I’ve summarized my consulting income data from the past several months below, along with lots of detailed tactics that I’ve used to improve my business in the past few months. As you look at the data, besides getting a general idea of my consulting income, you’ll notice a few things:
- My consulting income was consistently higher in the last 3 months.
- My average hourly rate increased during the past 2 months.
Below the charts & graphs, I’ve included a ton of detailed tactics and strategies on what I’ve been doing to increase cash flow, convert prospects to paying clients faster, etc.
Consulting income details
I also want to share the story behind the numbers, because there are some important details, tactics, and strategies that I’ve been working on and testing that you can implement in your own consulting business.
- Tactics to improve cash flow:
- For the past few months, I switched from invoicing my clients only at the beginning of the month (for work done the prior month), to invoicing my clients at the beginning of AND around the middle of the month. That twice-monthly billing cycle has led to quicker payment and more consistent cash flow (and we all love cash flow).
- I’ve implemented a new policy where I require clients to pay a 50% deposit before I begin work on a project.
- Reducing payment fees: I have one client who pays me by credit card; all other clients simply send me a hard-copy checks. For my credit-card client, I allowed them to pay by credit card so I can collect faster from them (they had been pretty slow to pay, so I give them a 2% discount for paying by credit card). I’ve been using Square for my payments, which works OK (though I’ve had to e-mail them a few times to get my deposit limit increased), but I get slapped with a 3.5% transaction fee. Now, 3.5% doesn’t sound like much, but when the client pays a $6,000 invoice, that 3.5% becomes $210. Ouch. I researched other credit-card payment providers, and found similar fees. Undeterred, I kept researching, and found Dwolla, an ACH provider (which is how direct deposit transactions work), which charges 25 CENTS per transaction. Yep, 25 CENTS. That’s a big savings to me, so I got my client hooked up with a Dwolla account, and next time they pay, I’ll be saving a hunk of cash. One caveat: Dwolla is a bit cumbersome to set up, so if you have tons of clients, getting them set up with Dwolla might be a headache.
- Fluctuations in rate from month to month: The reasons for this are:
- Non-billable work reduces my rate. I have one client for whom I capped the cost of a project–which I’ll probably never do again. I’ve found that clients who want to cap costs can often be very demanding, and the projects can lead to scope creep–resulting in much more work without being able to bill for the time worked–unless you’re extremely diligent about limiting the scope of the project.
- Resellable tools boost my rate. Last month, I sold 2 tools to a client for a flat fee; however, the hours it took me to build and install the tools were low, and as a result, I earn more per hour. Now, the next step is to sell those tools to more clients, since it only takes me about 15 minutes to install the tools at a client site, but I still bill them the full flat rate–meaning that my hourly rate gets a huge boost.
- Annual increase in my hourly rate: Every January, I increase my rate for existing clients by about 7-10% (this year, my rate went from $150/hour to $165/hour). For new clients, I can increase my rate whenever I want (my new-client rate is $175/hour). Those rate increases let me work less and make the same or more than the previous year.
- I’ve been making an effort to have more consistent and higher monthly billings; you can see that over the past 3 months. Why? Well, it’s easier to plan my family budget if my income is more consistent, and it’s less stressful when I get more money every month. In addition, my son got accepted to private middle/high school for the fall, and that extra monthly expense has been a motivation to sharpen my focus. Here are a couple tricks I’ve used to keep me on track:
- Breaking down the total monthly hours needed to reach $15k, and then breaking those monthly hours into a daily hours goal.
- Using HabitForge (which sends daily reminders), Google Calendar (where I highlighted blocks of time for billable work), and weekly progress emails to my personal coach to keep myself on track with billable hours.
- Being more systematic about marketing:
- I still don’t do cold calls, but I do warm calls (for example, after I respond to a question on a relevant forum, I’ll e-mail or call the person whose question I answered).
- Most of my prospects come to me (instead of me finding them) via SEO or forums.
- Managing and following up on prospects: I use Evernote (I friggin LOVE Evernote!) for notes, status, and next things needed or steps to take. With Evernote, I have one place where I store all my info on clients, and Evernote is accessible from my phone, laptop, or any other computer.
- Immediately after I talk to a prospect, I put a follow-up appointment on my calendar. That way, I don’t have to dig through my notes on 27 different prospects to know when to follow up and what to follow up on. This has had the biggest effect on following up more consistently, and converting prospects to clients.
What tactics, tools, and strategies have you been using to be more effective?