by Jay Niblick | May 5, 2018 | Blog, Consulting Fees
Time to start deciding what you will charge. The first thing you need to do is to determine your “true hourly base rate.” However, this rate is for your information only, not for your clients. It is the hourly price you will use to calculate what you will charge based on the overall effort you will put in, and the return you would like to get for that effort. It is not the figure you will tell the client you charge per hour. Even though it won’t be used on all types of pricing structures, it’s an important number to understand regardless of the pricing model you use.
To calculate your total base hourly rate, you need to fill in the following variables:
A. Desired annual revenue $____________________________
B. Number of work weeks (annually) ____________________
C. Number of hours worked per week ____________________
D. Working base rate (TBD) ____________________________
E. True hourly base rate (TBD) ________________________
Once you have these figures you want to plug them into the following formula:
In this formula you have:
- A (which is the total desired revenue annually) divided by:
- B X C (which is the sum of total weeks worked in a year multiplied by number of hours worked per week), which gives you:
- D — your working base rate (D).
- The last step, since you will never work 100 percent of your week delivering services for fees (think sales and marketing time, admin-istration, networking, hand holding, project updates, travel, etc.) is to assume that at best you get to spend 50 percent of your week delivering revenue-generating work. So, you multiply “D” (your working base rate) times two (2) to arrive at:
- E — your true hourly base rate.
Here’s a real-life example:
- You want to make $100,000 in a year (A).
- You start with 52 weeks in a year, but subtract 4 for vacation, sick leave, holidays, and so on, so you have 48 weeks of work in that year (B).
- You take an average of 40 hours worked per week (C).
- You multiply 48 times 40 (work weeks X work hours per week) and get total hours worked in a year as 1,920 (B X C).
- You divide annual revenue by total hours worked (100,000 divided by 1,920) to get your working base rate of $52 (D).
- To adjust for true hours worked, you multiply that working base rate X2 to arrive at your final true hourly base rate of $104 per hour (E).
However, you’re still not finished because you will have expenses. Even working from your house you will have Internet bills, cable, phone, supplies, non-reimbursed travel expenses, membership fees, and so on.
You need to add your operating expenses into your true hourly base rate to make sure you cover those costs as well. A good rule of thumb is to use 10 percent of your projected revenue for expenses or the cost of doing business. Obviously this figure can vary widely, but it will work well for now. Once you get your business running you can come back and revisit true expenses if need be.
The fastest way to do this is to simply take 10 percent of your true hourly base rate and add it on. In the example above, my true hourly base rate is $104.00. Ten percent of that is $10.40. Combine them and you arrive at $114.40, but keeping it easy, round it up to $115.00 per hour, and that’s the figure you should use in some of the fee structures we will tackle next.
I’ve created an automated Excel spreadsheet that will help do these calculations for you. Visit www.innermetrix.com and look under the “Consultant Support Library” to download it.
by Jay Niblick | Apr 28, 2018 | Blog, Consulting Fees
In consulting, perhaps one of the most recurrent reasons for poor profits is undercharging. It’s unfortunate, because it has less to do with not understanding what should be charged and more to do with the consultant’s lack of confidence, insecurity, or most commonly desperation.
Let me share the story of a friend of mine named John Butler. John was a seven-figure management consultant in Dublin, Ireland, and he had been a client of mine before he passed away. John attended a conference I was hosting in Germany some years back, and over beers one night we got to talking about this vexing issue, and how so many other consultants we knew suffered from it.
John had indeed built a very profitable practice years earlier, but he had grown tired of working so hard and was considering retiring from the 80-hour-a-week job he’d built for himself. He wanted to pull the throttle back and relax a bit.
He struggled with the thought of having to let clients go, so he figured the best way to avoid that confrontation was to get the clients to voluntarily leave him instead. He decided that if he raised his prices significantly, enough clients would walk away, and if he did keep some small percentage of his clients the addition in fees would cover the losses. Near the end of one year John informed all of his clients that he would be quadrupling his fees!
