🎙️Show Notes for Episode 037 - 5 Ways You’re Underearning as an Independent ConsultantNov 24, 2021
One of these themes I see across almost all ICs is under-earning.
The issue with under-earning is that you can often look outside yourself for things to blame and for external justifications. However, as an independent consultant, you're creating your under-earning and you’re doing this in five very subtle ways that I want to share with you in this episode.
Once you understand what these five areas are that are causing you to underearn, then you can start doing something about it, because you have full control to address it. Listen in to learn more.
To further assist you with identifying opportunities to improve and grow your business, I want to invite you to check out a new process that I've created called the Independent Consulting Success Blueprint. In this process, I help you assess your business as it is now. You will be able to identify the areas for improvement and opportunities. And then we hop on a 60-minute call where we deep dive into your business, evaluate your findings and determine where your focus should be to get to where you want to go. So I encourage you to book one of these calls so that you can get the clarity that you need in your business to move forward.
Some of those elements that we're going to talk about in this episode, we will cover in deeper detail during the Independent Consulting Success Blueprint process. So if that's of interest to you go check it out at https://www.melisaliberman.com/ic-blueprint.
In this episode, I discuss the five ways in which I see ICs are creating their under-earning:
[04:44] Root Cause #1
[11:27] Root Cause #2
[14:46] Root Cause #3
[20:53] Root Cause #4
[24:05] Root Cause #5
[26:39] What To Do Next
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**note: This is an automated transcript, so please ignore spelling errors and grammar mistakes*
Welcome to the Grow Your Independent Consulting Business podcast. I'm Melisa Liberman, a fellow IC and business coach. On this podcast, I teach you to become a consistently booked independent consultant without becoming a pushy salesperson or working 24/7. If I can do it, you can too, listen on to find out how.
Welcome back to the podcast. So today we're talking about the five ways you're under earning as an independent consultant. And I'm excited to tell you why we're talking about this today. Last week, I was asking my guest, will Bachmann who runs the company on brex, where he sees independent consultants getting in their own way in their businesses. And he shared his perspective on how he often sees independent consultants over complicating their business in many ways. And so, we talked through that. And so, as part of that interview afterward, I thought to myself, like how would I answer that question, if I had asked myself, how do I see independent consultants, those consultants I work with every day on their businesses? How do I see them getting in their own way? And so that's what I want to share with you today. That's the focus of today's podcast. So simply put, the way that I see most independent consultants getting in their own way, is creating their own under earning, the market conditions are not creating, you're under earning, nothing outside of you is creating, you're under earning, you're creating, you're under earning. And I'm going to share with you the five different ways that I see that happening. And with that being said, I also want to tell you that I'm not pointing the finger at you that you've done anything wrong, or something's missing in you. That's not the case at all. In fact, it's actually the opposite. Once you understand where these five areas are, that are causing you to under earn, then you can actually start doing something about it. So it's actually good news that you're creating your own under earning, because you have full control to address it. So that's what I want to dive into day two, today, I want to help you whether you've plateaued in your business, revenue wise, or maybe you've even started regressing, or maybe you're actually making more money than you have in a long time. But you're feeling really overworked on the verge of burnout and overwhelmed. I want to focus today on The Five Root Causes of why you might be doing that, what it looks like to under earn, and the root causes of why you're creating that dynamic for yourself. So that again, we can address that. And you can start making more money in your business, creating the impact in your business, and ultimately having the independence and the flexibility and the impact that you really want. So before we dive in with that, I really want to invite you to a new process that I've created. It's called the independent consulting success blueprint. And it's a process that I walk you through to help you assess where your business is now. And I give you a whole pre work on what does your business look like now? And where is it going really well, and where are your areas for improvement and opportunity. And then we hop on a 60-minute call where we deep dive into your business and figure out where your focus should be, and what's going to be the needle mover for you, and what your obstacles are that you need to overcome in order to get to where you want to go. So I invite you and encourage you to book one of these calls so that you can get the clarity that you need in your business to move forward. And some of those elements that we're going to talk about today, we dive deeper in that icy blueprint process. So if that's of interest to you go check it out. There's more information on the websites. I see as an independent consultant, the letters I see blueprint.com. And we'll put that in the show notes as well. With that being said, let's focus on today's topic, the five ways that you as an independent consultant are under earning, how to recognize this if you are so how to recognize each one of them. And figure out if this is you why and then ultimately why are you doing each one of these, you're obviously not under earning on purpose. So let's figure out why that could be. So let's start off with number one. The number one cause of you under earning is you under charging. This is one of the most common mistakes that I see independent