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February 12, 2018

2 Models of freelance consulting (and how to plan for each)

Are you part of the 36 percent of the U.S. workforce currently engaged in freelance consulting?

I am, and I’ve been doing so for the greater part of a decade. Consulting offers a number of benefits: flexible work schedules, the freedom to chart your own course, and the opportunity to meet a ton of interesting people.

On the other hand, consulting does come with its fair share of tradeoffs. After all, with freedom comes responsibility. Case in point? The ability to make your mortgage payment, health insurance premiums, and retirement contributions are completely reliant on your ability to pay yourself. It’s hard to pay yourself when your business isn’t profitable.

So, how can you ensure a more sustainable business model, thereby offering the personal lifestyle you desire? To answer this question, let’s examine the two most common freelancing business models – and, how to plan for each.

Model 1: “Package” Providers

What’s due each year on (or around) April 15th? That’s right! Your federal income tax returns. Unless you prepare your own taxes (which I wouldn’t recommend), there’s a good chance you pay a CPA to do the work for you. In exchange for a flat (or relatively flat) rate, your accountant analyzes your books, organizes your 1099s, prepares the necessary paperwork, e-files everything on your behalf, and (hopefully) minimizes your tax obligation.

Your CPA is leveraging the classic “service package” model. Unless you receive a letter from the IRS or state, you may only engage with your accountant once a year. Likewise, your CPA might only think about your needs once a year. It’s a relationship that works, but surely it could be so much more. Sadly, you’re both too busy to ever change.

What other consultants commonly leverage the service package approach? Here are a few examples I’ve seen over the years:

Web developers: “I’ll get your site up and running for $999.”

CRM experts: “We offer a few packages to help you transition off your legacy CRM.”

Bloggers: “Our rate card is based purely on word count.”

Video editors: “I charge $50 per minute of video you want me to edit.”

The package model has several distinct benefits. Perhaps most notably, this model can be scaled with relative ease through the hiring of skilled labor. Granted, that assumes the market supports both sides of the equation.

Here’s the obvious challenge with the package model: you typically need a lot of customers to make it work.

Planning Tips for Package Providers

Let’s assume you’re a web development consultant who is selling packages for $999. Some simple math would say that you need at least 100 new customers annually – just to make the business worth your time. Ideally, you’d love to far exceed that baseline. Of course, this can be done, but you need a game plan.

Remember, not every lead is going to convert into a paying customer. It’s a simple reality of business. In fact, after studying your past records, you learn that only 50% of your opportunities pan out. Given your minimum benchmark of 100 new customers in 2018, you better get busy with sales and marketing. Your sales pipeline is going to require 200 quality opportunities!

That’s where a CRM comes in handy. In addition to helping you feel more organized, a CRM makes it easier to identify gaps in your pipeline. The sooner you become aware of such gaps, the sooner you can begin ramping up promotional efforts.

Before getting too far ahead of yourself, it’s probably wise to first scope out the basic phases of your sales pipeline. You don’t need to make this overly complicated. Just list out the basic steps you go through to close a deal. It might be as simple as:

Prepare a quote or proposal
Receive written approval from the prospect
Mark the deal as won and get busy

A reliable CRM will make it easy to build custom sales pipeline stages. For example, I quickly created this example pipeline in Insightly, based on the bullets above.

Once you’ve customized your pipeline, you can then begin adding your in-progress deals. You might be surprised by how much prospecting is needed!

As time goes on, you may begin offering enhanced packages or new services that complement your basic $999 package. Or, you might think of new ways to drive revenue from past customers. Would former clients pay $100 for an hour of your time each month? Do they need ongoing maintenance or development support? A CRM makes this type of brainstorming more fruitful. Since all customer and project-related information has been tracked in one system, you’ll be able to generate reports with the information you need most.

Need to see a list of past customers in a specific industry or geographic region? Want to identify lost opportunities likely to need a website refresh later this year? Your CRM saves the day once again.

Model 2: Hourly Consultants

“My current hourly rate is…”

If you’re not offering some type of canned service package, you’re probably accustomed to saying these words. And, why not? From your perspective, hourly work is a low-risk way to build your consulting business. You do work, you get paid. From the client’s perspective, it’s a nice way to ease into the relationship without much commitment.

