Archive for November 26th, 2010

How Working More Hours Can Mean Earning LESS Money

How Working More Hours Can Mean LESS Money

Continuing the conversation in this week’s Dear Danielle post, I’ve Lost All Boundaries–Is this Relationship Salvageable?, I wanted to illustrate how someone can be working 50 hours a week and still not be making “any” money to speak of.

I use quotation marks because, sure, she’s getting paid something. But “something” doesn’t necessarily mean “enough.”

There are all kinds of people out there in our industry who fall into the “working poor” category.

A lot of this is because:

  1. They aren’t charging enough, and
  2. They are looking at this as a telecommuting job instead of a business and so they keep working with clients as if they were still that assistant/employee, except that instead of working outside the boss’s door, they’re just working virtually from home.

That they might call themselves business owners means nothing, because for all intents and purposes, they’re not.

I see this thing all the time in our annual industry survey.

While the report that goes out to participants shows the collective/aggregate totals of all responses as a single group, I get to see the results in individual context as an admin.

What I mean is that when someone fills out our survey, their submission gets recorded as an individual number. When you click on a number (the number representing an individual, anonymous respondent), it shows you that particular number’s individual responses to all questions in the survey. In this way, you can see what an individual business looks like in the context of their individual responses to survey questions.

It’s a common to see respondents who are working with 11 (or more!) clients and still only making maybe $30,000 a year, if that.

Sometimes it’s because they aren’t charging enough. Often it’s because those clients aren’t retained clients, they are only project/one-time/occasional clients.

The ones faring the worst are the ones who are working with that many retained clients and still only making that little per year.

And they aren’t an anomaly. Many (dare I say, most) of them are making less than $10,000 a year!

There’s something definitely wrong with that picture and it’s what fuels my passion to help Administrative Consultants start earning better.

But getting back to our example, to provide some illustration, I asked the person who originally submitted the question if she would mind sharing what she was making with this client so we could work with some actual figures.

She was really embarrassed (which I assured her she shouldn’t be; we’ve ALL done things in the initial stages of our businesses that we cringe at later). Still, she very graciously obliged my request (thank you!) knowing that I always keep these things confidential and never use anyone’s real name without their permission.

If you remember in the original post, the person stated that she “took less (money) to build the relationship.”

Problem is, that “less” amounted to less than the national minimum wage that an employee would make! It certainly wasn’t in keeping with what her business needed to earn (and your first priority when it comes to earning is always what the business needs, otherwise you don’t have a business, you have a hobby).

If you look carefully at her choice of words, “took” tellingly suggests that the client was calling the shots and dictating the terms and she passively acquiesced.

To use a crude analogy, how often do we hear of one night stands turning into real relationships?

Not that this situation here is a one-night stand (sort of the opposite, LOL), but it’s the same concept of devaluing and dishonoring ourselves that leads to clients (and one-night bootie calls) not having any respect.

A relationship that is flawed from the beginning just isn’t going to grow into something better.

I point this out only because it’s so important to examine the underlying thinking and default modes that drive our actions because they are what allow us to accept things that aren’t always in our best interests.

In this case, she had relinquished ownership/leadership of her business, took a subservient role in the relationship and let her personal needs and standards take a backseat to the client’s.

In recognizing this, she knows that this will be an area of personal growth she will need to focus on and be conscious of as she continues to move forward with her business and interact with clients.

And what was she making with this client? A mere $350 a week.

So let’s pick this apart…

At 50 hours a week, that amounts to $7 an hour. Yeah, you read that right, seven dollars an hour.

That’s less than the national minimum wage that an employee would make!

And even an employee would really be making more than that if you figure in the Social Security, Medicare, vacation pay, sick leave and all the other myriad benefits that they don’t necessarily take home, but that are earned nonetheless.

At $350 a week and 52 weeks in a year, this person is only making $18,200 annually.

And actually, she’s making even less than that after you subtract taxes, business expenses and operating costs, etc.

I don’t know about you, but I certainly couldn’t live on that little money all by myself, much less with any kind of family to take care.

So yeah, she’s making something. But that something is amount to relatively “nothing.” It’s barely enough to survive and exist on.

And in this particular case, this person actually is a single mom with a high-school age child nearing college years. She is barely making enough to keep them fed with a roof over their heads; forget about any kind of money for college.

Plus, at 50 hours a week, she doesn’t have any time left to do much of anything else, let alone market or work with other clients to increase her income.

There are other things we all have to do in life besides working in our business—things like taking care of kids, grocery shopping, helping with homework, spending time with our husbands or boyfriends, exercising… um, SLEEPING.

Again, I don’t know about you, but I am a mere mortal. I’m just not going to have a lot of time and energy left to do much of anything else in my business after a 50 hour work week with one client.

Even if technically there are more hours left in the day, I’ve still got a life to live, responsibilities to take care and a finite amount of energy with which to do it all.

As you can see, this isn’t a healthy situation in any way, shape or form. It’s certainly not a business situation as she recognizes.

I can hear some folks out there saying, “Well, she isn’t charging enough! If she would just raise her rates, all her problems would be solved!”

No, not actually.

Because a) she’d still have all her eggs in one basket; b) she’d still be working in what amounts to basically an under-the-table job; and c) she’d still have no extra time and space for any kind of growth or business development.

Success is not success unless you are both making money (and by money, I mean MONEY!) and are profiting in terms of also having the extra time and freedom to enjoy it.

Maybe you’ve got the inside track, but I charge what amounts to roughly $75-85+ an hour and even I would be hard-pressed to easily find clients willing to pay $15,000 for 200 hours of administrative support a month.

And not that I would ever advocate this as an adequate, sustainable professional fee, but even if she was only charging as little as $20/hr, that’s still $4000 a month. While there are clients in the world who can afford that, how many of those kind of clients is she (or any Administrative Consultant) realistically going to find at this stage of her business?

Even if she did, that still doesn’t resolve the problem of working that many hours, having time for a life and doing anything else in or with her business.

When you are operating a business, it shouldn’t be in what amounts to the role of an employee to your clients.

And dammit, you have a right to want more, to want better, for yourself and for your kids and your family!

You have a right to not settle for merely a meager, subsistence income that you have to work your ass off just to get! That’s never what business is about!

This is why, like I say, it’s infinitely easier to find and work with a handful of 20-hour a month clients.

The work is more broken up. It’s easier to give superiorm high quality attention to each relationship. AND you’ll have room to grow or take on other kinds of work, clients and projects in your business if you so choose, not to mention a healthier amount of time left for the rest of your life and to simply BREATHE.

To put some numbers to this, let’s go with a nice middle of the road fee of $50/an hour. If you had 5 clients each on a 20-hour retainer of $1000/mo, that’s $5,000 a month. That’s almost four times the amount she’s making with that one full-time employer-client.

Obviously, that’s before taxes, expenses and operating costs, but you get the idea.

It’s still a very nice, healthy income, much more than what most of us ever made as employees. And she wouldn’t have all her eggs in one basket. And she’d have more time, space and energy to work on developing her business and living life. Because with 5 clients at about 20 hours a month, that equates to roughly 25 hours of client work per week, more or less.

This is why you have to understand your role differently and redefine that role. You will never create the kind of circumstances I’m talking about here by working like an assistant to your clients.

AND, if you get away from selling hours entirely, your potential skyrockets for reaching a six-figure business that doesn’t have you working slave hours to earn it.