Thinking that this move would surely thin out his client base, imagine the shock when he found out he had only lost approximately 20 percent of his customers! And thus John’s profits skyrocketed into the seven-figure range.
The moral here is that too many consultants think it’s safer to charge less and get at least some business than charge more and risk not getting any. In reality you’d be surprised at how charging more doesn’t scare off clients as much as you may think. I would argue that it actually only scares away the cheap ones you don’t want anyway, and it creates the impression of superior value in all the ones you do want.
by Jay Niblick | Apr 26, 2018 | Blog, Managing Your Consulting Business
Too many new consultants fail to establish a sound business plan right up front. As important an aspect as having a sound business plan is, however, I will not be diving too deeply into this topic as we could easily get lost. I will, however, recommend an action that will allow you to save time, yet still allow you to create a very well-constructed plan. And that’s the rub, managing to create a very solid business plan that actually delivers value, but not spend months doing it.
Also, a good plan is a process, not a static event. One of the biggest mistakes any business owner makes is to create a strategic business plan in the beginning of their company, then leave it in a drawer forgotten and useless. A good plan is dynamic, meaning it is built to be changed or modified as the business grows. Its structure is one that is flexible, and to me the most important part is that such flexibility is quick and painless, since if it sucks to change it, it usually doesn’t get changed.
For years now I’ve personally benefited from being able to develop a very strong business plan for my own businesses, yet not having to invest countless hours to get it done. I’ve done that by using the “One-Page Business Plan,” based on a book of the same name written by Jim Horan. Since the two most important parts of such a plan are content and speed, this has been my solution of choice.
If you’re an expert in building business plans, and that’s one of the things you will be providing to your consulting clients, then by all means listen to your own expertise. However, if this isn’t something you’re an expert in, I highly recommend you not spend hours research-ing, learning, and inventing your own wheel. Instead just invest $39 and purchase the One-Page Business Plan (Professional Consultant’s Edition) from their website.
That website: www.onepagebusinessplan.com
Once you get a plan—wherever you get it—just be sure to use and follow it, as it is definitely something that will greatly add to your chances of success.
by Jay Niblick | Apr 12, 2018 | Blog, Managing Your Consulting Business
For the purposes of this book I will speak to the United States business market. Every country has its own set of policies and regulations, so I advise you to seek the counsel of a licensed attorney in your own market to make sure you decide on the best business structure for your specific business.
There are really only four types of business structure most consultants choose from. Each has its own unique set of strengths and weaknesses.
- Sole Proprietors (taxed as 1040, Schedule C) are unincorporated businesses. They are also called independent contractors, consul-tants, or freelancers. There are no forms you need to fill out to start this type of business. The only thing you need to do is report your business income and expenses on your Form 1040 Schedule C. This is the easiest form of business to set up, and the easiest to dissolve, but it provides the least protection.
- C Corporations (taxed as 1120) are incorporated businesses. Every form of business besides the sole proprietor is considered a separate entity, and this often provides a measure of legal and financial protection for the shareholders. The shareholders of corporations have limited liability protection, and corporations have full discre-tion over the amount of profits they can distribute or retain. Corporations are presumed to be for-profit entities, and as such they can have an unlimited number of years with losses (ask your accountant why that can be a good thing). Corporations must have at least one shareholder.
- S Corporations (taxed as 1120S) have features similar to a part-nership. An S Corporation must have at least one shareholder. If any shareholder provides services to the business, the S-Corp must pay that shareholder a reasonable salary. This salary is a separate payment from distributions of profits or losses. S Corporations have the same basic advantages and disadvantages of general or close corporations. When a standard corporation makes a profit, it pays a federal corporate income tax on the profit. If the company declares a dividend, the shareholders must report the dividend as personal income and pay more taxes. S Corporations avoid this double taxation (once at the corporate level and again at the personal level) because all income or loss is reported only once on the personal tax returns of the shareholders. However, like standard corporations (and unlike some partnerships), the S Corporation shareholders are exempt from personal liability for business debt.
