The ultimate guide to escaping the “hours for dollars” trap

The ultimate guide to escaping the “hours for dollars” trap
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My first business was in manufacturing.

I was 10.

I used to make all sorts of dazzling arts and crafts and sell them at the local Sunday markets. I remember the table being so huge I could barely see over top of it to talk to my customers; then again, everything seems huge when you’re 3 feet tall.

By the end of each market day, I’d pack up what was left, assess the best sellers, count my earnings and go home feeling exhilarated, ready to do it all again the following week.

I’d always reinvest some of my profits back into my business with a shiny new glue gun or some swanky new fabrics but, all in all, I had money in my pockets and life was bliss.

I didn’t realise it at the time but I was learning some pretty valuable lessons early on.

My second business began some 14 years later. I was older, wiser, and a little taller. Yep I was now 5 feet and 8 inches of freelancing passion. I had just launched my design business and I was ready to conquer the world. This is where I first met and fell in love with ‘Hours for Dollars’.

It was love at first sight… in the beginning.

It was bliss when jobs ran on time, changes didn’t blow out and clients didn’t get unreasonable.

It was like the best Sunday market ever! But after a few years of building my list of clients, it dawned on me: I charge by the hour and I only had 24 hours a day. It was like a knife had been plunged deep into my entrepreneurial heart; I was never going to afford that tropical island I always wanted (you think I’m joking!). After a brief period of mourning I started thinking of ways to diversify my earning potential.

I went back into manufacturing and started a canvas art company but I later sold that when I realised that web was my true passion.

The challenge was to create the perfect business model where cash rolls in automatically every month, clients pay upfront and I could make money while I slept.

Not a bad dream, huh?

That dream became Web123 and, four years later, things are pretty sweet. We’re not ready to go island shopping just yet, but we’re well on our way!

So, how would you like to achieve the same? I’ve got good news…. you can!

But before you can innovate, you need to analyse.

Here are 3 simple research steps you must complete before you can innovate and create your dream business.

Note: You will need all these steps completed before you can dive into the innovation stage in Part II (below).

If you stick with me and follow my advice, I know you can remove yourself and your business from the hourly grind. You’ll be free to rise to a whole new level, super fast. I promise it won’t hurt a bit, and who knows, you might even feel an overwhelming sense of empowerment!

Hint: Today’s post is all about laying down the right foundation and doing proper groundwork. In the second part of this post, I reveal the secret recipe contained within the  4 innovation steps that complete my 7-step process. Keep reading cos you’ll see just how easy it can be!

Step 1: Analyse your current income streams.

First up, you need to know exactly where your numbers are at right now. It’s time to take a snapshot.

Hopefully you already use a good accounting software. It will make this stage a lot easier if you’ve allocated all your different products and services as separate accounting items so you can easily export your sales figures in detail and analyse. I know this bit isn’t fun, but please don’t let your eyes glaze over, push on designer, your business needs you!!

The top things you need to look at first:

  • Analyse a break up of all your products or services. What are they?

  • What are your top 5 sellers in terms of total turnover?

  • Where’s all your revenue coming from?

  • What’s profitable? What’s not? Do you know your margins for each?

  • What’s a drain for you? What do you hate doing?

  • What’s the cheapest product you sell?

  • And what would happen if you cut it from your offering altogether?

Okay, by now you have a good idea of what’s profitable, what to keep, what to cull and you may even be able to see some untapped opportunities.

For example, you may discover you’re doing a lot of minor website updates for minimal invoice amounts and they simply aren’t profitable. Rather than lose the business altogether, why not upsell? Offer your clients an ongoing maintenance contract for 12 months (when you sell the website initially) therefore slashing your less profitable hourly services; in it’s place you’ve just created a product that puts money into your pocket every month. It’s better for your bank balance and it’s better for your work scheduling too.

See how easy this can be?

Step 2: Go deep, not wide.

Don’t try and spread yourself over tons of different industries. Pick your mark, know your niche and go deep. What do I mean by this? Read on…

You’ve no doubt heard the buzz about the great profits you can make in a niche area. Well, it’s true. Why go fishing in a big lake teeming with piranha when you can fish happily (and safely) in a small one?