Hourly engagements are especially common among:

Marketing consultants (like me!)
Business coaches
Graphic designers
Lawyers
IT consultants
Project managers
HR consultants

As compared to the first model discussed in this article, the hourly consultant’s sales approach may be vastly different. In some cases, the hourly consultant might only be interested in winning a dozen or so clients – total. Rather than continuously searching for, starting, and stopping engagements, the focus is shifted toward serving the same known clients.

Although a pure hourly model may come with less sales administration, there are a few noteworthy downsides. In my experience, hourly consultants routinely find themselves falling into these temptations:

Putting your eggs into too few of baskets: Some clients want as much of your time as you’ll give them. That’s great, but does it expose your company to too much risk? If 50% of your income comes from a single customer, what happens if they cut back or go out of business?

Forgetting about your continuing education plan: If clients are willing to pay for “as much time as they can get,” why would you “waste” non-billable hours on learning things? The temptation is to pack every waking hour with billable time; yet, this approach makes you less valuable in the long run.

Cannibalizing margin potential for “easy money”: As you refine your skills, what formerly took several hours may only take you an hour (or less). Some services you offer would be a perfect fit for the “package” model; unfortunately, your “hourly-only” mindset is hard to overcome.

Forgoing long-term viability for short-term income: If you didn’t show up for work, your business wouldn’t earn much money. This presents a major challenge for the hourly consultant, and there’s rarely an obvious path for overcoming it.

Planning Tips for Hourly Consultants

At a foundational level, hourly freelance consultants must be very strategic with their time. For starters, you at least need a weekly and daily hour plan to ensure you’re always meeting your goals. (Check out this spreadsheet I personally developed and use every single week.) Unless you set very clear goals, you’ll struggle to ever realize your earning potential.

Beyond the use of an effective hour tracking tool, the hourly freelancer must regularly seek ways to challenge the status quo. For example, I try to make myself answer these questions on a regular basis:

Why do clients find value in my hourly services?
Does my current hour allocation expose my business to too much of a cash flow risk (or should I mix things up a bit)?
How efficient are my non-billable hours? Could I automate certain things?
Which of my services should be bundled into a fixed-price package?
How can I increase my hourly rate while providing even greater value?
Should I delegate certain tasks, thereby freeing up more capacity?
How can I learn more things with less of an investment of my time?
What is my plan for vetting and managing the occasional new lead?

As you begin to challenge the status quo, you’ll likely identify several opportunities for improvement. Again, this is where a CRM becomes so useful. For the sake of discussion, let’s assume you’re a graphic designer who primarily works on an hourly basis. You’ve designed logos for several clients, and you think there’s a potential market for a logo package. After doing some research, you learn the market typically supports $250 for such a service. This type of package would not replace your hourly work; rather, it would complement and further diversify your income stream.

Before spending a ton of time launching a completely new endeavor (and potentially diverting attention away from your hourly work), you decide to test this idea among a few select clients. Luckily, you know that one of your best customers is getting ready to rebrand its corporate website. It’s the perfect chance to give it a shot.

So, you jump into your CRM and add a new opportunity pipeline called “Logo Package.” You then add a new opportunity in the pipeline, link it to your customer’s record, and set a reminder to mention this to the client.

All of that only took five minutes, but it is time well spent. After discussing the idea with the customer, you start to realize how big this could be. Not only does he want to move forward, he’s ready to refer this service to five other business owners. He’s excited about this service, and so are you!

Which Model is Right for You?

There’s no question that the freelance consulting industry is picking up steam. For many consultants, the real question is this: fixed price, hourly, or both? Oftentimes, a blended model offers a more scalable balance. Just be sure to plan your work and always be intentional with your time!

Matt Keener is a marketing consultant and President of Keener Marketing Solutions, LLC. Matt specializes in content marketing and strategic planning, having helped numerous Saas (software as a service) companies and other small businesses worldwide. Read more of Matt’s work, get his book, or connect on LinkedIn.

January 22, 2018

Measuring the True Cost of New Consulting Clients

“Yes, let’s move forward with your proposal.”

For consultants (like me!), few sentences are sweeter to the ear than this one. In addition to boosting next year’s revenue forecast, new clients help you hedge against uncertainty. After all, you never know when an existing client will decide to unexpectedly change course.

