – when the embers are cold and I’m asleep in a hotel room – I can get back to thinking about those long-term adjustments again.

This business is not rocket science, but has required discipline, persistence, faith in my own abilities, and openness to experimentation. And because I primarily work alone, it’s also required being even more strategic about how I spend my time and energy (far more so than when working as part of even a small team: because there is literally no one else to pick up the slack).

Don’t ever feel ashamed about doing whatever needs to be done (ethically) to get through and fight another day.

Pragmatic margin management and labor intensity for micro-businesses

Large businesses can afford to extract profits from high labor intensity yet low margin activities. Small businesses cannot IMO.

And certainly not solo operators like independent consultants/ freelancers!

Here’s my thinking (& best advice) on how I manage and take advantage of this in my own consulting activities…

The choices we make about our consulting/ freelancing business models impact how many leads & clients we need per year to meet our income needs. These choices directly determine how hard we have to work on a whole host of activities …

… at marketing (lead generation, lead screening, non-billable interactions), at sales (how many proposals we have to write annually, how many deals we have to close), & at getting up to speed with each new client/ situation.

That’s a lot of stuff for a solo operator!

I try to keep my transaction sizes – or per client annual revenue at the very least – ($$$$+) on the higher side.

I much prefer generating 3 to 5 really good inquiries from focused outreach efforts versus, say, 30 to 50 mixed bag inquiries with smaller annual needs.

I’m a solo operator: I don’t have the kind of time needed to screen these folks and to go through the sales process … simply to make a smaller margin on the project!

These are very labor intensive non-billable outreach efforts after all!

This is also, in part, why I prefer new business from existing clients over new ones. There is less sales uncertainty as well as lower “getting to know each other” overhead.

What will work best for you? I think it depends on where you’re starting from / what you’re working with. I’ve certainly made numerous exceptions over the years, both for practical reasons – i.e. I needed the cash flow – & for personal reasons – i.e. I really like the client.

My point is this: the labor intensity of your marketing, selling, & production matters A LOT when you’re a small business or solo operator. And these are directly driven by …

… your marketing strategy & strategic decisions about which markets, clients, & projects to emphasize & accept. My best recommendation?

Be conscious of this ongoing trade-off, choose wisely, & adjust as you can, but remain pragmatic. Keep the future in mind – not just immediate cash needs – or you’ll always be STUCK focused on immediate cash needs.

If you enjoyed this, and you haven’t already subscribed, you may be interested in my newsletter, which is ~80% focused on sharing the business strategies used in my solo technology consulting practice & highlighting high caliber viewpoints on these same topics from other independent professionals and small business operators. It has a couple hundred subscribers and gets sent out once a week.

Hope you got something valuable out of this post. You don’t have to do things the same way I have, but maybe the sharing of my experiences & thinking trigger something in your own thinking … that’ll get you closer to where you want to be. Good luck in your ventures!

Bend business networking to your will

When you’re just starting out (and even when you aren’t) you’ll probably hear a lot of generic business advice. One bromide is the suggestion that you should “network with people.”

Here’s the thing: networking can mean a lot of things, many of which aren’t all that productive or may simply not be your strength.

Personally, I don’t like to “network” in the traditional sense of going out to business events, mixers, and – if I’m being entirely forthright – coffees or lunches with strangers.

I’m an introvert. It’s nerve-wracking and exhausting for me. But I do like to connect and to find ways to be helpful and supportive to those I encounter.

I’ve had to find ways that work for me as well as are effective for my business goals and activities.

Fortunately, along the way I’ve also discovered strengths and capacity that I didn’t realize I had in me. This has come from experimenting and pushing myself outside my comfort zone.