Are you trying to focus on too many services across too many industries or specialities? That’s what I mean when I say ‘don’t go wide’.

Instead, go deep. Look at how you can maximise the profit potential of your existing clients. How can you further exploit the niche you’re in? Nicely of course! :) Oh, and if you’re not marketing to a niche yet, I’d advise you start thinking about it. I feel another blog idea coming on, look out!

So now is the time to ask yourself some tough questions:

  • Are you trying to do too many things at once?

  • Do you have too many products and services?

  • Do you have more than one business? (I used to have three at once and it’s not  easy or healthy! You spread yourself too thin and end up just scraping by with all of them.)

  • Do you have lots of different pricing models to suit all different price points?

If you answered ‘yes’ to any of the above, you need to focus on the most profitable, hungriest segments that actually have the cash to spend NOW, and go fish in that pond.

Then, it’s time to find out what else they’d like to buy from you. How? By asking them.

That’s called going deep and not wide.

It’s much easier to sell to existing clients than find new ones so don’t waste your precious time diversifying into other markets, client types or industries, just go deep into the one that will bring you the most money.

Step 3: Less clients, more money.

Next, you need to look at your current client list. Export the last 1-3 years of financials from your accounting software. Pay special attention to each client’s total annual spend with you.

Then sort your clients from highest to lowest spenders and then have the total spend for all clients combined at the bottom. Cast your eyes down that list. What do you see? Interesting huh?

Now ask yourself this question:

“What would happen if you got rid of the bottom 50% of spenders from your business?”

I bet your total turnover would probably only reduce by 10-15%. And guess what, if you concentrated on just your top clients, I know you could easily pick up the difference in maybe only a week or two AND you’d have a lot more time on your hands to service them. Win for you, win for your clients. A loss for those bottom 50% clients, but hey, this is business!

Here’s a tip to make up the lost 15%. Call your top 10 clients and offer bulk buy discounts, ongoing design packages, retainers, maintenance packages etc to pick up the slack from your top clients whilst not having to deal with the headaches the bottom ones cause.

And then…

Okay, so all you need to do for now is crunch those numbers, ask yourself some tough questions, sort those clients and sit tight.

If you have good bookkeeping files, these tasks shouldn’t take you longer than a few hours. So pencil some ‘business time’ into your diary over the next few days and get ready for the next part of the equation. In the next part of this post I reveal all the ‘hows’.

I’ll share with you the remaining 4 steps in the 7-piece puzzle to higher profits, positive cash-flow and better clients. And it may not be what you think!

So stay tuned because the secret sauce is all in Part II below.

If you have any questions or suggestions, leave me a comment. Otherwise take a minute to bookmark this page and come back when you’ve got all the info you need.

I’ll wait. :)

Part 2

•  •  •  •  •

If you did your groundwork from Part 1 of this post, you now have a really good understanding of:

  1. The makeup of your current income, including your top 5 sellers.

  2. The most profitable (and enjoyable) products/services you offer.

  3. Whether you’re spreading yourself too wide, and need to instead go a little deeper.

  4. If you’re offering too many products/services, plus

  5. Exactly how much each client spends with you, from highest to lowest.

I also got you to think about what would happen if you stopped taking work from your bottom 50% of clients and instead focussed on the top 50%. How did that go for you by the way?

Now that you’ve identified what you enjoy doing, what actually makes you money and you have a list of clients who are already good spenders, it’s time to get innovative.

This is my favourite part!

The 4 innovation steps to escape the ‘hours for dollars’ grind

Here’s the secret sauce I promised you in Part 1. But remember they only come together if you’ve done your homework so if you haven’t, go and do it now and I’ll wait for you…

Innovation 1: Sell in bundles.

People don’t like choices.

Gordon Ramsay’s restaurant makeover show ‘Kitchen Nightmares’ is a perfect example. The first thing he does with every restaurant on the show is cut back the menu to simplify the choice.

Choices mean thinking. And thinking means indecision. And indecision is bad!

When you give people too many choices they get overwhelmed and the indecision causes them to get cold feet and they don’t buy as much, if any, as what they would have with fewer choices.

More choice = Less sales.