As great as new clients can be, there are also a few tradeoffs to consider. In this post, we’ll discuss the costs and risks associated with adding new clients.

Preliminary Sunk Costs

Before you ever bill your first hour, you’ve already dug yourself into a hole. Allow me to explain.

Let’s say that you own and operate a growing IT consulting business. Your company specializes in network and web security, and most clients are within driving distance of your office. About one month ago, a new prospect filled out a form on your website and requested a free consultation.

It turns out that this lead (a well-respected software company) represents a very large opportunity for your firm. That’s the good news. The bad news is that they’ve been putting you through the wringer – with no end in sight. You’ve already visited their headquarters on multiple occasions, pulling your top IT minds off important projects to attend the meetings. After several rounds of proposals, you feel no closer to a closed deal than on day one. To make matters worse, you have a bad feeling that even if you do win the contract, it’s going to be a very one-sided arrangement (in their favor).

The last thing you want to do is pass on the opportunity (especially this far into it), but you can’t help acknowledging your sunk costs:

Lost billable hours: Time is money. Had this lead never requested info, you could have freed up additional billable hours. Instead, your team invested substantial effort in preparing proposals, brainstorming solutions, and engaging with the prospect (for free).

Switching costs: Jumping from one thing to the next increases mistakes and decreases productivity. With so much attention being paid to a single lead, your team must work even harder to keep everything balanced.

Administrative costs: Each meeting brings the inevitable set of follow-up activities. You’ve smartly organized all of your contact records, meeting minutes, tasks, and project milestones in Insightly. That helps out, but there’s still a quantifiable amount of administrative work to go around. Things don’t get done on their own.

Legal review fees: A wise man once said, “The only thing worse than no deal is a bad deal.” Being the prudent business owner that you are, there’s no way you’ll sign something without having legal counsel look it over. That’s smart, but it’s also going to cost you something.

Now, you might be thinking to yourself, “Yes, Matt. These are indeed sunk costs, but that’s just part of doing business. You win some, and you lose some.” I wholeheartedly agree with you. I’m not saying you shouldn’t pursue new business. I’m simply pointing out that there is a real cost that’s associated with any pre-sale process – especially when you’re doing complex deals. Surprisingly, some business owners never consider how much their sales pipeline is actually costing!

Ongoing Obligations

Finally, you receive the email that you’ve been waiting for: the software company is ready to move forward. Considering it’s Friday afternoon, you decide to take the crew out for ice cream and celebrate the victory. Everyone is very excited about the outcome.

Then, Monday morning rolls around…

As you stroll into the office at 8:02, you can immediately tell that it’s going to be a stressful day. You glance down at your phone, and you’re surprised to see several texts from various contacts at the software company. Your inbox isn’t much better. The first email is from the client’s accounts payable department, asking you to fill out a ton of paperwork. Another email, from their legal department, is asking you to complete something called a “new vendor due diligence packet” – before the close of business, of course. And, to complicate matters, your IT manager won’t be coming in to the office today – or the rest of the week, for that matter. His wife just went into labor a few weeks early.

The next thing you know, your office clock strikes 7:00 pm. What a day! As you walk toward your car, another reality hits you: this new client is already changing your company’s work patterns.

Incremental staffing costs: Your IT manager’s absence is a stark reminder of your team’s fragility. Should you hire additional staff to support new and existing clients? Doing so could be a wise move, but it also comes with a big price tag.

Non-billable requests: Some aspects of your client relationship simply aren’t billable. Submitting the vendor due diligence packet is the perfect example. On the other hand, failing to submit the packet would probably result in an unhappy ending for your firm. There’s an opportunity cost to fulfill these types of requests.

Other administrative “stuff”: If you want to get paid on time, invoices must get generated. Overdue invoices must be pursued by your accounts receivable team. Paid invoices must be reconciled in your general ledger. And, at year end, you hope that your 1099 will match up with your books. If not, there’s more work to be done. All of this has a cost.

