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One of the hardest lessons I’ve had to learn as a business owner has been around my money. How to make it, how to manage it, and most of all, how to think about my money goals.
That’s why in this episode, I’m unpacking money goals, why I think that the conventional teachings of online business are broken, and how we can define a new approach to making money.
Listen Now To This Essay On The BS-Free Service Business Show
When you think about growing your service business, a few things come to mind. Maybe it’s having a team or moving into the agency model. Maybe it’s moving towards offering a group program or a course.
All of that is rooted in the message that we should be growing our business at all times, and the word growth is code for relentless revenue growth.
There’s this idea that if we’re not scaling, we’re failing, and marketing and sales tactics come at us from every angle to remind us of that daily.
Never mind that people pushing this storyline are trying to sell us something designed to help us grow or scale. They sell the dream of what our lives would look like on the other side if we only do the thing they’re teaching.
Truth? For service business owners this conversation does every one of us a massive disservice. It overlooks many of the fundamentals of running a service business while telling us that it’s a one-way ticket to a revenue plateau and/or burnout. It encourages us to abandon a business model that’s working for us in order to keep growing and to supposedly make more money.
I’ve heard time and time again from established service business owners that they don’t want an agency and they don’t want to move into a different business model. They want to stick with services as they love working with clients, and they’re fulfilled by the work they do.
But they feel like this is wrong or bad. Like they’re going to be screwed if this is what they choose to do.
And that’s what we’re going to talk about today.
Why $100k is a Terrible Success Metric
For whatever reason, the online business world pushes the $100k a year revenue mark as a success metric.
It’s a bullshit metric.
It’s an empty measure that does little to reflect actual success, and everything to do with income claim marketing where people use their revenue (and lifestyle) to sell you a dream.
In many cases, the $100,000 a year mark is a literal dream, especially for women. Case in point, the 2018 State of Women-Owned Business Study from American Express found that 88% earned less than $100,000 in revenue.
That’s not to say you can’t reach the $100k a year mark in revenue. I know many service business owners who have, but it’s important to keep in mind that it doesn't automatically mean you personally will take home more money.
This is particularly true if you focus on a business model that requires you to reinvest a significant portion of the profits back into the business.
As I shared in my episode on coaching vs. done-for-you services, there’s typically a higher cost involved when you’re focused on mass marketing and/or offering coaching or group programs that require you to reach a wider audience.
One of the reasons I love service businesses is that you can run a relatively lean business, so you’re able to maximize what you’re able to pay yourself. Lower expenses lead to higher profits, and the ability to pay yourself more.
The Dirty Secret of Online Business: What People Really Pay Themselves
Something that’s not talked about enough is how people who are making multi-six or even 7-figures are paying themselves a relatively low salary.
Many times these salaries are below the $100k a year mark, and nothing near what you’d expect for someone bringing in this type of revenue.
The reality is for these businesses to reach those revenue numbers they need to reinvest constantly in order to sustain growth. This comes in the form of high-priced coaches, Facebook ads, and frankly, overinvesting in their teams.
Their operating expenses are extremely high, and it’s done under the guise of “to make money, you need to spend money”. While that may be true, in many of these cases, that money is reinvested purely for the pursuit of a bigger revenue goal, and not because the math makes any sense.
The area I see this happening the most is with hiring. People are being taught that they should hire more and more people in order to fuel the growth of the business. The result is that they’re hiring speculatively and taking on the financial risk of that gamble not paying off, often at the expense of their own compensation.
For most of us, we started a business with our lifestyles in mind, not to grow a million-dollar business that requires us to take on financial risk that requires us to consistently underpay ourselves to chase a dream.
Before anyone decides I’m super conservative in my investing, the reality is that I’ve made many gambles in my business, and the ones that required me to stake money speculatively to “make more money” simply didn’t work out. (And that’s even with literal years of business experience and a hell of a lot of talent.)
In the last couple of years, I’ve made bigger financial gains by being very intentional with how money is reinvested in the business. Instead of throwing money at things I want to happen, I pay myself a professional salary, prioritize paying my team well, and save money for the future.
When I do invest in the business, it’s based on hard numbers, not trying to buy myself a specific business result or trying to reach a specific revenue goal.
Based on conversations I’ve had time and time again over the past five plus years, far too many online business owners are trapped in a cycle of “investing” in the business to try to reach a BS revenue goal.
The result is that they’re chronically and consistently underpaying themselves in the pursuit of the dream of making more and more money.
No one starts a business with this goal in mind, so I want to model paying yourself a professional salary as a more important goal than an arbitrary revenue goal set by celebrity entrepreneurs who just want access to your credit card.
To make that salary goal (which you’re going to decide on below), a service business offers a simple, sustainable path as it requires very little overhead.
What’s Your Salary Goal?
Now, let’s figure out your personal salary goal.