consultants making and it's very subtle, right? A lot of times we don't know what the competition might be charging, we don't know what kind of the standard is we're making a lot of this up, right? Or we might just be trying to meet a client's budget, whatever it is. So it's really this is a subtle cause of under earning the undercharging, that may be a little bit tricky to identify. But let me share with you some examples of what this does look like. And really, you should know this kind of in your gut whether or not you're undercharging, a lot of us know it in our gut. And we just ignore that, I'll give you an example. I was working with someone who knew they were undercharging and didn't address that rates increase that need to happen for over five years. So letting it go on and on knowing in their gut that they needed to and should be and that their competition was increasing their rates. But they just weren't able to get over the hump and get comfortable with doing it themselves. So they knew they were undercharging, and let that go on for quite a long period of time until we were able to address it together. So that's one way that you know, is that you actually do know you're just not doing anything about it. Another way you might know that you're undercharging is if you purposefully are accepting a low bill rate because it's kind of your thought processes will this is a bird in the hand, I would rather make $85 an hour, for example than my normal 200 Because I know that the cash is going to come in. And you know for sure you're accepting that lower bill rate. That is another very obvious way that you're under charging. And you may choose to do that if you've got a cash flow issue. But I would strongly suggest you don't do it for very long, it's a stop gap. So that while you're in the process of creating a more predictable pipeline of high quality, high paying clients, where you're not going to keep accepting that and justifying it and taking it over and over again. Another example of what undercharging looks like is where you're giving 20, sometimes 50% of your rates to a third party, like a recruiter, because you're leveraging them, essentially, you've outsourced business development to them. Now, again, I'm not 100% opposed to leveraging recruiters or marketplaces, they're certainly a really important place for them in this ecosystem. But at the same time, if that's your main source of new business, you've got a problem. Because you're you've outsourced a big chunk of your business and your success to someone else. And without the ability to drive it on your own. And so you're giving up such a huge chunk of your income as a result of that, rather than working on creating that predictable business development process yourself that you know, 80% of the time can bring you business, and perhaps the other 20% or so you fill in with recruiters or marketplaces, a lot of people have the opposite going on 20% of the time they're bringing in business on their own and 80% are relying on others. So these are some more obvious ways that you could be undercharging. And so look at those for yourself. What obvious ways are you undercharging? And in what ways do you think you might be undercharging, and you need to go test the market on what an increased rate might look like? And what your close rate might look like? And that kind of thing? Why might you be undercharging? So that's what undercharging looks like? Why might you be doing that? The obvious reason is that it's more comfortable, right? It's more comfortable for a lot of us to charge less than what we are comfortable with. We have this number that feels comfortable. And then maybe a little bit below that I was talking to someone the other day, it's like, well, I'll just take $10 below that it's only $10. You know, in this case, they were charging per hour, which certainly adds up over time, right. But the point is, is that when you're just charging based on what you're comfortable with, of course, you're going to be undercharging. The reason why is that we all have what's called a money ceiling. A money ceiling is what you feel you're capable of earning is kind of like the number you attach to your own value. And for a lot of us the reason why we get stuck and stagnating at a certain level is because we are have hit that money ceiling in the way that we see ourselves and we constantly are bumping up against that and kind of sabotaging ourselves to stay at it or under it because we're actually aren't, haven't moved to the place where we see ourselves as someone who is the type of person who makes more than that. Another way to say this is almost as if fear of success, like, Oh no, if I start charging more, like the old saying, right, though a lot of us probably heard from our parents, like, don't get too big for your britches, that creates a belief system that keeps you under a certain ceiling that feels really, like safe. And that's one of the reasons like underneath the covers of the mechanics and strategies of this, the reason why you could be doing this another root cause reason is that you're coming from scarcity, like, there's only a few clients out there, and I better take whatever they're going to give me, because there might not be anything else coming down the pipe. That's a scarcity mindset. And that will keep you at this place where you're under charging, and under earning, because you're constantly thinking there's not enough for everyone. And therefore, you better just take what you can get, versus shifting yourself, as successful business owners do into abundance, which means that you start to cultivate the belief system, that there's enough business out there for everyone. And there's enough value that you can provide to be charging the level that you are commensurate with the value of what you're delivering. And therefore your rates can go up as the value that you deliver goes up. So those are under the covers two of the root causes, I see most of why people are undercharging. So let's now move on to number two, which would be you're not charging. Seems really strange, right? Why would you not be charging for your work? And you might add on the cuff of this say, well, most I'm that's not a problem. I'm not doing that. But there's some subtle ways where more