Ongoing Risks

We’ve discussed the hard costs associated with servicing new clients. But, what about the unknown risks? Here are just a few to watch out for:

Nonpayment: Most customers pay on time. Some customers are forgetful and occasionally require a gentle reminder. Others aggressively push the envelope on payment terms in order to optimize cash flow. Remember, you’re not a bank. An occasional past-due invoice will happen, but a pattern of delinquency is detrimental to your own cash flow and stability.

One-and-done: The client’s work agreement has you locked in for a twelve-month period. That’s great for your current P&L, but what about future years? There’s no guarantee of renewal, which is all the more reason why you need a best-in-class CRM system. You essentially have a twelve-month window to lock in renewals and identify upsell opportunities. A tool like Insightly can help you manage such opportunities, reducing the likelihood of “one-and-done” clients.

Refunds (or worse): While most clients are very easy to work with, some can be quick to point the finger when things go wrong. You’re not planning on anything going wrong, but nothing is 100% certain in business – especially when it comes to the IT world. Until you establish a better relationship with the customer, refund requests are a possible outcome that you want to avoid.

Bad relationships: Consulting engagements are more than just the exchange of services and cash. Lasting engagements are built upon an interpersonal relationship between vendor and client. Like any relationship, however, some are better than others. Both parties must proactively work on the relationship. Otherwise, it’s destined for failure.

Balancing Cost vs. Reward

Clearly, there are many costs and risks associated with taking on new clients. In fact, at this point in the article, you’re probably tired of thinking about them all. I sure am.

So, should you dwell on all the downsides? Absolutely not! On the contrary, the smart consultant simply acknowledges them and creates systems to drive profitability. A platform such as Insightly can be invaluable for doing exactly that. Here’s how.

Efficient Pipeline Tracking: The moment a new lead enters your pipeline, Insightly can bring clarity to every aspect of the sales process. How many team members (and hours of work) have been dedicated to closing the deal? Where is the most recent proposal deck? Insightly integrates with the industry’s most widely used document systems, allowing you to quickly attach and link cost estimates, tracking files, quotes, and proposals. The built-in opportunity tracker brings key dates and milestones into the forefront, such as the forecasted close date, time spent in each stage, probability and deal size, and much more.

Effective Service Delivery: Unlike some CRMs that only track the sales process, Insightly provides a seamless transition from sales to delivery. Converting an opportunity to a project ensures your pre-sales information remains intact throughout the customer’s journey. No more jumping between your CRM, project system, and document system. Insightly brings it all together, ensuring a more cohesive client experience.

Upsell Management: Turn your “doers” into your best sales reps. As clients share their frustrations, challenges, and goals, your team can easily add new opportunities on the fly. They’re already using Insightly to coordinate tasks, projects, milestones – why not turn them loose to also identify upsell opportunities?

360-Degree View of Profitability: At the end of the day, you’re not a charity. You need to know if each client is contributing (or detracting) from your overall profitability. Insightly can help you get the answers you need. The library of prebuilt and customizable reports brings life to your CRM data. Pull together client project information, revenue forecasts, and booked business to make more informed business decisions.

Are New Clients Worth It?

If you find yourself routinely asking this question, it might be time to implement a more robust client management system. To find out if Insightly is the right tool for your consulting business, click here to learn more.

June 6, 2017

Time Management Secrets for Marketing Consultants

Time management secrets are essential for marketing consulting success.

Right-brained or left-brained? Creative or analytical? Strategic or tactical?

Marketing consultants have a fine line to walk between ideation and execution. On one hand, we must continuously develop innovative ideas that keep clients ahead of competitors. On the other hand, we also must be highly efficient in the implementation of campaigns and programs.

Luckily, technology is here to help.

1. Strategically Examine Your Work

Before spending too much time on the technology aspect of this article, let’s first step back and examine the bigger picture. If you’ve been in business for very long, you probably have a good feel for your business model. But, have you ever paused to specifically consider the commonality of your client engagements?

To do this, pull out a whiteboard or notebook and list your most important clients near the top. Below each client’s name, answer these questions:

What is the nature of my relationship? (hourly, fixed retainer, per deliverable, etc.)
What services do I provide within the framework of this relationship?
How much do I usually bill for each service?
Do any of these services follow similar production cycles, regardless of the client? (i.e. pitching, drafting, writing, editing, etc.)
Which steps in the production cycles are known to cause bottlenecks?
What do I (or others on my team) regularly forget to do?

