There’s More Than One Way to Earn 5 Figures+ Monthly
This is a guest post by Stefanie from the Aff Playbook Forum
Every once in a while, someone will approach me at a conference (or on Facebook) and ask me why, if I “know so much”, am I still doing consulting work for other people. Most of the time, they say the same predictable things –
-You’re trading time for money.
-It doesn’t scale!
-You got rid of one boss only to trade it in for SEVERAL bosses.
-There’s so much money to be made in affiliate marketing – why would you ever bother doing consulting work?
-You can’t make very much money with consulting…
Most of the time, I smile and laugh it off with something short and conversationally-appropriate like, “I enjoy the variety,” or “It’s good for keeping skills fresh and learning new things on someone else’s dime.”
Technically, those things are true – but to give a complete answer, I’d have to turn into that awful person who corners you and monopolizes your entire evening at a party, leaving you hoping that someone else will wander up so you can leave that poor sucker with the obnoxious over-talker. In the interest of not being avoided at conferences, I decided to post the long answer here instead.
So – if you’ve ever thought about doing some consulting and you talked yourself out of it with the kind of reasons I listed above, keep reading.
You’re trading time for money
Sometimes, yes. However, a good consultant is careful about both project mix and project structure. I definitely have some consulting gigs where I work X number of hours for $xxx per hour. Frequently, they’re one-off things where I’ll either talk with the client or do some kind of an audit or marketing plan for them. Because these projects are often one-time things, and because they require my full attention and expertise for a predetermined period of time, I generally charge a lot more for them. If they require me to be in a certain place at a certain time, I’ll add a premium for that, too. Ongoing projects of this nature (monthly strategy calls, for instance) typically get a slight discount, since it’s a repeated stream of income with minimal ongoing overhead.
If you’re going to specifically trade time for money, make sure you charge enough that it’s worth it to you. Beyond that, you want to ensure that you don’t let yourself get into too many projects like that. It’s understandable that a new consultant would take virtually any job that comes along, but once you have a bit of wiggle room, you need to start thinking about the overall portfolio of projects you take on. Don’t *just* trade time for money. If you DO trade time for money, make sure there’s a good reason – the hourly rate is extremely good, the project seems fun/fulfilling, it allows you to get experience in an area you’ve been looking to expand in, it gives you an “in” with a valuable contact or company, etc. Trading time for money can be very stable, profitable, and strategically sound in the right situations. It only becomes a bad thing when it overwhelms your business and prevents you from pursuing other types of projects. In fact, it can be a good thing to have a few “time for money” projects, given that they’re the most common type of consulting gig and they can be a good way to fund riskier or more long-term/slow payoff personal projects.
It doesn’t scale!
Tell that to McKinsey or Deloitte. When most people think of consulting, they imagine some overworked freelancer slaving away for $50/hour, trying desperately to figure out a way to work 120-hour weeks to give himself a raise. Don’t get me wrong – that’s how a lot of people go about building their consulting businesses. It’s also why so many consultants end up burnt-out and looking for a day job after a year or two on their own.
When you’re building a consulting business, you basically have 3 ways to increase your income:
1. More hours. This works well up to a certain point, but it’s not sustainable or healthy as a growth strategy. There are only 168 hours in a week, and you can’t get more of them. When people say consulting doesn’t scale, this is usually what they’re referring to.
2. Higher rates. This is a much better place to turn when you’re looking to scale. To some extent, more experience and a better professional image will automatically give you the ability to ask for (and get) higher rates.
If you want to earn a lot more, though, you have to specifically locate clients for whom you can deliver superior value. Some clients just aren’t in a position to EVER pay you a good amount, no matter how much you do for them. Sometimes their market isn’t big enough, and other times the client themselves place limits on how much you can accomplish for their benefit (for example, a client who refuses to update a horrible, conversion-killing shopping cart because his brother-in-law told him it looked cool).
