In a national survey of self-employed professionals, almost 50% of the consultants, coaches, and other professionals declared that they were currently not earning enough to meet their expenses. This result isn’t too surprising, since according to the U.S. Small Business Administration, almost 20% of all small businesses fail in the first year and 45% fail within the first five years. But it still made me curious. How could 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. So the businesses themselves are operating in the black, but there isn’t enough money left over for the owner to pay their personal expenses. The business owners are living off their savings, working a second job, being supported by family members, or going into debt.
It seems these self-employed professionals are doing something right. They are reaching clients, making sales, and turning a profit. But what they aren’t yet doing 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 significant changes of the most challenging kind — changes in themselves.
If you are one of these struggling professionals, it’s time to take a serious look at what needs to shift for your business to succeed. To break out of underearning, you may need to work more, sell more, learn more, or charge more.
Doing more sometimes means working more hours. You may feel like you are working hard, but have you actually kept track of your working time? Many self-employed folks are surprised to discover that they are putting in fewer hours than they thought. Particularly when your business is new, it’s unrealistic to expect a full-time income from a part-time business.
Or you may be putting in plenty of time (maybe even too much), but not putting it in the right places. How many hours per week are you spending on selling and marketing? And is some of your marketing time devoted to actively reaching out to prospective clients and referral sources through networking, phone calls, personal emails, and meetings, or are you limiting yourself to more passive strategies like website traffic, posting on social media, bulk email, or placing ads?
Working more on your business or on marketing and sales 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 selling because you fear rejection. If this sounds unfortunately familiar, notice that a fear of failure may be causing you to fail! (And if so, check out my newest book, Overcoming the Fear of Self-Promotion.)
Being successfully self-employed requires taking some risks. Many professionals experience multiple failures, small or large, before they eventually begin to 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 need to be willing to risk failure to get there.
Perhaps doing more is not the answer in your situation. You may be already working hard 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 got started.
You may know everything you need to about delivering the professional service you offer, but there is lots more to learn about not only marketing and selling, but pricing, negotiating, client agreements, financial management, and beyond.
In fact, one of the biggest gaps between success and failure may lie within 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 that 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, 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, project, or program?
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 decent living, your business won’t have a chance to succeed. Do you believe that the people to whom you’ve been marketing are unable to pay more for your services? Then it may be time to focus on a different target 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.
Your business isn’t going to improve without help from you. You will need to make changes in how you are working, marketing, learning, or pricing yourself in order to become more successful. If your business isn’t earning enough to sustain you, the business itself isn’t sustainable.