What’s the point of doing this exercise? In the context of this discussion, you’ll be setting the groundwork for designing more effective workflows in your project management system. From a broader perspective, you may also identify new upselling opportunities. What works for one client typically works for several!

2. Divide Your Work into Two Camps

I’ve often heard experts compare marketing to an engine. Before you start your vehicle’s engine, you must first put in the right type of fuel. As your car takes you where you need to go, the fuel tank begins to run low. Unless you want to be stranded somewhere, you must continuously refill the tank before reaching empty. And, it’s always wise to have a qualified mechanic to run diagnostics and recommend ongoing preventative maintenance.

Like your car’s engine, your client’s marketing engine depends on you to fuel it. Quality content, wise SEO decisions, clean and mobile-friendly web design, and effective branding are just a few of the important ongoing responsibilities. Much like the mechanic, you also keep a close eye on performance by reviewing web traffic reports, lead data, email analytics, acquisition costs. You use this information to recommend exciting new initiatives, aimed at optimizing performance.

Although there are many moving parts, most tasks usually fall into one of two categories:

Repeating
One-off

Before going any further, make a list of your tasks that repeat. As you look at the many services you provide, it may be surprising to see how many occur on a recurring basis. Unless you’re already using project management software, simply remembering to do these tasks on time can be a chore. Looking at my own to-do list, I must admit there are many recurring responsibilities, such as:

Monthly

Prepare newsletters
Develop content plans
Review and interpret website traffic reports
Send invoices

Weekly

Review and approve social media plans
Publish blog articles
Prepare for 1×1 meetings
Check weekly SEO analysis reports

Daily

Provide feedback to web developers
Provide feedback to graphic team

Identifying your repeating tasks is relatively straightforward. But, what about things that are less predictable? For example, if you’re a digital marketer, you’ve probably helped a client promote a whitepaper or two. At first glance, this seems like a one-time engagement. In reality, although the specific whitepaper is new, the process typically follows a similar pattern. Spend time listing out the steps you typically follow to help bring a downloadable asset to fruition. Your list might include:

Gather content
Edit copy
Ask for client input on draft
Design the layout
Create landing page & thank-you page
Build email nurture sequence
Enable CRM integration for web leads
Seek client’s final approval
Set up goal tracking in analytics package

Go through this process for any other work that requires a specific production workflow but does not necessarily occur within a predictable time frame. Examples might include:

Launch a new website
Promote a webinar
Design a brochure
Write a guest blog post
Produce a training video
Deploy a new CRM system
Implement a marketing automation package

3. Create Standardization with Technology

Now that you’ve documented how your time is spent, the fun can really begin.

A system like Insightly can help create work standardization while simultaneously reducing your propensity toward forgetfulness. To illustrate, let’s see how client invoicing can be streamlined with Insightly.

Most of your clients prefer to be billed monthly. However, you have a few on bi-weekly billing. With everything else on your plate, keeping these dates organized is more challenging than it seems. Forgetting to invoice a client is not only bad for your cash flow, but it also sends the wrong message about your project management skills. If you can’t even send an invoice on time, how can you be trusted with other more important matters?

Automate your client invoicing by setting up repeating tasks in your project management system. For clients on a monthly schedule, you might just set up a single recurring task (to avoid unnecessary task clutter). In Insightly, that might look something like this:

Now, let’s take care of your handful of customers who prefer bi-weekly billing. Set the task to first occur on the next due date and select a repeat schedule of “every two weeks.”

Once set up, each completed task will automatically trigger Insightly to create the next instance on your behalf. Remembering to invoice clients on time just got a lot easier.

By automating your repeating tasks, you’re likely to find new time in your schedule. Reinvest some of this time into building more scalable operations for your business. If you’re using Insightly, you might pre-populate an activity set for each important process.

Recalling the whitepaper example from above, we discussed how the production of such an asset follows a specific, predictable process (gather content, edit copy, design the layout, etc.). Regardless of the whitepaper’s theme, these steps must be followed each and every time. It therefore makes sense to create an activity set to serve as a template for your milestones or project pipelines.

Once created, the activity set can be applied to all future whitepapers that your team produces. Instead of wasting time to figure out what happens next, all of your steps are clearly laid out with a single click.