So what products and services could you bundle and upsell with others to make them more profitable and enjoyable? An obvious example would be a logo design package which includes the logo design, business card and letterhead design and perhaps an email signature.

If you’ve got a product that’s not hugely profitable but you don’t want to cull it, maybe you can bundle it with a higher ticket item?

Could you bundle everything you sell into 2 or 3 packages? How would that affect your business? I think you’d be impressed at what that could do for your business.

Innovation 2: Look for the repeat.

Why doesn’t every hairdresser out there book in all our hair appointments 12 months in advance and just send us SMS reminders ahead of time to make sure we’re in the loop?

They could have a guaranteed flow of business booked all year round. I just don’t get it!

As creative designers, we need to be creative with business too.

Get innovative. Don’t fall into the trap of designing just a logo or website design and wave the client goodbye wishing them good luck and waiting for them to knock on your door again 2 years later. Instead, look at how you can lock in repeat business NOW, whilst you’re talking to them.

Here are some ideas to get your juices flowing:

  • Offer a discount for clients if they prepay blocks of time at the beginning of the month.

  • Schedule (and even part invoice) design projects around promotional calendars.

  • Obviously, if you’re in web your clients need traffic strategies like PPC & SEO.

  • Conversion rate optimisation maybe every quarter.

  • Landing page setup, copywriting, design and ongoing reporting / analysing / optimising.

  • Regular website updates or blog content uploads.

  • Ongoing maintenance packages for print and web.

  • Hosting services for your website clients bundled with support ticket allocation each month.

  • Refresh website banners and/or display ads every month.

  • Take care of your clients’ email marketing campaigns on a daily/weekly/monthly basis. You could organise copywriting, design, delivery & even reporting afterwards.

  • Regular website reviews with recommendations for improvements. Guess who will be asked to do the improvements? Yep, that’s right, YOU!

  • Website makeovers every 1-2 years. Instead of your client coughing up one big lump sum for a new site design, why not offer an ongoing package where they can pay you by the month instead? I know a lot of small business clients would jump at the opportunity if they’re happy with your service and you blow their socks off early on.

  • Sell them a Facebook post planner with one month of content already planned for them, and you’ll probably find they want to pay you to do it every month.

  • Google Analytics setting up goals and regular reporting. The list goes on!

My goal by the end of 2014 is to generate enough revenue on the 1st of every month with our website ongoings that it pays our entire expenses (including wages) for the month ahead. The rest then would be pure profit. And I’d truly be living the stress-free life I know is possible…. and then I’ll focus on my dream of my own tropical island!

Remember this: Repeat income is where it’s at. Please look for repeat. Would you rather build websites or host them? Would you rather build pools or clean them?

I know what I’d rather and I’m doing it. You can too!

Innovation 3: Earn while you sleep.

I bet when you read the title of this post you probably thought I was just going to bang on about info products and membership sites huh?

Well truth be told, I was. ;)

I’ve created both. But that wouldn’t be all that innovative now would it?

Having said that, I can’t leave it uncovered, but I’ll keep it brief. The beauty of business in 2013/14 is that you’ve never been more connected with the rest of the world… ever. It blows my mind when you think about how far we’ve come in just 10 short years.

Right now, billions of people all around the world are buying online. Come on, there’s so many people out there surely you can grab a few hundred or even a thousand who wants what you have. If you do this right, you can even sell in your sleep. Don’t doubt your value. You are special and unique, don’t forget that.

Just remember what I said earlier about niching up before you brainstorm ideas on this one. The smaller the niche, the more money you’ll likely make. But it goes without saying you still need to ensure enough demand also.

You can create any number of:

  • Info products

  • Courses or online educational programs for clients (think social media!)

  • eBooks

  • Step-by-Step guides

  • Write a book

  • Compile a book of your most successful blogs and sell it

  • Membership site etc.

If you sell Facebook design as a service, why not also sell access to a ‘Facebook For Business Beginner’s’ video course you just happen to have prepared earlier?

There is so much opportunity still out there for us to teach our clients how to market themselves online so don’t be intimidated. Just because Amy Porterfield has amazing Facebook courses doesn’t mean there’s no room left for yours!

Think about it this way… If you have a product, what service can you attach? If you have a service, what product can you attach?

Innovation 4: Build your team.

