Is it possible to run a sane and profitable consulting business?

As I run my business Credo and speak with consultants and agency owner all the time, I get two answers to my question of “What’s your biggest challenge in your business?”:

  1. Don’t have enough qualified leads to turn into clients;
  2. Don’t have enough time/working way too much.

I recently polled a group of agency owners (and some solo consultants) about who does sales at their agency. Many said they do it themselves (which is not a surprise to me in the SEO world), but someone added an answer of “Too busy working to do sales” and many of them also selected that!

This made me wonder about the health of many businesses in the SEO/digital marketing world.

There is an attitude, and maybe even an acceptance, in the freelancer/consulting/agency world that you are always going to be working too many hours.

I recently had a tweet go semi-viral (I guess?):

So many people favorited this that it really made me wonder what was resonating with people.

Through some conversations (and wading through the usual Twitter BS of “yes but”), I came to realize that most solo consultants are billing too little and thus taking on too many clients to pay for their lifestyle.

I have a lot of solo consultant friends who work a lot. One friend told me fairly recently:

I am making 3x what I ever made at my old agency job, but I am working 70-80 hours a week and it is just not sustainable.

You know what?

He’s right.

When you leave your job to work for yourself (whether it’s a choice of your own or you get laid off), the first step is showing yourself that you can survive on your own. And believe me, learning how to run a business and everything that goes with it (taxes, contractors, sales, etc) is a lot of work and a completely new skillset.

There’s a reason why second and third time entrepreneurs succeed a lot faster than first time entrepreneurs. They’ve learned how to run a business.

But once you’ve learned how to run a business and have proven to yourself that you can succeed and are happy doing it, then it’s time to figure out how to run a sane and sustainable business.

I firmly believe this is possible as I’ve done it and I’ve seen quite a few others do it as well.

So here are the things you need to have in place to do this.

Set your revenue goals

Now that you know how to make money by generating leads and signing new clients, you need to figure out what your goals are and how much you need to actually bring in each month to pay your bills and help you reach your goals.

There’s a pervasive belief in the online world that if you’re not growing your business double digit percentages each month and doubling every year, then you’re not really succeeding.

That’s not true.

Success for one person is different from success for another person. I might want a $500k/yr business that I can operate by myself in ~20 hours a week whereas you might want to build a $5M a year business that has 20 employees.

Whatever your goal, define what success means (or what you think it will mean, because you can always change it) and that is your true north, your goal.

If you want a six figure revenue business (note: this is not what you will take home after expenses and taxes), then this means you need to bill on average $8,333 per month. This means that you need to bill on average $83/hr for 100 hours each month, which is about what you can realistically do (25 hours a week * 4 weeks a month).

Don’t get mired into the growth-for-growth’s-sake rat race of comparing yourself to others. Set yourself a goal and work towards that, then define if you have the business that you want. If you’ve reached this mythical “six figure business” and are working 100 hour weeks, then you’ve done something wrong and need to rethink how you’re doing your business. If you’re happy, then keep on keeping on.

Define your niche and build authority

If you want to have a sane and profitable consulting business, then you need to define what it is that you offer and specifically the kinds of businesses you do that for best.

Maybe you do email marketing for SMBs. That will have its own challenges, but it’s a niche that you can market directly towards.

Maybe it’s SEO site audits and keyword research for B2B SaaS companies with over $1M ARR ($83k/mo).

Whatever it is, define that niche and go hard into building case studies for the work that you do and the results that you have achieved for your clients, including specifically what you did (and did not do, for example maybe you defined the URL structures and content, but their engineers implemented it and their copywriters wrote the content with your direction). This way, you show through verifiable work how you work with clients, and thus the right ones will still contact you and the wrong ones will self-select out.

Choose your clients carefully

If you want to be sane and happy in your work, you need to carefully choose who you work with.

This is true when you’re employed full time and when you’re working for yourself.

When you’re self-employed it can feel like a much bigger risk to tell someone that you cannot work with them (for whatever reason) than when you work for someone else, but this is also a positive of being self-employed as you have this freedom. How many of us have worked for an agency where we were assigned a client that we absolutely hated, but couldn’t fire that client?

Too many of us, that’s how many.

If you are afraid of turning down specific clients who will not be a successful project and thus are not a good fit for you, then there is something broken in your lead generation efforts.

The goal should always be to have enough inbound clients that you do not need to take clients who cannot pay what you charge or expect too much. The more able you are to say no to the wrong clients, the healthier your practice will be.

Recommend reading: Million Dollar Consulting (Amazon affiliate link)

Raise your rates

Finally, the best way I have found to have a saner consulting life is to raise your rates. To answer the objection that inevitably comes here, the answer is “Yes, this does reduce the number of people who might potentially hire you.”

However, what I and many many others have found is that when you raise your rates then you:

  1. do not have to sign on or manage as many clients and
  2. the ones that you do bring on are going to be better clients.

I have worked with many agencies and consultants on Credo who started off with rates around $50-$75/hr but quickly realized that they had to work too much in order to pay their bills, and because of that their work suffered and because of that they didn’t get as many future recommendations from clients.

This is a spiral of bad news, but can be corrected by raising your rates. When the average consultant in the SEO/digital marketing world charges somewhere from $125 to $275 based on experience (source), then if you are under that then you are undercharging.

Undercharging may be a competitive advantage when you are starting so that you can get clients in the door, but if you know how to market yourself then it will quickly become a liability instead of an advantage.

So how do you raise your rates? The best way to do it, in my experience, is to first make sure that a client can afford you (by straight up asking them what their budget is) and then make sure that you are quoting within that but also raising your rates from your previous client.

Remember:

Your new client does not know what your old clients are paying you.

You can absolutely quote new clients a price higher than your current clients, especially when you’ve gained more experience and your work is going to be even more valuable to them!

The way I like to do this is:

  1. Make sure they can pay my rates;
  2. Think about what compensation I would gladly do it for;
  3. Add 20%.

That becomes my new rate. At some point you do hit a ceiling for what you can charge (I haven’t found it yet and I charge 2-4x what most consultants do), but that is far off for most.

Raise your rates.

How to run a sane consulting business

To recap, in order to run a sane consulting business you need to:

  1. Set your revenue goals so that you do not feel the pressure to continue growing past that if you do not want to;
  2. Define your niche and build authority with happy client testimonials and case studies;
  3. Choose your clients carefully and say no to the ones who would not be a successful project;
  4. Raise your rates continuously to eventually find the ceiling and give yourself the luxury of doing better work for fewer clients all while making more.

Once you’ve done all of the above, if you then want to keep growing then you can do it more easily as well. That’s the cheat code: build a sustainable business on your own that makes you happy, and then if you want to grow beyond yourself you will have a much less stressful time!

I hope this helps,

John

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