Consider how much profit you think you’ll be able to bring in for the client, and don’t forget about the long-term value of your work. For example, if you believe you can help a client optimize their checkout process and increase sales by 3-5%, that gain will continue indefinitely into the future. If you do SEO for a client, there’s usually a trailing value in the months where rankings hold steady and slowly drop off after you stop working with them. You can’t be certain how long that future will last, but you can and should base your rate on the rough value you expect the client to get from your work (whether you market it to them like that or not).
When you work with value-based rates, it’s very similar to affiliate marketing – except that you can actually earn a lot more in some cases because the relationship to the advertiser (client) is closer and more transparent, and because you can gain access to offers (projects) nobody else gets. Whether you get paid before or after you actually deliver the results (and whether you have to include a guarantee) depends on your negotiating skills.
Some clients would prefer to pay a set hourly or per-project rate and that’s fine if it works out for everyone and doesn’t leave you selling yourself short– but if you always think in those terms, you’ll limit your ability to scale up and earn an amount that reflects the true value you deliver.
As a side note, I’ve even been known to go back to clients a year later to help them determine the value of what I did for them. People who have to answer to a boss LOVE to have hard evidence that the person THEY chose to hire made the company money, and reminding people how much money you made them can be a great way to get referrals or additional work.
3. Greater Leverage. Even though the potential for scaling is greatest with leverage, it seems to be the area that’s most ignored by consultants. Leverage lets you make the most of your raw human input, and it’s most commonly accomplished through either technology or additional human capital.
There are a ton of software products that can give you greater leverage in your business. If you’re currently doing monthly reporting by hand, a software that automatically imports the important numbers and creates easy-to-read client reports will free up time so you can spend more time doing things that make you more money.
Similarly, I’ve never met a consultant (myself included) who doesn’t occasionally slip into the habit of doing things that would be better done by someone less skilled (and less expensive). In fact, most consultants end up doing many of the same types of projects over and over again, to the point that the projects become predictable and routine. If you can locate routine projects, or even parts of projects, that could be outsourced to someone less skilled than yourself, you can dramatically improve your income by doing so.
Many of the large consulting firms take advantage of this by building a 3-tier business with junior, mid-level, and senior consultants on staff. The most difficult projects (which require a lot of experience and knowledge) go to the top employees, more familiar tasks go to the middle levels, and the most familiar tasks end up with the junior employees. That structure allows them to gain leverage by taking on lots of routine projects while simultaneously building new expertise and maintaining leadership in their industry with complex, challenging projects.
Although a lot of us aren’t looking to build up huge consulting firms with tons of employees, you can still benefit quite a bit from adding in a few outsourced helpers and perhaps even a moderately skilled project manager-type. If you can bring in $100/hour work and have it completed by a $15-25/hour employee (under your guidance and methods, of course), you can dramatically increase your income in a relatively short period of time.
You got rid of one boss only to trade it in for SEVERAL bosses.
It’s true that a client gives you money and has the ability to stop giving you money, but that’s really the only meaningful similarity a client would have to a boss at a day job. Consider…
-A boss typically gives you the bulk of your income/benefits and takes up most of your potential working hours. As a result, you’re in a weak position where you depend on the money and you don’t have enough time and energy to easily do something else. For most Americans, it borders on ownership/slavery. Think about how completely devastated most people are when they lose a job. It really shouldn’t be that way. When you’re a consultant, a client is one of a group of income sources, and unless you let yourself get into a bad spot (poor diversification), you should have no trouble dropping one or changing the direction of your overall business. +1 for having more power and control with client work.
-A boss tells you where to be at a certain time and how you should dress (usually). Most clients only care that work is done within a certain timeframe. If you like working in your bathtub at 2 in the morning, the client doesn’t need to know. You may occasionally have conference calls or meetings, but those things are the exception, not the rule, and you can definitely structure your business in a way that minimizes that stuff if it bothers you. +1 for having more freedom with client work.
-Bosses (usually) make you grovel for even slightly-above-average raises. They judge you in comparison to other employees at your level of experience and seniority. Many companies have hard limits to how much your salary can be increased. With client work, there are generally far fewer restrictions on the nature of the relationship and compensation, and if you don’t like it, finding new clients is considerably easier than finding a new job. You’re also much more likely to get paid based on the value you add rather than the title you hold. +1 for lack of boss placing arbitrary limits on your income growth.
