One of the issues for self-employed people is the way income can fluctuate quite markedly. It's often referred to the feast-or-famine effect.
While it's just part of running one's own business, it can be pretty frustrating not knowing how much money is going to be coming in, or at least not being able to count on at least a portion of it being steady and reliable.
There are ways to help overcome this, though. Most business owners can't entirely wipe out the ups and downs in their income cycle, but many can at least make the undulations swing less wildly and create a predictable "foundation" of revenue. If you can achieve that, then bad months are not as nerve-wracking, and good ones can be a real boon.
I'll illustrate this using an example of a friend, Sally, who owns her own little gardening business.
Now Sally got into gardening (some would call it garden landscaping but she's a real wellies-on type and baulks at the idea of a fancy title) because she's always loved pottering around and when friends offered to pay her to help them sort out their back (and front) yards, she not only loved the work but enjoyed having a bit of pocket money to spend on herself. When her marriage foundered, though, she asked me to help her turn her hobby business into something which could support her more effectively.
We decided one of the most important things was for Sally to create a baseline revenue stream which was regular and predictable, which she could grow over time. Instead of just selling her time on an ad-hoc basis, Sally and I worked out several "gardening packages" she could offer. They boiled down to roughly:
- Monthly: regular weeding and minor tidying
- Quarterly: planting seasonal annuals, minor seasonal tidying
- 6-monthly: mulching, pruning and major tidying
- Annual: planting new perennials, repotting, major tidying
Now, Sally could sign up clients for any of these regular services, and as she billed monthly, she would have income coming in on a far less ad hoc basis. Not only that, but by also designing some attractive vouchers, she made her packages suitable for gift-giving - and the local garden centre through which she sourced the majority of her supplies was more than happy to display these, as well as her brochure, at their checkout.
Sally soon had a regular clientele. But she's been smart about the packages, too, as she'd made sure each one did not exclude the others. It was not too hard to upsell a "weeding" customer to a quarterly one, or to get someone to commit to a 6-monthly package and find not long after they were asking about some of the other options. Of course, she offered a couple of additional options:
- A discounted all-in-one package which included all the services
- A one-off consultation and design service, which was a great introduction for customers wanting to redo their gardens and often lead to selling one or more of the packages, but could also be offered to existing package clients who wanted not only to maintain or upgrade their gardens.
Finally, Sally also spoke to a couple of other business owners she had met through networking. She arranged with a handyman to refer business his way and he would do the same for her. Sometimes she even sub-contracted to him, depending on what the job entailed. She did the same with an arborist. She found out many people did their gardens up just before selling or after buying a house, so she also got some friendly local real estate agents on board. Oh - and she rewards client loyalty with vouchers to spend at the local nursery I mentioned above.
Sally has built her little business up quite nicely by packaging her services, and is finding her income a lot more regular. She still takes on ad hoc work when she has the time available (often converting this customer to a new regular client). She still has fluctuations in her income but there's a good chunk of it she can count on - and the best of all is she has a great win-win relationship with her customers and a small network of associates.
Many other service businesses can also package up their time in a similar way.