4. Commit to a Disciplined Work Life

As a marketer, you’re an expert at juggling a lot of things at once. Client meetings, phone calls, emails, and webinars are just a few of the many priorities in your busy workday.

Without a disciplined approach, it can be easy to get very overwhelmed. After all, your clients count on your expertise to grow their businesses. To provide prudent and timely advice, marketers must possess expert-level prioritization skills.

How can you achieve this for your consulting business? Digitizing your to-do list (as outlined in the three previous steps) is a great place to start. Unlike handwritten notes or even a spreadsheet, a project management system helps you to visualize your daily workload. By assigning due dates for yourself, your tasks can be automatically sorted by due date or priority. Log in, get your plan, and stay focused on what’s most important.

It’s important to note that any to-do list (be it digital or paper-based) is only as good as what you make of it. Failure to check it regularly will cause you to only feel further behind.

To avoid this situation, set a goal of checking your to-do list at least daily (preferably in the morning). Identify that which must be done today; anything else can happen as a second priority (or be pushed back to a later date). As you complete tasks, be sure to mark them as “done” in your project management software. This step is particularly important for repeating tasks, as to ensure future tasks get created by the system.

5. Delegate First (When Possible)

An idle task represents a missed opportunity – particularly if it involves work that requires group collaboration. When facing a list of a dozen or more tasks, give preference to those that can be delegated.

For example, let’s say your task list is packed full of (among other things) client infographic ideas. Although you’re not the person who will design the graphics, each concept does require your attention. Before the designer can do his job, you must first scope out the idea, provide detailed instructions, and explain your overall vision. Making this type of delegation doesn’t require a significant investment of your time. But, with everything else on your schedule, it’s natural to push it off for later. Unfortunately, in doing so, your graphic designer will be twiddling his thumbs instead of adding value.

With a rock-solid project management system, you can expedite your delegation process, thereby increasing the likelihood you’ll actually do it. With Insightly, delegating is as easy as updating the assigned user, adding your comments, and saving the record. You can also indicate progress completion, priority, and/or status.

Of course, on unusually hectic days, it may not be possible to find time to delegate. Time management can be well intentioned but not always feasible. That’s OK. Just to be sure to set aside delegation time on your “normal” days (if there ever is such a thing) and always look for things that can be delegated downward. In doing so, you’ll keep others busy, improve your team’s output, and make your workload seem much more attainable.

6. Create Accountability

Even the best of plans are worthless without proper accountability.

As the days and weeks go by, you may be tempted to fall into your old routines. Don’t let this happen to you! Instead, seek technology that can serve as your accountability partner.

For example, Insightly can actually remind you when important tasks are almost due. By enabling task reminders, you can make sure that nothing slips through the cracks. For visibility into tasks assigned to other users, consider building a task report that tracks overdue tasks by owner. Advanced users can even opt to automatically receive emailed reports. Customize the delivery frequency to fit your business model and availability.

From a bigger picture perspective, it’s also wise to incorporate a retrospective process into your project management workflow. Not every project goes as planned, which means there are probably valuable lessons to learn.

As you peruse your list of completed projects (and/or associated tasks), consider these questions.

Did we finish behind, ahead of, or on schedule?
What caused the deviation from our original plan?
Were there certain tasks that held up the process?
Are certain team members consistently clogging things up?
Could some tasks be merged into fewer items, thereby creating less clutter?
Was the client satisfied with the outcome?
How much downtime was attributed to delegation delays?
At the end of the day, was this project profitable for our business?

Of course, an in-depth retrospective doesn’t make sense for every work product. Depending on your business model, it may be best to spot-check at random. Or, it may make more sense to review closed projects over a certain budget or hour amount. Either way, define a process for your business and stick to it. Use this information to further optimize future work and technology decisions.

Better Time Management = Happier Customers

Clients don’t pay you just for the sake of paying you. Rather, the goal for any consultant is to deliver more value than what the client pays. Making the most of every minute, hour, and day with better time management will ensure clients always see you as a net positive asset.

Thankfully, technology continues to provide innovative solutions to even the most difficult productivity challenges. Make time to regularly identify your bottlenecks, map more efficient workflows, and deploy software features that can bring your vision to life.