-With a day job, severing the relationship is a huge deal. Many people spend months out of work in between jobs, and new employers spend a lot of time analyzing your career trajectory, your past salaries, and the gaps in between jobs. With clients, I’ve never seen that kind of scrutiny on your personal choices and past circumstances. If I tell someone I made X Company $500k this year, they don’t ask which months I did it in, and why I didn’t work with them during the other months. They only care that I did what I said I would do, and that it got positive results for the client. +1 for the freedom to choose your own path and change it with minimal penalties.
-Co-workers. If you’re one of those ultra-social people who enjoys poking his head into cubicles and saying things like, “Hey, are ya working hard, or hardly working?” you may actually think consulting comes up short in this area. However, if you like doing your work without playing office games, consulting is a pleasant change. That’s not to say you’ll never have to deal with difficult personalities, because you will – but it’s generally easier to deal with from a distance. +1 for peace and quiet.
-Bosses know they “own” you, and their behavior usually reflects it. Because the power balance is different when you consult, most of your clients treat you as a partner and/or expert in your field. You get more respect because you’ve earned it. As you make the shift to value-based pricing and higher rates, that respect level only goes up. +1 for being treated well.
There’s so much money to be made in affiliate marketing – why would you ever bother doing consulting work?
This one’s pretty easy…
-Diversification/Income Smoothing. Affiliate income fluctuates like crazy. Offers go down, rules change, campaigns inexplicably dry up, and some things are just seasonal. It doesn’t take much more than a few months of bad luck to send most affiliates scurrying back to day jobs. If you have even one or two $2-3k/month clients, you’ll have enough stable income to weather the bad times.
-Credibility & Prestige. Not every client will be one you can brag about, but if you keep at it, you’ll be representing big brands in no time. J Being able to say you’ve worked with recognizable clients is a great shortcut to credibility with a lot of people. It’s much easier to say, “I worked with — and —, “ than to spend an hour or two talking with them and proving you know your stuff. For better or worse, most people associate well-known brand names with quality work.
-As part of your exit strategy. Most affiliates don’t last more than 5-6 years in the business. It’s exhausting sometimes. Client work lets you continue to build skills and explore other avenues while still leaving plenty of time for your affiliate business.
-It gives you valuable contacts and keeps your social skills intact. It’s easy to sit on the computer all day…building campaigns, sending people to Google Hammer, and making fun of pointy-elbowed young women…At some point in time, though, you may want to do something with your business that involves other people. If you’ve allowed your business and networking skills to atrophy, that’s going to be a lot harder. You’re also going to have far fewer useful contacts to draw upon when you have questions or need favors.
-To learn. As a consultant, you get experience in areas you wouldn’t necessarily see as an affiliate. That’s valuable for both your current affiliate campaigns and whatever you may do down the road.
-You get to help other people. I frequently come across projects that aren’t a good fit for me, or that I’m too busy to take. There’s a lot of satisfaction to be had in handing off projects to someone else who can benefit from the relationship.
-Variety – It’s easy to burn out if all you do is build campaigns. Client work offers some variety to keep things interesting.
You can’t make very much money with consulting…
I’m not sure where this idea came from, but I’m guessing it has something to do with the vast legions of consultants who severely underprice themselves. It’s relatively easy to get to the $100-200/hour point as a consultant, and I’ve had a number of projects where the effective hourly rate worked out to $300-500+/hour. I’m not going to give specifics, but I earn more than most on my consulting income ALONE – and I do alright on the affiliate side of things, too.
An awful lot of consultants and potential consultants seem to think that the most important thing is to know everything about the service you’re offering. I disagree. It’s important (and you can always learn more as you go), but it’s equally important to understand the business of consulting itself. There’s a lot more to it than simply setting a rate, proving your expertise, and asking people for work. If you’re willing to learn and put in the effort, a 5-figure monthly salary will be easy – and 6 figures is not outside the realm of possibility if you do things right.