The biggest change in running your own business? Definitely a psychological one. You have to learn to think in terms of what you really want, and the opportunity costs between you and what you desire, which — all feelings of competence aside — almost none of us actually do on a day-to-day basis.
The fact is, we’re all lured by the shiny and impetuous, and it takes a long time to rope that desire and tame it for our own purposes.
To illustrate, consider this typical conversation between my husband and I:
HIM: What’s my hourly rate, for doing awesome visualization stuffs for an agency?
ME: Like what?
HIM: Dunno yet. But I told them it’d have to be really awesome, since I’m doing my own stuff. And it would have to be no more than 20 to 40 hours. Their stuff looked pretty cool.
ME: Who are they?
HIM: X Agency.
ME: researches Their front page is flash.
HIM: Guess that’s why they need me!
ME: skeptical Their work doesn’t look that interesting.
ME: Hmm, you’re right.
ME: So… if you did a 20-hour project for them for $500 an hour, that’d only be $10,000. Or we could just do another Master Class.
HIM: You’re right.
HIM: faux pout Why are you so logical?
Why am I so logical? Cuz I’ve learned the hard way that if I don’t rule my magpie side with an iron fist, I am easily lured away by 5-figure sums. So I’ve learned to conquer my desire for the shiny with logic.
With the exception of one very awesome client, we’ve suffered (and our goals have suffered) every time we’ve let our heads be turned by a phat consulting budget. It just ain’t worth it.
Creating products, and learning to sell them, gives me a totally new type of math to work with:
20 hours of consulting? Hmm, well. Sure, $500/hr sounds like a lot, but we pull in nearly $10k from one JavaScript Master Class. And it’s infinitely more fun. And takes less time. And we get paid faster. And we make new connections with people who might become long-term customers. (And it has a greater impact, too, because we’re sharing our love of JavaScript and helping people make more awesome stuff, not just helping to promote some big brand.)
This is the no-brainer math of opportunity cost vs upside. This is the no-brainer math of freedom.
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Yes, opportunity costs matters, but you’re comparing $10K from a very real prospect to $10K for a master class you haven’t set up yet. You still have to find clients for that master class, right?
The other thing to do is charge a rate, for Client X Agency, that gives you $10K in the same amount of time it takes you to do the master class. If a master class takes ~10 hours and you get $10K, then you should be charging a rate of $1,000/hr to Client X Agency. That’ll make it more worth your while to do the side jobs (money-wise, at least).
Great stuff. I’m really enjoying your posts.
You gotta be kidding, Michael! Even if we didn’t always sell out our Master Class, the consulting gig would still be a bad deal.
Here’s why:
The shorter the project, the higher the rate… but not only will nobody pay $1,000 an hour, there’s always slooooow fooot-draaaggging when you get started, internal politicking and BS to deal with, and the fact that clients whose taste is as good as yours are rarer than unicorn poop.
And how often does consulting work turn directly into more money later, without doing more work? Just about never.
On the flip side, our course is repeatable, easily sell-out-able, creates new repeat customers and demand for more classes like it, and many of our students are referred by previous students. And yet, to serve these new students, we don’t have to change a thing, go to any meetings, or respond to any proposals. Barf.
Products = yay!
Clients = boooooooooo!
Opportunity cost is a much, much bigger, deeper, more involved thing than the strict dollar amounts you’re thinking about.
Excellent response. Thank you, Amy. Love this one particularly:
“And yet, to serve these new students, we don’t have to change a thing, go to any meetings, or respond to any proposals. Barf.”
“And it’s infinitely more fun” That is the biggest key for me. Either way, you are going to pay the bills (well, I guess if your bills are really high you may not), so it really comes down to the more enjoyable, more profitable (in regards to your impact on society) decision.
Calling all cars, calnlig all cars, we’re ready to make a deal.
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