- Limited Liability Partnerships or LLCs (taxed as 1065) are unincorporated businesses. Like corporations, partnerships are sep-arate entities from the shareholders. Unlike corporations, partner-ships must have at lease one General Partner who assumes unlimited liability for the business. Partnerships must also have at least two shareholders. Partnerships distribute all profits and losses to their shareholders without regard for any profits retained by the business for cash flow purposes. Many business professionals believe LLCs present a superior alternative to corporations and partnerships because LLCs combine many of the advantages of both. With an LLC, the owners can have the corporate liability protection for their personal assets from business debt as well as the tax advantages of partnerships or S Corporations.
There are also trusts and non-profit structures, but I’m not aware of any consultants who have ever chosen either of these. If you have any questions about which structure is right for you, it is best to consult with your attorney or accountant. Taxation and liability issues are the two strongest determining factors for deciding to seek their counsel.
by Jay Niblick | Mar 29, 2018 | Blog, Marketing Your Consulting Business
What do Consultants need to prepare for in order to successfully market their services via Blogging?
- Know your niche market. Don’t try to please everyone. Do you consult to bankers? Speak their unique language. Restaurant Owners? HR Departments? Knowledge Workers? CEO’s? They all have a language that they use in business.
TIP: VISUALIZE WHAT YOUR TARGET CLIENT LOOKS LIKE AND WRITE YOUR BLOG POSTS TO HIM OR HER.
- Know your keywords. Know what your prospects are typing in the search engines and target your articles to match the requests. Google has a keywords tool that is available for you to search.
- Google likes blogs but Google also likes EVERY blog. Try to find ways to stand out by being engaging to your readers with dynamic calls to action. (See more below) Donʼt be afraid to give away valuable education. Your followers and Google will love you for it.
- Keep your motivation level high. Stay consistent with your blog posts. Focus on your goals, objectives and clear cut reasons as to why you are doing this. Remember that by staying consistent you are building authority, trust and brand recognition.
- Your brand is YOU! A brand is not just a logo but an emotional connection to your audience through everything that you say speak, write or show visually both online and offline. Reflect a positive brand image when you write.
What can I do to grow my Tribe through blogging?
(Excerpts taken from the book The Profitable Consultant by Jay Niblick.) Here are the top 6 tips to building a large and loyal following of readers of your blog. These are in the order in which you should complete them:
- Write your first five Lead Articles: Get them written and posted within the first week or two of opening your blog
- Be Prolific: Write a follow-on post at least once a week, preferably two. These are 250 words long and simple to write when you are feeding off the Lead post you started with. As your tribe grows you wont have to be as prolific, and you will spend more time in discussions with readers on existing posts
- Spread the wealth: Don’t hoard your expertise on your blog. Comment on other people’s relevant blogs, but do so in an education-based mindset, not a marketing one. Never hijack someone else’s blog
- Scratch backs: Be sure to reference other posts you’ve read that are relevant and provide links to that blog. Give links to them and credit where credit is due. Don’t approach this with a scarcity mindset and worry about sending prospects to the competition. Share links to other blogs that aren’t direct competition, but more importantly to content that would be interesting and helpful to your readers
- Repeat: Go back and write more lead articles, more follow-on posts and keep attracting comments. By repeating this process, and monitoring old posts, you will soon build your own tribe of followers, wherein you will find prospective clients who already see you as an authority even before you speak with them
- Submit your blog: there are numerous blog submission sites where you can submit (i.e., register) your blog and the site will list it for all of their viewers to find. These sites draw a lot of viewers. You only submit your actual blog site once and you’re done. I’m telling you to register them now instead of when you first set your blog up because you should have some posts on your site when you submit
What are Some Blogging Details for Successful Blogging?
- Make your intro sentence easy to read and your paragraphs short
- Create lists instead of long sentences
- Write as much as you need but no more. Around 500 words ideally.
- Write stellar headings that answer pain point questions. Whatʼs in it for the reader, not you.
- Use storytelling to let people know you understand
- Make a list of FAQs and SAQs and turn them into Blog Posts
- Provide a Call to Action
- Show some personality
- Be open and honest (Just be you!)