people than you would imagine are doing this. So listen in. Basically, the mistake that I see is that one of a couple things happens. You're not billing for work that you're doing. Because you're justifying it for some reason, I cannot tell you the number of times and I personally have done this myself, I will be honest and upfront with you raise my hand here, you justify, well, I'm really close to going over the budget, and I should have told them sooner that the scope was bigger than I expected. So I'll eat some of the costs. Or, well, I'm gonna do this upfront work, because it's really just cost of doing business. And once I get a clearer picture, I can write a better statement of work, and then I'll start charging them. I mean, think about all those internal conversations you've probably had with yourself over the years, to justify some scenario where you're not charging someone, a client's for work that you're doing. A really very simple example is so many clients out there implementing and getting kind of the onboarding step of their new clients without charging them. So many consultants out there, doing a lot of scoping work and due diligence work to get to a really detailed statement of work and doing all of that work for free, versus charging for it as a phase one. So there are many examples. While on the surface of this, you might say, well, Melisa, I'm always charging for my work. When you peel back the onion and look under the hood. There's a lot of scenarios that I often see where clients are justifying. And it sounds very logical, where consultants are justifying and saying that they aren't charging for X, Y, or Z reason when at the heart of it is that they have a fear of rejection. If we just look under the covers, again, it's a fear of rejection and a fear of the client pushing back and needing to have a more challenging conversation potentially, and would rather just eat the work and not charge for it. And so that's the root cause, right? It's a fear of rejection. So as a business owner, you're going to be rejected, my friend, that's gonna happen. And if it hasn't happened to you yet, if you haven't been rejected in some form, or fashion, either grandiosely or more minute Lee, then you aren't playing big enough. I'll just tell you that. So get to the place where you've got those protocols in place, you know what you charge for and you charge for the value you're delivering. And you are charging for things like onboarding your new client or writing and scoping and doing that kind of due diligence. So ask yourself the question of where am I not charging that I could, where I'm adding value. Okay. The third area where you could be underearning is disregarding what I call the low-hanging fruit. The low-hanging fruit are things like transferable projects, there's probably a a better term for this. But essentially, it's the work that you're doing for one client that could apply to that client, perhaps in another business unit, to maybe one of their competitors may not sharing any trade secrets, obviously, but taking what you're doing and your methodology, and applying it to their competitors in some form, or fashion, or even transferring the work you've done to other industries, leverage the work that you're doing, and start productizing it start creating a methodology around it, and create it into that low hanging fruit, where you have stories to tell about how this has worked for other clients, for example, you have case studies, you have sample deliverables, redacted deliverables, right. This is all low hanging fruit. as consultants, a lot of times, we love finding the most complicated, complex, challenging problem to solve that we've never solved in that exact way before and starting from scratch. That is not low hanging fruit. That is not what a business person does. That's what a consultant does, who loves solving problems. We're running a business here. And I'm not saying you shouldn't do things that you love, and enjoy. It's part of why you're here. So don't give that up. But at the same time, think about this from a business perspective that what you're doing for one client can apply to other clients in different ways. I was talking to one of my own clients a few weeks ago about this, she was explaining to me how amazing it was this new contract that she signed. And so I asked her well, what about applying that to this other company, and she looked at me, like a deer in the headlights with sort of a shock on her face, and started telling me all the reasons why it's kind of unique work, why only applies to that client. And they just kept pressing her and asking questions. And we figured out, absolutely, it applies, like the 8020 rule, right 80% Of what she's doing could apply to every company in that industry. And it's a matter of her repeating it over and over again, why not take on that type of work versus like hand baking something brand new from scratch. Another example of the low hanging fruit are those connections you're afraid to call. A lot of us have an amazing network. And we go through the motions of networking, but we don't actually call the people who are kind of at the center of it, who could make the biggest connection, who have the most influence, they may not necessarily have a job for you or a contract for you. But they probably know people who do. And those are the people that a lot of times are afraid to call. And there's all sorts of justifying going on about why now isn't the right time to call that person, I'll wait until after the holidays, I'll wait until this project is done. And I have a better story for them on and on and on. Right? Versus like picking up the phone and calling that person or texting them or whatever it is another example of low hanging fruits, our past clients, what kind of follow on work? Could you propose to those past clients? Could you take what you've done for a past client in one business unit, and apply it to another business unit and ask for that introduction within their organization, you already have learned their organization, so why not leverage that? Those are the types of examples of low hanging fruit. And I've touched on why we don't do that. Part of it is like the consulting DNA. Right? We love solving problems, creating problems and solving