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Summary:

The reality sets in once you start getting busy. What once what once seemed like a badge of honor starts resembling a ball and chain. Even if you thoroughly love your work, you can see the billable hours trap you’ve set for yourself.

A common dilemma for many solo entrepreneurs and freelancers is how to justify turning away paid work from one-on-one clients in order to create or explore new revenue streams.

When you first start your business, you’re simply looking for clients, so you become excited by the prospect of actually being able to work for someone. As things get busier, you’re excited to finally be able to say, “I’m booked.” Then the reality sets in, and instead of thinking excitedly, “How am I ever going to handle all this work?,” you actually start thinking:

  • “What if I get sick?”
  • “How will I retire?”
  • “What if I decide to sell my business?”
  • “If I’m not doing billable work, then I’m not getting paid.”
  • “What if I want to take a vacation?”
  • “The only way I can make more money is to charge more.”

All of a sudden, what once seemed like a badge of honor starts resembling a ball and chain. Even if you thoroughly love your work, you can see the trap you’ve set for yourself.

Deciding to Free Yourself from the Trap

In order to free yourself from the trap, you have to begin weaning yourself from one-on-one clients, and somehow replace that income with revenue from another yet-to-be-created source. It seems like a magical balancing act to make it happen, and you arrive back at the original question, “How do I justify turning away paid work from one-on-one clients in order to pursue [fill in the blank]?”

First, you have a choice to make. Do you want to continue working under your current business model, with all its limitations, or do you want to figure out and pursue an alternative? The best way to decide is to connect with the “why.” For example, why do you want pursue an alternative? Do you want more free time, greater flexibility, more income, etc., or do you want the business to be less reliant on your physical presence? Once you know the reason why you want to do it, then you just have to explore the “how” and find a way to make it happen.

Also, if you decide to go after the alternative, you’re going to have to accept that resources will need to go towards this new pursuit. That might be in the form of money, like the loss of income when you turn away one-on-one clients, or when hiring an assistant to take over some of your work or help out in other areas of your business. It might also be in the form of time, like you having to work additional hours so that you can maintain your current income while creating new revenue streams.

Alternatives to the Trap

The next step is figuring out what options you have for creating additional revenue streams. What you’re looking for are more automated sources of income (ebooks, products, etc.) or more group-centric sources (group workshops, membership sites, tele-seminars, etc.). The easiest way to get started is to explore ways to repackage or re-purpose your one-on-one work. Is there some way to create a group setting around the consulting or work that you provide on a one-on-one basis, or is there a way to package that into an informational product?

Another place to begin exploring the possibilities is with common questions that you’re asked or common problems that customers and clients report to you.  How can you create a “do-it-yourself” solution around these common questions or problems? Could you create a product, an ebook, an audio workshop, or a group tele-seminar that addresses these issues?

As an added note, you’ll want to remember that it’s more important to roll out these alternatives quickly and perfect them over time than it is to get caught up in the details. A tele-seminar, for instance, can be put together quickly and easily using EventBrite and a free conference call solution.

As solo entrepreneurs and freelancers, it’s easy to get caught in the spin cycle of working only billable hours, but there are ways to begin introducing new sources of revenue to your business. If you hope to create the greatest level of flexibility around your work, they’re definitely worth exploring.

At what point in your business did you begin setting up other revenue streams aside from one-on-one client work?

Photo by Flickr user »dolfi«, licensed under CC 2.0

  1. Oh, man — I so get this! Our business, New England Multimedia, became a billable hours trap that relied entirely on one person to keep it going. That’s just plain frightening. We’ve been brainstorming like crazy, and laying the foundation to start turning our gifts and talents into revenue streams. Webinars and screencasts will be part of a larger endeavor to get out of the one-client-at-a-time grind. Scott calls it “making widgets.”

    At the same time, both Scott & I are working on personal projects that will NOT become billable hours traps, plus one we’re doing together to see our dream of travel happen. We’re turning the Titanic here!

    Michelle Quillin for new England Multimedia & Q Web Consulting
    http://twitter.com/NEMultimedia

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  2. Great post – completely vital freelancers get this. One word of caution, when looking for other projects don’t forget that you time is valuable. The opportunity cost is foregone billable hours. Your are becoming an investor, using your time, and you need to evaluate projects based on their likelihood to succeed.

    Good luck

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  3. Problem with selling your time is there’s no endgame. You can’t sell more of it. The only option is to be paid more per hour and for most people that only goes so far. Even if you bring people into your organization, they have prebuilt revenue caps (only so many billable hours in a day).

    Good article. I always encourage service providers to spend time looking into passive revenue streams. There’s a lot of opportunity out there. Unfortunately, most service providers get so bogged down that they can’t see it.

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  4. I am stuck with the same. Earning very good by freelancing but I have hit my limits. Still trying to find a passive source, but not successful yet in that area. It’s a tough journey to handle everything alone. :(

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  5. What I did is this:
    While running a small Web development business (10 employees) I developed on my spare time an Accounting Package called Caspit. We started to sell it along side the regular business (project oriented) that we were doing at the time.
    Slowly, over the years the Caspit business grew, so that now
    I am not doing project-development any longer.
    My advice to developers: always strive to develop a product and not a project.
    Dror

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  6. I have been in the same position and worked out of it. I took a couple of packages that I developed that have broad applicability, bought them from the customer and built the configurable products.

    This is working well as I only have to work on a few programs that I know very well to keep the stream going.

    JD

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  7. [...] I read a post on Web Worker Daily titled, The Billable Hour Trap. If you’re a freelancer, you should have a look. It’s something I’ve been turning [...]

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  8. Delegate also helps.
    If you can, delegate as much work as you can.
    It will enable you to do more with the same amount of time.

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  9. Good article.

    Another approach could be to turn the per-hour-pay into project pay based on value creation. This is riskier but enables you to scale your knowledge across several projects and increase revenue. It’s also harder to say: I’ll deliver X for Y dollars by Z date. How much time something takes is very often irrelevant if you are working with providing solutions.

    I rather think service than product as we work with intangibles, concepts and knowledge. Focusing on solving problems and adding value brings the work from “just” being a per hour gig to providing a real solution. Makes you less interchangeable.

    The above enables bursty work, shorter really well-paid sprints that free up time to work on new projects, research et cetera. It also moves you further away from the limited “salaried” solutions with limited earning power.

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