Here’s the breakdown of the past few months for my consulting business:
I finally get a big payday
From the chart, you can see a big spike in the amount I was paid in November. That’s because one of my biggest clients had 2 months’ worth of invoices that they finally paid in November. Generally, my clients pay within about 30 days, but this particular client was running a bit behind, which, needless to say, caused some cash-flow stress in the household.
As a result, I had a few conversations with the client, and they finally paid so that they’re now current. What’s more, I tried to figure out why they were paying late, and then came up with a couple of incentives to encourage them to pay more quickly. Specifically, I give them a 3% discount if they pay their invoice within 15 days, and give them an additional 2% discount if they pay via credit card (I enter their credit card info on my Android phone using an app from Square). I end up eating the credit card fee, but it gets money in my bank account faster. And as they say, a bird in the hand… It’s MUCH better to have a big bank balance than a big accounts receivable balance–even if you “know” your client will eventually pay. After all, I can’t buy food with an IOU.
Since I’ve given this client the discounts/incentives and agreed to bill them more often than monthly, they’ve paid fast, so things look like they’re on the right track.
Some non-billable work lowers my hourly rate
As some of you might know, my hourly rate is $150/hour–although I recently raised it for new clients, and will raise it for existing clients in January (which I’ve done every year since I started). However, the average hourly rate that you see in the chart is less thn $150; that’s because I worked a couple of projects where the cost was capped, and so I’m tracking that additional time worked as non-billable. As my wife and my chart reminds me: do NOT cap the cost of projects. It’s a real disincentive to finish the project–and get paid.
I also slacked off the billable work in November due to the Thanksgiving holiday and a couple of personal things I’d been working on, but in general, the months were fairly ordinary.
You DON’T need lots of clients
You may have noticed in my income reports that I generally bill about 8-10 clients per month. That’s really not a lot of clients. You might be thinking, “What if you lose a big client? Won’t that lower your income?” Actually, I haven’t ever lost a client, and even if I did, it wouldn’t affect my income, since I have a steady stream of work from other clients–I have several dozen clients for whom I’ve done work over the years.
And even billing 6-8 clients a month, I’m still much MORE secure than I was when I depended on a single employer.
So, despite the consistent doom-and-gloom news stories about the economy, things are pretty steady for me. I also picked up a client at the end of November who’s got a ton of work for me over a relatively short timeframe. And guess what? The client found me through my website. That means I didn’t have to do any marketing–other than some basic SEO last year–to land this big client. I love lazy marketing.