the problems finding the problems, making things hard. I'll tell you, when I first became a coach, one of the biggest aha was for me was that I value and saw myself as someone who is very good at doing hard things. And then at some points, I don't know when it was in my life, it flipped on me. It was serving me for a very long time. I could do hard things I could push through and persevere through crazy challenges. But then at some point in my life in my business life, it flipped on me. And I started making things hard in order to feel more valued and place more value on them. Right? It's kind of like that same thing. That could be one of the reasons. And I see that a lot with other consultants. We value hard things and therefore we make it harder than it needs to be. And therefore we under earn because we've created these complexities that are unnecessary. Another reason why we're doing this to ourselves why we're disregarding the low hanging fruit, and therefore under earning because we're just missing that entire layer of revenue that we could be capturing so easily is that we somehow create this construct that it doesn't count. I'll give you another example of a client I was working with and we were just talking about her revenue. And she was giving me this number and I just couldn't figure it out because it just didn't add up and then we realized she wasn't even Counting this other entire revenue stream in her business, because she felt like the money was coming into easily and it didn't count. Now in that case, she wasn't under earning necessarily because the money was actually there. She just wasn't even recognizing it. But she probably would be making more of that type of money, that easy money if she thought that it counted. Right. And then finally, again, the reason why we do this, why we disregard the low hanging fruit, and therefore under earn is similar to the other ones, right? We're avoiding discomfort, like fear of rejection or some kind of shame. So it's easier to not talk to the people who are those connections were afraid to call or it's easier not to go back to past clients and worry about them saying no, we'll just start over fresh. And that's why we're disregarding that low hanging fruit. Okay, number four, why you're under earning as an independent consultant, deferred business development. This is if you are someone who is thinking, I don't need to worry about business development right now, because I'm on a project for the foreseeable future. I cannot tell you how many times I've heard this. And it could be true, you could be quote, unquote, safe. You could be quote, unquote, have visibility into your revenue. But I will tell you, and you know, this too, there are many places for you to be blindsided in this process that you're not actually safe. And, or you're leaving opportunity on the table that you could swap out your leaving opportunity by just getting safe and cozy and your current client and the revenue that's coming in, you're not being forced to think about your business model in a different way. And how you're going to scale, you've essentially created a job for yourself, not a business. If that's what you want, then no problem. Just be honest with yourself that that's what you have, I don't think you want that. Otherwise, you probably wouldn't be here listening, you want a business. And so even if you are on a project, and you've got revenue for the foreseeable future, continuing your business development processes are vital. This is part of running a business. So the reason why you might be in this zone, the deferred Business Development Zone, and there are a lot of people there, you're not alone is an obvious reason, right? It's your comfort zone, you might be justifying it for lots of good reasons. I'm very busy on this client, this client has me working night and day, I'm safe, like I just described to you all of those things. But those are at the heart of it, you justifying being in your comfort zone. So a lot more comfortable to deliver for a client and feel very busy and taxed and tied up with that client than to say to the client, you know, I work four and a half days for you. And that's it, and the other half a day you're doing business development as an example. The other reason why you might be making this particular mistake in under earning is that you're misunderstanding the roles in your company, you actually are running wearing two different hats. You're the business owner. And you also happen to be the employee who works for that business owner. So are you essentially the employee all the time, like a lot of independent consultants are? Or are you flipping back and forth very purposefully between the business owner and the employee, and really running your business in that way, even to the point of having, having meetings with yourself, having check ins with yourself, like running a true business. So if you're in this zone of deferred business development that eventually overtime creates under earning, that's the reason why you're doing that most likely could be something else, but most likely, and that's something you're going to want to address. Okay, the fifth reason, the fifth most common reason why I see independent consultants under earning is that they're taking a lot of action. And they're busy. I was just talking with someone about that this week. They're very busy. They've got a lot of steps. They go through those steps every single day, but they're not getting any results from them. They're under earning because they're working on the wrong things in their business development. They've been doing those things, but then not adjusting when they don't get the results. So it feels really good, right? You're like I'm checking off all the boxes. I'm doing the business development. I'm maybe posting on LinkedIn or I'm networking with people, whatever it is. But when those activities aren't leading anywhere, this is a scientific experiment that you're running in your business. You create No hypothesis that if I do X, I'm going to get y results. So if I do these things, I expect that I'm going to, I'm anticipating that I'm going to get these leads, and these leads are going to turn into revenue. That's the hypothesis. And then you start doing that. And when they don't pay