There’s a phenomenon that drives me batty. I’m not sure if it’s caused by the rampant personal development market based around money blocks or what, but here’s what happens:
- Freelancer/entrepreneur decides they want to make more money
- They set a goal of $X/month
- They bust their asses trying to reach the goal and…fall short
- They can’t figure out why they fell short, so they beat themselves up and work even harder
- …because they never did the math and realized that reaching that dream income is physically impossible
Here’s the thing: there’s only so much time in the day.
We all know that. And we all know we can only work so many hours or create so much in one day. But we don’t often think about that as it relates to our income. Here’s a few things to remember:
- If your business is service based, you should probably plan for having 15-20 billable hours a week. (When you make your income goals/hourly rates based off of a 40 hour workweek, that’s often mistake #1.)
- If your business is consulting based and you only bill for time spent at appointments and getting to/from appointments, you should base your hourly rate off of having 10-15 billable hours a week, unless you are an extreme extrovert.
- If you base your rates off some other metric, then you still need to make sure it’s reasonable by doing some cold hard math.
For example: I don’t charge hourly for my writing services, I charge per word (partially because I write so fast that per-word tends to come out better for me, even factoring in for email and editing time). I know that 2,500 words per day is pretty much my max output. My current per-word rate is .12, so 2,500/day = $300.
What a lot of people would think here:
$300/day x 23 workdays this month = Holy crap, I can make $6,900 this month! That’s my income goal!
What is actually the truth here:
If I write 2,500 words/day, no matter how long it takes me, I don’t usually get much else done. I have one, maybe two hours of work time left. In that time, I need to:
- keep my client funnel filled by following up with previous clients and potential clients, and pitching new potential clients
- work on my marketing by writing blog posts for this site & scheduling social media shares of said blog posts or of other useful content
- create this week’s newsletter and schedule it
- edit any pieces that need edited
- answer emails from readers and potential/current clients/customers
- send invoices and track income/expenses
- work on the content for any products and/or courses I’m currently creating/running (and for courses, answer participant questions, etc.)
And honestly, I’m probably forgetting things off this list. I could make that^ much money a month if I did nothing but work on client work all day every day…but if I did that, here’s what would happen:
- I wouldn’t have any product income coming in
- I wouldn’t have any class or course income coming in
- I’d be at the mercy of my current clients and when/if our work together came to a close, I’d be left without any interested parties to help fill that income gap (because I hadn’t been pitching or marketing)
More realistically, I can plan on working at max capacity for billable writing three, maybe four days a week. That puts my income cap at my current rate in the $4,000-5,400 range. (That’s gross, not net – it doesn’t take into account taxes, etc.) That also doesn’t take into account product and/or course income, which can be a pretty solid chunk of money. This means that right now, with my current business model and rates, creating the fabled “five figure month” or “six figure income” is pretty much impossible and I’m okay with that.
“So that’s why I keep falling short. What do I do now?”
Did you do your own math and realize that, oh shit, your dream income is actually-factually out of reach? Here’s what you can do to fix that:
- Raise your rates. Obviously.
- Diversify your income streams. Make products, if you’re used to offering services, or vice versa. Experiment with sponsorship – Patreon or Passionfruit can help. Do a class (a one-off event people pay for) or a course (a longer, ongoing learning process, like the guest posting for fun & profit course).
- Start delegating. If you look at the “all the other things that go into running a business” list above, you’ll notice that several of those items can be delegated. You can get started without hiring an assistant by delegating basic things like researching by using FancyHands (read my review of FancyHands here, one year update coming soon), and Zirtual can also help out here. Here’s some tips on delegating from the archives. Of course, delegating frees up more of your time, but it also costs money – so it’s important to keep track and make sure that you’re coming out ahead.
Not sure which one is the best way to go, or how sustainable your rates are? Sound off in the comments – I’m here to help!
PS: Don’t forget to sign up for the webinar tomorrow – you can do that here.