If you are in the service industry it is a common practice to sell time for money. Often it’s how service companies start out, as a contractor or consultant.
While it’s not a bad way to start out, it’s not a great way to grow a business, and is one of the biggest causes of cash flow problems. There are four reasons why…
NUMBER 1: If you don’t work, you don’t get paid. When you sell time for money, if you take a holiday, get sick or take a day off, you don’t get paid. It also means that if you aren’t working on customer specific work, like admin tasks you don’t get paid. This makes sense, until most business owners end up working 60+ hour weeks just to find enough cash to stay in business, let alone grow one.
NUMBER 2: There is a cap on what you can earn. When you sell time for money, you are limited to… time! Once you sell up all your hours you’re capped. Even if you start selling other people’s hours, there’s still a cap. Selling time for money is difficult to scale.
NUMBER 3: Often times you don’t get paid for weeks, sometimes months after you’ve done the work. You complete the work, send in the invoice and then wait for your customers monthly pay cycle. You can negotiate shorter terms, but the bigger the customer, the harder this is to do.
NUMBER 4: Having to pay staff cash before your invoices get paid. If you have staff, often times you’ll be paying not just yourself, but your staff as well weeks or months before you get paid by your customer. In effect you’re having to finance your customers work yourself!
So what’s the solution? The solution is to stop selling time for money and start selling value for money. Put simply, sell outcomes, not time. By productising and packaging value driven services, you’ll be able to increase margins, take deposits up front and get paid consistently through recurring revenue.
If you’re struggling to productise your services, schedule an appointment and we can brainstorm a few ideas.