off, when they don't lead to the results that you want, then you've got to pivot, you've got to adjust, you've got to figure out, why is this not working, and adjust for it. Because otherwise, you're just doing something that's futile. And most likely, if you're in this zone, in this kind of example of underearning, the reason why you could be in that spot in your business is that it feels really good to check the boxes, you feel like you've accomplished something. So you're creating that kind of a dopamine hit really, right, I'm doing the things, Melisa, it's just not leading anywhere yet. For it will eventually, but it's not leading anywhere yet. But under the covers of that. Similar to the other four, you're really avoiding discomfort, you're avoiding making that one phone call that could lead somewhere, you're avoid avoiding kind of putting a plant a flag in the ground, about what it is that you do and how you help your clients. You're kind of skimming the surface, if you will, it feels really good. But at the end of the day, you're under-earning because you're not creating those results. So those are the five main situations that I most often see independent consultants creating a situation where they're under earning. So by now you've probably identified, you know, your self identified with at least one of those areas where you could be under earning. And so now what do you do? So I want to leave you with a couple of next steps. The first is, why should you even care about this? So what most I'm under earning, like why does it matter? I'm you know, making money. So why does it really matter? What I want to offer to you is that this has a compounding effect you're under earning. The compounding effect is let's say you make 50k less than you're capable of this year. What it does is create a dynamic, that's an example, right? But it creates a dynamic where you see yourself as a, let's just say a 200k earner instead of a 250k earner. And somehow next year, you end up at that same place. It's like the ceiling that I that I shared with you earlier. So you just keep kind of jogging along up and down a little bit, right. But around that, let's just say 250k Mark. And that's what the compounding effect is because you're not incrementally moving up every year, you're missing out each year, it compounds how much money you're missing out on. It's not just the money that you're missing out on though, it's that you're not becoming the person who earns that next level of money, you haven't moved from the person who earns 250, to the type of person to the type of business owner to the type of consultant who makes 500k. And that's what's adding up over time is not only the deficit in the actual dollars, but the deficit in who you're becoming as a business owner. Okay. And then secondly, I want to leave you with address the root causes. So I talked with you at each level, like what are the root causes of potentially this particular under earning scenario, it could be as simple as awareness, like being aware that you're making these justifications in your mind. So hopefully, today's episode helped you with that. Just to call out where a lot of this stuff, you might be making excuses for yourself to stay in your comfort zone. And so then from there after that awareness, it's a matter of figuring out and addressing the fear of rejection, addressing the fear of failure, addressing if you have a fear of success, which sounds strange, right? But I assure you it is a thing, get out of your comfort zone and challenge yourself and become the version of you who already has what you want. So that's the key here. And that's the work. Obviously, we're not going to solve all of that on this episode. But that's the first step is really knowing what the underlying root causes are that you need to address. And then finally, I'll leave you with a couple of practical steps. The first is go sign up for that icy Blueprint Session that I mentioned to you at the beginning of this episode. So that we can dive into this work that I talked about today and on other episodes with you figure out for you where you're at in your business right now. Why you're there, where you want to be, why you're not there, and what the steps are to get you from where you are to where you want to be. And then finally, I'm going to give you a question that I think breaks open some of this to help you break past that scarcity and fear that could be underlying why you're earning. This is a really fun question. And let me just preface it by saying it is rhetorical. It is rhetorical. I'm not actually making you this offer, but I'm going to give it to you to start thinking about. If I were to give you a million dollars, if you were to sign a new consulting client in the next 30 days, think about what would you be thinking and feeling and doing in order to make that inevitable?
I love that question. Because it really helps kind of put a accelerator on it, right? If you knew you were going to go just get a check for a million dollars by landing a client, let's say a client worth 50k, or something like that. You would go out there and do whatever you had to I mean, legally, to land that clients. And so what it should open up for you things that you might not have been considering, up until this point, if you really sit and ponder that question, so we'll put it in the show notes. Okay, today was a little bit long. But I'm really passionate about how much under earning is going on in this industry, and why it's happening and what you can do about it, so it doesn't happen to you anymore. So go put this work into action in your business, and we'll see you again next week. Take care. Thanks for joining me this week on the Grow Your Independent Consulting Business podcast. If you liked today's episode, I have three quick next steps for you. First, click Subscribe on Apple podcasts or wherever you listen to make sure you don't miss future episodes. Next, leave me a review in your podcast app so other independent consultants can find a benefit to and finally to put the ideas from today's episode into action. Head over to Melisaliberman.com for the show notes and more resources to help you grow your consulting practice from your first few projects into a full-fledged business. See you next week.