Here are some ways that have worked for me to network – that that worked better for my hermit-y preferences – but still served by business and professional goals:

  • Publishing a hardcopy newsletter of interesting resources, commentary, and other thought provoking materials. This has kept me in front of my audience (to maintain a referral and lead inquiry pipeline for my various businesses), not required me to figure out how to convince my network to subscribe to yet another email newsletter, encouraged folks to reach out to me with comments of their own, provided a channel to highlight clients and client work, and sometimes even created some conversation starters for those situations where I can’t simply be a hermit.
  • Recognizing special dates like client anniversaries and fun holidays with greeting cards, unexpected cake deliveries, and the like. I used to get my wife to deliver cakes from a fantastic local bakery, complete with plates and utensils to clients and their teams around the one year mark after our first project together.
  • Drop shipping handpicked books to folks that I think they’ll find interesting based on our past interactions, our work together, something I learned about them in passing, or just my gut. I’ve sent out everything from technical books to investing books to personal development books to lifestyle books. I try to include a personal note / explanation.
  • Finding more than one way to recognize whenever someone sent me a referral. Sure, I shoot them an email or thank them on a phone call (or in person), but sending them over a tasty box of See’s Candy after that initial thank you really makes it clear I appreciate their support of my business

My point is fourfold:

  • Learn from others and consider their input (if it’s informed), but don’t assume following convention is a requisite
  • Be willing to experiment. Also be on the lookout for ways to be a little unconventional (in comparison to the norms of your industry). While none of the above were outlandish, it’s surprising how rare a lot of these things actually are utilized. Also I like to find ways to put a spin on otherwise conventional things if I can – e.g. my first newsletter went out in bright day-glo colored oversized envelopes with quirky stamps that one wouldn’t expect to see in a professional / corporate environment. Also, sometimes I included reviews of my favorite restaurants even though that has nothing to do with my business activities.
  • Ultimately do what fits into your personal strengths and your business needs
  • Don’t overlook things that seem potentially attractive – but currently lie outside your comfort zone – because things change 🙂

FreshBooks studies impact of invoice terms on timing of client payments

Daniel Reiter for the FreshBooks blog writes:

We wanted to understand if there are any patterns to getting paid faster, so the FreshBooks Data Analytics team did some digging into what FreshBooks customers use as invoice payment terms in 2019, and what the impact of those terms have on client payments.

Turns out if you give your clients more time to pay, they’ll take it: Putting “30 Days” in your payment terms has lower time-to-paid percentages than the “All Invoices” column.

One of the most glaring takeaways is that asking for payment sooner will get you paid sooner.

Imagine that.

Also:

Your key takeaway to [getting] paid faster is to ask for payment within 7 days and start charging interest on unpaid invoices. Throw in a “Thank You” and you’ve got your bases (and your client relationships) covered!

Use Your Payment Terms to Get Paid Faster

Regardless of your billed revenue, as a solo consultant (or small firm) you are only as viable of a business as your liquidity.

Your business will die – even it bills out a billion dollars – if it doesn’t collect it fast enough to pay your own bills and your own salary.

I’ve been pestering anyone who will listen about this sort of thing for years (e.g. here).

Invoicing and collecting on your accounts receivable is generally not an exciting topic for most business owners. But cash flow is the blood flow of your business. When you think of it that way, perhaps it’s worth an afternoon or two of tweaking.

My suggestion for invoices:

“Due upon receipt. 1.5% per month financing charge applicable if not paid within 7 days. Don’t hesitate to let me know if any concerns or issues. Thank you!”

(Check your local laws; I’m told that many states regulate what the maximum annualized late payment interest percentage can be. Mine works out to 18%. If unsure, remember I’m not providing legal advice. A safe bet might be to see what your local utility companies have in their fine print and match it).

The value of price objections

If your fees are not being objected to occasionally than you are probably under-pricing your services.

On the other hand, if you fees are being objected to frequently, you need to dig a bit deeper to troubleshoot the cause.

It could be your positioning, lead generation pipeline, sales process, proposal approach, work quality, reputation, marketplace perception, client/consultant risk assumption, or return on investment.

Whew, that’s a long list!

It could be you have ridiculous pricing, but it’s more likely to be one of the other things routinely shorthanded as “price.”