- Use Emotive Language
- Use short sentences
- Promise an Outcome
- Use links in your posts back to other blog posts
- Be positive or offer solutions to negative problems
by Jay Niblick | Mar 22, 2018 | Blog, Starting Your Consulting Business
It all starts with a name. Not to argue with Shakespeare, but the name you choose, unlike that of a rose, will indeed determine if it smells sweet or not. The name of your company is one of the most important things you can decide on, as it is a big part of that all-so-vital first impression.
Naming any business can be a difficult task, but it doesn’t have to be insanely complicated. Important shouldn’t translate to impossible in this exercise. There are companies out there that will build such fear and hype, then charge thousands or literally tens of thousands of dollars to help you select a name. But it shouldn’t cost you any money and it shouldn’t keep you up at night.
Follow these seven simple guidelines when selecting the name of your new company, and relax.
- Brandstorm it. The first thing you should do is get some blank paper (a lot, perhaps). Like brainstorming, start jotting down names that you like. Do not judge them, just write them down. Let them flow. I would recommend coming up with at least 30 to 40 in this stage. Next you will start paring down that list.
- Make sure it’s available. Start removing names from your list by seeing if they are available. You can do this in two ways.
- Domain search. You’re going to want to have a name for your company that you can brand on your website. Go to www .godaddy.com, enter a name idea, and click search, and it will tell you if that domain name is available. If you chose Johnson Consulting but www.johnsonconsulting.com isn’t available, try some other domains like www.jconsult.com or www.johnson consultingllc.com. Just make sure that any variant you try is available as a “.com” (not .org, .net, .TV, etc.). Also be sure not to make it so convoluted that only you know how to spell it (e.g., Greg.Johnson.consulting.LLC.com). If you can’t find a simple variant available, nix that business name off your list.
- Web search. Type in the name you are considering and see if any websites come up in your search results. You would definitely not want to select a name that some other company is already using, regardless of their domain name.
- Keep it simple. The name should be simple, so avoid naming your company after something only industry insiders would know or appreciate (unless they will be your only clientele). Resist the urge to name your business after the Greek god of productivity or war. Avoid names that combine two descriptive words (e.g., Qualicoach or Growthcom) as they are difficult for anyone to spell, and they just sound awkward.
- Make it representative. I named my company Innermetrix to represent the fact that we provided metrics that measured inner strengths and talents. Granted, had I known what I know now, perhaps I would have chosen a name slightly easier to spell, but I’ve worked hard to establish the brand of Innermetrix and wouldn’t change it for anything now. The best names stand for what you believe in, and have real meaning for what you do or whom you help.
- Make it catchy. Avoid using cliches or hyperbole in naming your business. Peak, Apex, Pinnacle, and Summit are descriptive, imply great success and height, but they’re also insanely worn out and over-used. On the other hand, don’t go so far in the other direction that you end up with “Johnson Consulting.” Part of effective branding involves separating yourself from the crowd and standing out. If the name is boring or sounds like every other company, it will only make it that much harder to achieve differentiation. Yahoo! or Google selected great names as far as standing apart and being catchy, while not making them complicated.
- Make it corporate. Many consultants opt to name their consult-ing firm after themselves. While probably the norm for legal PLLCs, calling your business “John Smith Consulting” implies you are the business—and only you. Follow the old adage of “playing big until you are” and shoot for a name that represents a legal entity, not a human being. I know—Macy’s, Johnson & Johnson, Kellogg’s, and many other very successful companies were named after their founders, but you aren’t entering the business field a hundred years ago. Most of the large consulting firms used founder’s names as well, but they all started as legal or accounting firms too.
- Don’t restrict geography. Sometimes new consultants tie their brand to a specific city or region (e.g., New York Management Inc. or Southeastern Consulting), but unless you plan to do business only in the same geographic area, I advise against regional naming. As an independent business consultant you will quickly find that you have no geographic borders, which is one of the great aspects of this industry.
** I’ve provided a complete checklist in Appendix D of my book where you can keep track of work done, such as deciding on the name of your business, and many other activities to come. You can purchase it here.
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