Monday, January 26, 2009

Business Plan for Service-Based Company

You just got laid off and you're thinking about starting your own business...
  1. But, you don't know if working for yourself is something that fits your personality
  2. You're not sure how feasible your business idea is.
Yesterday we covered the above quandary with a product-based model. Today let's talk about a service-based model.

We should still think in terms of the business plan and if people need your service(s). All that research is very important. It can be a little less straightforward when it comes to the fee structure. You may employ one, any or all of these fee structures over time or with different clients. What works in one situation does not always work in all.

One of the first things a client will ask you is "How much is this going to cost?" This of course is a very tricky question because most of the time, you will have no idea what "this" actually is until you go in and get your hands a little dirty. I would always recommend a free evaluation lasting an hour on-site. It's really only when you see a situation for yourself that you can make a clear "estimate" .
If you are offering services that do not relate to a particular situation, like an hour of phone consultation or office consultation this would not apply to you. If you are about to repair something like a computer system for an entire office, seeing the situation may not be crucial, but it may change the way you choose to bill because of the organization or (lack of) that you see on-site.
Here are some options for fee-based services:
  • Hourly (with a mininum)
  • Daily (with or without expenses)
  • Value-based (based on what is produced by your service)
  • Retainer and monthly fee
  • Subscription (a range of time put in, say at least 20 hours monthly at a flat rate paid in advance.)
I'll speak to this last one a bit because it's a little more unusual but can work in a difficult economy or with a nervous client. What you're saying is:
"I will work at least X hours monthly and probably more by being on call for you. These are my hours and you (or your staff) may call me during those hours for immediate assistance all month long."

You may wonder how that could work for you?! Well, if you know the client and have worked a little with them, this may be a sort of maintenance contract. Because the money is paid up front, monthly you have certain income. Because they are not watching the clock all the time, worried, they get a sense that you're really there for them.

What you need to do to make this work is to have a flexible schedule and fit them in so that they are not taking away from your other clients, but are actually filling time that you might otherwise not be working. Of course the hours and fees would still need to be negotiated, but having at least one client on this kind of plan may create some security for you and keep you easily engaged with their process.

Contracts like this can also be a stepping stone to bringing on other folks into your company. If you do the initial work, having others do the upkeep may be a way to increase your income.

Someone once said to me "Being a consultant is like renting your brain." What she was eluding to is the 24 hour day and how to make more of it. You can be sure I'll talk more about this in the future as well.
Good day, folks!

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