Lastly, you need to find your dream team to successfully pull all the pieces together.

Don’t try and do it all on your own, it’ll be a slow climb to the top because it will literally take you f..o..r..e..v..e..r..! And don’t panic, they can be freelancers or marketers or social media experts on a contract basis, I’m not talking about hiring full-time staff here.

For example, if you’re not a Facebook guru but you want to offer Facebook post plans or management on an ongoing basis, team up with a social media expert who has a proven track record. I don’t outsource ours but I know if I wanted to I could get an amazing, top-end social media manager in Manila through an agency for about $12 per hour.

If you suffer from “nobody can do it like me syndrome” then perhaps you need to go back to the drawing board and revisit your vision for your business. After all, we’re in business to make money right?

So let’s innovate beyond hours for dollars and make hay for a better business with bigger profits. We owe it to ourselves as designers and we owe it to our next generation.

That is true innovation, my friend.

What have you done to innovate yourself beyond the hours for dollars grind? I’d love to hear it!

Comments here. 

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About Bianca Board

Co-founder of Web123, Australia’s small business website specialists, author of ‘How To Destroy Your Design Business in 12 Easy Steps’, and creator of the Web123 ProPartner Program a complete ‘web business in a box’ solution for graphic designers, Bianca is Australia’s design-business doctor. Her mission is to help designers, just like you, create a profitable business you love.

 More about Bianca’s Business: Bianca is co-founder of the Web123 Partner Program. Design, build and deliver client projects in the space of a day. Design it your way, totally HTML and developer free.

Comments

  1. Violet Koncz says:

    This is just what I needed. :) I want my business to be exactly as you listed out here and I am so grateful to this website and post! Looking forward to future posts!!

    • I love hearing from ‘gung-ho’ designers like you Violet. Just get those ducks lined up in a row and hit it hard… but hit it smart. You’ll get there for sure!

      Cheers,
      Bianca

  2. What has worked really well for me is, I worked part time as an illustrator and created income that I didn’t need for my monthly expenses. I saved this money. When I had enough money in my pocket, I put a down payment on a small apartment and rented it out. I have continued to do this. It was far quicker and easier to buy my 2nd apartment because I was able to re finance the first one and get some equity out. That equity together with my illustration business bought the 2nd one.

    • That’s awesome Darrell. It’s true we need to look at the entirety of our financial life, not just what we get from our design biz.

      I’m no economist but with the world economy being as mercurial as it is right now, don’t put all your eggs in one property basket! To that end, I’d now challenge you to get creative with the ‘business of design’ and see what else you can do to build your financial freedom. :)

      Cheers,
      Bianca

  3. Hey Bianca, I read your article “” Hour to dollar”. Good job ……

  4. What software do you recommend for effective accounting?

  5. I loved the article, these are all things I’v been pondering as I enter my 3rd year of business. However, I can’t help but see a bit of contradiction in finding a Fiverr ad in the sidebar and suggestions of outsourcing to Manila. I’m looking for ways to grow my business and income without having to capitalize on/undercut fellow designers or service providers. I can’t help but feel all this outsourcing is putting people right here out of work. Any thoughts?

    • Carolynne Smith says:

      I agree. I find it a bit disturbing to see an ad for Fivrr on a site for designers. People should also be warned about the pitfalls of you get what you pay for with these services as well. I’ve had many clients tell me how they got ripped off by their “cheap” designer.

      • Yep, so true, cheap isn’t always good. And luckily for us design clients aren’t always buying on price alone. But still, my advice is to get creative with your business and think of ways to take advantage of the cheaper talent out there… at least for some jobs some of the time. I can guarantee you that your competitors are starting to do it.

    • Hi Michelle,

      I can’t speak for Preston as it’s his blog, but I don’t see a problem with there being a Fiverr ad on a graphic design blog, nor should anyone feel threatened by me suggesting we can outsource some tasks to Manilla (or anywhere else for that matter). Outsourcing is a reality, and it’s not going away and we can’t bury our heads in the sand.

      Think about the silent movie stars of yesteryear when ‘talkies’ were invented. Those who accepted and adapted thrived, and those who didn’t quickly became a memory. Who do you want to be?

