Is Your Business Model Generating More Money or More Stress?
Business model, shmizz-ness model. I used to poo poo this term until I started studying how successful entrepreneurs think and really strategize their businesses. Your business model is basically how your business makes money. For example, how you attract prospects, convert them into clients and make a profit.
If you are in a service based business, the most common business model is to work with clients on a one-on-one basis. This has its advantages and disadvantages. The upside of the one-on-one model is that someone is paying you for your help. It’s a great feeling when you see the results that your clients get from taking your advice. And it becomes even better when your clients are paying you what you are worth, right?
But what happens when you have a full plate of clients and you are crazy busy? Like when you can’t even get away from your desk to go to the bathroom? You don’t have time to review your profit loss statement, get a massage, or even take a vacation. Bummer.
If you have a full plate when it comes to clients, I’ll bet you wish you didn’t have to work so hard to make about the same amount of money year in and year out. A better business model is to have scale, leverage and passive income, in addition to working one-on-one with clients.
Leveraged income is when you work with multiple clients at one time. It’s not one-to-one. It’s one to many.
Here’s an example of how leveraged income works.
Let’s say you’re a nutritionist and your hourly rate is $100 an hour. If you spent the same hour and taught a one hour class with ten people paying $30, you just tripled your revenue to $300, spending the same amount of time. That’s the leverage.
Here’s an example of how passive income works.
Passive income is when you don’t have to be actively involved in doing the work to get paid. Let’s say you are an accountant. You are still looking for clients but you want to make money while you are on vacation. So you decide to create a workbook for people to use for their taxes.
Your upfront costs are $2000. This is the time it took you to write it, design it, and get it up for sale on your website. You sell it for $50. When people buy the workbook on your site, you don’t have to do anything. It automatically gets shipped, and you get paid. You are drinking Mai Tais in Hawaii while people buy your product. Sweetness.
If you don’t have enough clients, you need to build scalable and leveraged programs/services/products/offerings at the same time you are building up your one-on-one business. This is so huge! OMG I wish I had known this when I started in business.
So how do you do this?
Write down all of your services and package them into a few programs. Price the one-on-one service to be more expensive.
Create a passive or leveraged product and price it lower to attract more people who may want to test the waters with a less expensive product. Make sure you are pricing it to make a profit, not breakeven.
Create a line item for marketing the items in your new business model. Consider spending at least 5% of your business revenue on marketing. Why? Because if you don’t, how will anyone know about your programs or want to buy them?
In these new leveraged and passive programs, create them in a way that you get paid over a longer period of time and not just once. Recurring income is super important.
As you build your empire, remember that it’s ok to work one on one, but make sure your business also has leveraged or passive income components to it. It’s a much better business model, and I’ll bet you will be happier with the results.