Making money - Part 2

Archive for the ‘Making money’ Category

Henry Ford failed

“Failure is simply the opportunity to begin again, this time more intelligently.”

– Henry Ford

Known today as a business magnate, philanthropist and social entrepreneur, Henry Ford actually failed several times:

  • He burned through all the money from his first group of investors without producing a car
  • He eventually produced a car and raised another $60,000 in share capital, but his Detroit Auto Company went bankrupt
  • In the 1920s, Henry Ford refused to update the Model T car, leading sales to fall dramatically
  • Ford tried to launch a political career, but never succeeded

Yet Ford played a tremendous role in shaping car engineering, assembly line production, business, pacificism, social leadership in business, education and other areas.

But rather than viewing failure as doom, Ford saw it as an indication that improvement was needed. Perhaps that’s how he seized on the opportunity to refine Model T manufacturing, reducing assembly time from 14 hours to about 90 minutes.

How do you view your failures?

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Consulting fee survey

Consulting fee surveys are a valuable tool worth reviewing. Not only is it natural to want to know how you compare against others in your industry, but considering your competitors’ rates is also an important part of setting your consulting fee rates.

Consulting fee surveys can often be found through industry organizations, such as the Association of Bridal Consultants or the Marketing Communication Consultants Association.

However, consultants have to be careful when generalizing from consulting fee surveys. Frequently, the surveys that are available online or from industry organizations are out-dated or are simply not specific enough to be relevant. The most useful information about what others are charging are statistics from those in your jurisdiction who offer similar services.

When considering setting consulting fee rates, consulting fee surveys are worth looking into. However, they are not blueprints for what to charge as a consultant.

Wondering how to set consulting fee rates?

How do consultants set their rates if consulting fee surveys shouldn’t be used exclusively for rate-setting purposes?

First and foremost, it’s all about positioning and adding value. What do you offer your clients? How can you position yourself as different than the competition? How can you focus on  the problems your services solve–rather than focus on price?

In my extensive consulting guide I outline specific strategies for adding value. After reading the guide, you’ll have the tools to work out a strategy for your pricing and calculate your fees accordingly. For details, consider purchasing Consulting Fees: A Guide for Independent Consultants.

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The one thing you should never do with a check

So you’ve been consulting for a while and a big check rolls in. Ka-ching! You’re set.

But there’s one thing you should never, ever do with a check.

In fact, if you do this one thing, the very future of your business may be uncertain, even if you’re commanding high consulting fees and you’ve got a long list of clients lined up. And you could find your business in ruins.

At Consultant Journal, we’re not normally doom and gloomers. We believe in the power of independent consulting. But we do know there’s one thing that can bring your business down.

Never, under any circumstances, cash that entire check. No matter how big or how small any check is, always put some aside.

No matter how successful your business becomes, you’ll always have to pay the Tax Guys come year-end. And you don’t want to be in a situation where your business earned more than ever before…but you haven’t got anything left to pay taxes and social security.

So always put some money aside. Talk to your accountant about how much you need or at least look at prior year’s taxes payable to estimate what you need to save for taxes. (And remember, you should always confer with your accountant or tax authority about taxes. At Consultant Journal, we can only guide you; we’re not accountants.)

And, remember, if you haven’t got an emergency fund to cover six to nine months of expenses, you might also want to throw some money that way.

Related to the one thing you should never do with a check

Why you need a contract

You want to sign a contract?! Why on earth do we need to sign a contract? Can’t we just do this on a handshake? Can’t I trust you?

Well, you could but both parties are leaving themselves wide open for potential hassles that a signed and agreed upon contract would eliminate. If you feel nervous asking your clients to sign a contract, consider these points:

  1. Contracts provide a description of responsibilities. Rather than suffer through the confusion of wondering what each party’s responsibilities are, you’re better to have everything in writing. This will help avoid confusion or disagreement.
  2. Contracts bind parties to their duties. It is incredibly disruptive if one party attempts to back out of an agreement. A contract will bind the parties to the previously defined description of duties eliminating this problem.
  3. Contracts can establish a time frame for duties. If you need work performed and performed within a certain time frame a contract binds the party to that time frame. As a consultant, you might want to require the other party to provide adequate and timely access to key personnel, for example.
  4. Contracts can secure payment. No one likes to be stiffed for work performed and a binding contract provides a written legal document establishing an agreement to be paid for services rendered.
  5. Contracts provide recourse when the relationship falters. If the relationship between the contracted parties deteriorates, a contract outlines the previously agreed upon steps required for dissolving the relationship without punitive measures.   

