Mission based Consulting: Pricing Affordably but Not too Low
When I started my consulting business several years ago my main goal was to share my 15 years expertise with start-up grassroots nonprofits at prices that were affordable. I quickly realized that although there were an unlimited number of individuals with great ideals and a passion for community service, I discovered that their biggest challenges were lack of knowledge and financial capital to bring those ideals to life. At that point my business’s mission evolved to include helping these individuals expand their capacity to build a profitable social-based business that would be sustainable over time and that could access grant funding but not be overly dependent on grant funding.
Considering that many individuals in the start-up phase don’t have a lot of investment capital, I was motivated to strike a balance between pricing I thought was reasonable for the customer and how much I could charge and still earn a decent living. During my first year, I told myself I would not exceed a certain hourly rate. Although I haven’t exceeded this hourly rate as of yet, I will likely at some point. Now that I know more about what it takes to manage a successful enterprise, I am learning how to compute the true costs of doing business as opposed to setting my rates arbitrarily.
When setting my prices originally, I had not known to figure in all of the costs of doing business because I had no accurate idea of what they would be. In any given week, on average 75% of my time is spent on billable work. The other 25% is spent on non-billable work such as maintaining my financials, marketing, hiring, managing human resources, updating my website, etc. When I figure in the time spent on these activities multiplied by my hourly rate, I realize that during some operating cycles I may only be making a few dollars an hour.
Conducting a SWOT analysis (Strengths, Weakness, Opportunities, and Threats) I realized that if I continue on this path I’ll never retire. What happens if I become ill and cannot work? My income would cease to exist. Working once and getting paid only once is a never-ending cycle that will not allow me to reach my personal and financial goals. My solution to this dilemma is residual income.
This idea is easier thought than done. With the help of a business coach, I have revised my business model. The new model includes an E-Commerce component as well as a human resource component. Selling goods online and utilizing inexpensive labor, I can advance toward my goal of earning money while I sleep. It’s an arduous process that requires a great deal of patience, but I anticipate it will be well worth the effort in the long run.