In a recent survey of independent professionals, almost 50% of the consultants, coaches, and other professionals declared that they were currently not earning enough to meet their expenses. This result shouldn’t be surprising, since according to the U.S. Small Business Administration, more than half of all small businesses fail in the first year and 95% fail within the first five years. But it made me curious. How can that many professionals be operating businesses that are not turning a profit?
Looking into the issue a bit further, I made an enlightening discovery. Many of these businesses ARE profitable — the business revenues exceed their costs. The businesses are operating in the black, but there isn’t enough left over for the owner to pay their living expenses. The business owners are living off their savings, working an outside job, being supported by family members, or going into debt.
So these independent professionals are doing something right. They are reaching customers, making sales, and turning a profit. But it seems that what they have left out of the picture is earning enough to pay themselves. Without enough of a profit margin for an owner’s draw, these businesses are ultimately going to fail. Can they be saved? Perhaps, if the owners are willing to make drastic changes of the most difficult kind — changes in themselves.
If you are one of these struggling professionals, you must ask yourself what you are willing to do to make your business succeed. To break out of underearning, you will need to do more, learn more, or charge more, and it may not be easy.
Doing more may mean working more hours. The average small business owner works more than 40 hours per week in their business. You may feel like you are working hard, but have you actually kept track? Many entrepreneurs are surprised to discover that they are putting in fewer hours than they thought. It’s usually unrealistic to expect a full-time income from a part-time business.
Or you may be putting in plenty of time, but not putting it in the right place. How many hours per week are you spending on marketing? And is some of your marketing time devoted to actively reaching out to clients and referral sources through networking and phone calls, or are you limiting yourself to more passive strategies like building a web site and placing ads?
Doing more about your business or about marketing may require not only a change of habits, but a change of attitude. You may be avoiding a full-time commitment to the business because you are afraid of failing, or holding back from marketing because you fear rejection. If these thoughts sound familiar, notice that your fear of failure may be causing you to fail!
Successful entrepreneurs take risks. Many small business owners fail multiple times before they eventually succeed. Successful salespeople hear “no” many more times than they hear “yes.” If you want to follow in the footsteps of people who succeed at business, you must be willing to risk failure to get there.
Perhaps doing more is not the answer in your situation. You may be working hard already in your business and marketing actively. But you may need to learn more. Almost half of new business owners say they did no prior investigation or learning about business ownership before they started. You may know everything you need to about delivering the professional service you offer, but there is plenty left to learn about not only marketing and selling, but pricing, negotiating, contracts, financial management, and more.
In fact, one of the biggest gaps between success and failure may lie in these not-so-minor details. You may need to charge more. Do you know exactly how much you need to charge in order to earn a decent living from your business? Not the amount you believe your clients will pay, but what you really need to earn?
Total up all of your regular living expenses, including housing, food, clothing, health care, family care, transportation, and entertainment. Add to that required payments for your debts, income tax, and self-employment tax, and an allowance for vacation, sick time, and emergencies. Now include a budget for savings and your eventual retirement. What do these numbers tell you about how much you should be charging for each hour, day, program, or product?
If you’re not currently charging this much, don’t wait until your business becomes successful to raise your rates. Unless you start earning a living, your business will never succeed. If you find that the people you have been marketing to are unable to pay more for your services, it may be time to focus on a different market.
This is where more learning comes in. There must be other professionals with businesses like yours who are succeeding. What can you learn from them? Who are their clients? What marketing strategies are they using? What business practices of theirs can you emulate? Whatever challenges you are facing, it’s likely that those who have gone before you have the answers.
But you have to be willing to listen to the experience of others and act on it. Your business isn’t going to improve without help from you. You need to make changes now in how you are working, marketing, or pricing yourself in order to avoid failure. If your business isn’t earning enough to sustain you, the business itself isn’t sustainable.