Now, doesn’t that sound better than dealing with the chaos that can erupt when a handshake deal falls apart? Stick with a contractual agreement — it can eliminate a lot of hassles.

(Note: I’m not a lawyer and this isn’t legal advice in any way, shape or form. If you’re looking for a lawyer or a contract, I recommend USLegalForms.

5 ways to make money from web data

Via CP Development, here’s a list of five ways to make money using data extracted from the web.

I’m not entirely convinced by #1:

  1. Extract a list of your prospective customers (from a business directory, professional association website, competitor’s reference list …) and employ sales force to offer your products&services via email, telephone or postal mail. Sweep the entire prospective market for as low as $1,000!

I’ve been in marketing for a long while. I’m not sure you can do a *great* job of sweeping the entire market for $1,000. It takes time to find, filter and clean data and more time to contact that market. Most people won’t convert on a single “touch”. But it may depend on your market and how you go about contacting people.

5 things not to do in a downturn

It’s Friday 5 time — a top 5 list to kickstart the weekend. Via Business Week, here’s a list of the top 5 don’ts for a downturn (expired link).

Those of you who know how I feel about consulting fees won’t be surprised that I agree with #4:

4. Don’t discount.

Cutting your rate just makes it look like you were joking the first time around. Either you’re serious about your fees or you aren’t. Send your market a consistent message — by being consistent with your fees.  

Friday 5: making more money

Via Flying Solo, I found a list of ways to set business goals. I loved their example list for making more money:

  • Charge a lot more;
  • Speak for money;
  • Create a high-end product to sell (or multiple products);
  • Work with different clients who expect you to charge a lot more;
  • Sell someone else’s related product for a commission;
  • Go totally online and remove your overheads.

As a consultant, I’ve pursued several of those ideas — while my revenues have soared. I raised my fees. I started teaching. I came up with products. I went after higher end clients. I started reselling other people’s services. And I moved many of my marketing efforts online, cutting my advertising costs. Last month, I billed more than I’ve billed in years — and I just had a baby in the fall. Yeah, baby!

Friday 5: top 5 uses for extra income

Although my consulting income tends to be pretty stable, I sometimes have months where I earn more than I expected. I have an emergency fund and enough cash flow that I don’t need to bank all the extra money. I recognize that some people have feast or famine cycles, but I’ve been working long enough for things to be steady.

So, what do I do in the months where I have extra money? Here’s a top 5 list of my "spends" for the first half of this year:

  • I bought a Roomba — a robotic vacuum that sweeps and vacuums my house while I’m working, playing with the kids or out and about.
  • I paid down my mortgage. (That is, I made extra payments.)
  • I topped up my kids’ college funds.
  • I topped up my retirement fund.
  • I bought a new LCD TV, which is great for projecting PowerPoints, demoing my work, watching the news, or, on occasion, for personal TV viewing.

What would you do with unexpected earnings?

Should you hire an invoice factoring company?

After the post on invoice factoring, many readers wanted to know if they should hire an invoice factoring company. As with many other questions, it depends.

Do you need to hire an invoice factoring company?

  • You have poor cash flow.
  • You spend a lot of time on invoice processing.
  • You waste time in chasing unpaid invoices.
  • You frequently run into clients who are slow to pay — or who don’t pay at all.
  • Your clients are reluctant to pay deposits, but you need cash in hand to buy supplies, hire subcontractors or pay for other necessities (like your rent).
  • You feel stressed out when you have to wait for an invoice to be paid.
  • You can see opportunities to make more money by investing the payment now, rather than waiting.

An invoice factoring company may charge a 20% fee (or more or less), but, depending on your unique circumstances, you may find that a bargain.

Before you make any moves, take a look at the template you use for consulting and see if it may be causing communication issues.

Stop buying your clients lunch

When you want to thank a client, it’s tempting to treat them to lunch. Good food, good wine, good conversation — they all go a long way toward making a client feel great. But, if you can avoid it, don’t do it.

At least, don’t do it if you want to improve your tax situation. Meals & entertainment only result in a 50% tax write off. You can write off gifts worth up to $25.