As you think about your personal salary goal, don’t get caught up in the hype and drama of what you think you should be earning. To some extent, we’ve all been programmed by the cult of online business that we need to make buckets of money.
This programming serves to do two things. First, it results in conspicuous consumption where we continuously “invest” in the business, which really only serves the people at the top of the industry.
Think of it as a messed up MLM-style business model where we’re helping a select few at the top of the pyramid.
Second, this is rooted in capitalism, as we’re conditioned to believe that each one of us is entitled to acquire wealth. The problem is that wealth, especially as business owners, can easily come as the result of exploiting someone else.
As you think about your salary goals, and back into a revenue goal, I encourage you to consider:
- How you can meet that goal without exploiting anyone.
- Where you can embrace the spirit of commerce over capitalism.
- How you get comfortable with living in a way, as my past podcast guest Bear Hebert shared, balancing justice and liberation with being financially secure.
Now, let’s do the math, and remember, I’m not going to tell you what to do here. This is your decision! What a nice change from the BS income goals, right?
What If You’re Nowhere Near Your Salary Goal?
First, you may be looking at that salary goal, and thinking you’re not there yet, and you don’t know how to get there.
This is a goal, and this is not about you needing to get there next week, but to give you a new number that’s meaningful to you to work towards.
A goal that’s one you’re invested in on a personal level, not one that’s dictated by external forces. This is important as many times as business owners we don’t have this goal in mind, and we find ourselves underpaying ourselves as we’re last on our list.
When you have a defined salary goal, you’ll be factoring that into your decision-making versus just keeping the leftovers.
You’ll have a tool to discern where you want to choose your goal over that one that’s being shoved at you when you’re scrolling Instagram way past your bedtime.
Three Proven and Simple Strategies for Sustainable Growth
Within a service business, there are a set number of things you can maneuver into order to increase revenue. Remember, the goal is to increase revenue with an eye on ensuring you’re getting paid in your business, not to chase an arbitrary goal.
Here are three proven ones that can help you address common challenges and get on your way to your goal.
Pricing is the most powerful tool you have in your business, as it provides the ability to make more money with the same amount of work. A small pricing increase when compounded over the course of months can quickly add up. Many times, that’s the difference between reaching your salary goal or not.
Adjusting your pricing will enable you to take a positive step towards your salary goal, and it’s something that can be done with both existing and new clients.
Now, I’m not advocating for an overnight 10x of your pricing, but I’m sure most of you have capacity in your pricing. Think about your pricing strategy and start by evaluating your pricing against your goals. Keep in mind trust is a key factor in your pricing, so you want to be thoughtful and intentional every step of the way.
If you’re bumping up against limited capacity and can’t take on more clients, pricing can also be a way to build in more space. You could work with the same number of clients and make more money, or work with fewer clients and make more money depending on your pricing structure.
Speaking of capacity, beyond pricing, there are multiple ways to build capacity in your service business. The most obvious one is through hiring, but I encourage you to run the numbers on this and have a clear plan before you dive in.
This industry sees hiring as a panacea and rarely talks about the intricacies and nuances of hiring. Rarely is someone productive immediately and helping you generate more revenue.
If you’re considering hiring, as a service business owner, there are two key options. First, hiring a billable specialist who can help execute on client work and generate revenue. The other option is an administrative-type role that can free you up to do more billable work.
Either option works, but my personal preference is usually the billable specialist to start as you’ll have a clear set of tasks for them and they’re helping you generate revenue.
The other option for capacity is reworking how your services are packaged. How can you free up time/energy by streamlining how you do the work you do. This can be done by creating a productized service, reducing the number of services you offer or finding ways to do more consulting work that’s high value but not time intensive.
Take a look at the services you currently offer and identify where your time and energy is flowing, and you’ll likely find an opportunity to approach your services in a new way.
Finding New Clients
Each one of us needs a certain number of clients to ensure we’re able to reach our goals, and it may require us to stretch ourselves beyond waiting for clients to come to us.
I know for me, I ran on referrals for so long, that I became complacent about other ways of finding clients. When I did rely on referrals, I managed to reach my goals because I was proactive about asking for referrals.
Once I started my agency, Scoop, it was very clear that I couldn’t continue to rely completely on referrals. Since then I’ve diversified my lead sources with everything from cold outreach to speaking to local networking and of course, content marketing.
If you’re falling short on reaching your goals, consider how you can do something new to find more clients. Be willing to experiment with different ways of connecting with potential clients, and take the time to understand what works best for your specific type of client.
When it comes to finding clients, what works for me, may work very differently for you in terms of the strategies that are best to find your clients.
Keep in mind, that as a service business owner, you don’t need to make it complicated or fancy. The best ways to find clients should be about building relationships, not amassing hundreds of thousands of followers on Instagram.