      The trick for us as businesspeople is to use outsourcing to our advantage where required WITHOUT losing what makes our design agency unique. It can be done, trust me.

      Cheers,

      Bianca

      • Hi Bianca. My perspective doesn’t come from feeling threatened, I just couldn’t help but see the contradiction of an ad for a service that (I feel) devalues the time and talent of designers next to an article about making more profit as a designer (my opinion, of course).

        I don’t have trouble understanding how business works and I’m not clueless about the profitability of outsourcing, nor the numbers of businesses doing it. I think there are lots of ways to bury ones head in the sand, and while it may be a cost effective solution, for me personally, I have reservations about how it affects the bigger picture. I guess I wanted to dialogue about that. I apologize if you felt threatened by my comment.

        Who I want to be (am) is someone who cares not only about thriving in my own little world, but one who contributes something important without tipping the balances of the eco-system I live in. If I’m remembered, that’s icing.

        I appreciate your response and look forward to putting some of your suggestions into practice.

        Happy New Year.

        • Michele,
          I completely agree with you. The ad you’re seeing is served by Google adsense and changes depending on the context of the page you’re viewing. We have long term plans to get rid of ads completely here at GDB, but for now, it helps pay for excellent writers like Bianca plus helps us stay afloat when it comes to hosting fees, security fees, etc.

          I’m so sorry. Soon, we hope we can pull this ad down. To help this happen more quickly, any support you can give to GDB is great. Anything from simply telling your friends about the site to actually making a donation are all wonderful. If you choose, you can support us financially here: http://bit.ly/GDB_Donate

          If that’s not the road for you, no hard feelings. Thanks for reading and being honest with us. We hope to see you here in the comments regularly! Best in all.

        • Hi Michelle,

          Happy New Year to you too!

          I guess what we’re having here is more of a discussion of business philosophy and I gotta say I’m loving the meaty topic, so thanks for contributing :)

          All I was saying is I don’t think crowdsourcing is going to negatively affect our business, but we must adapt.

          The reason I write on this blog, and the reason why I started my own program for designers, is because I want all designers to be savvy business people who are paid well for the valuable work they do.

          I believe it’s a mistake to fight the rising tide of outsourcing and crowd-sourcing sites. But that doesn’t mean sacking our local staff and replacing them all with 3rd world designers; however I’m convinced we will eventually be forced to change the way we do business as local designers.

          If you read my blogs, you’ll know I’m pretty much a ‘take a bite bigger than you can chew then chew like crazy’ type of person, that’s why I’d rather be ahead of the curve and find business opportunities before I’m pushed.

          Whatever path you choose to take, I wish you well. :)

          Cheers,
          Bianca

          P.S. Now, you can call me a glass-half-full girl, but I think sites like Fiverr will knock away a lot of little jobs that are generally unprofitable anyway. It’s exactly the type of work I advise designers to avoid in my ProPartner program. Focus on the bigger jobs and the more profitable clients who appreciate working with a talented local designer, that’s my advice.

  6. Thank you for such a great post! I know many designers who feel that they need to spend “hours for dollars”, but we are so lucky that the web has given us options to make money in our sleep! This post clearly helps us takes those steps to look at our business (and ourselves) and how we can improve to make it better. Thanks for you all your advice!

  7. Bianca, I am GDB reader for years and was about to quit forever but your arrival forced me stick to it. At least now i can get stuff which is more entrepreneural instead of freelancer oriented. I mean yes i had been benefiting from Preston’s posts too but they were only good at times when i was working from home. Please keep writing frequently and see if you have anything to share for the designers working through freelancing websites. Thank you!

    • Hi Tanvir, and thank you for sticking with us here!

      That’s the great thing about blogs, everyone has their own opinion and everyone has their own flavour. For myself, I know that not everyone likes my ‘business-first’ approach to design, and that’s totally ok.

      I joined GDB as a feature writer because I really liked Preston’s direction, and I felt we had a lot in common. We both want to help designers grow their business. I also enjoy the fact that we don’t always agree on everything, and I often learn something new when I read his posts… and I hope Preston feels the same. :)

    • Tanvir, I’m so glad to have both you and Bianca at this blog. Thanks for being here! Wishing you the best in everything.

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