(Taken from the Profitable Authority Framework: Positioning, Profit, Productize and Promotion)
Does your profit reflect the value your business delivers today? As your business grows, your pricing, payment plans and offers deserve another look. Otherwise, you can bring in more revenue, take on more responsibility and still keep too little of what you earn.
Growth changes the math.
If you started as a solo operator and have since added a team, revisiting your pricing involves more than adding their compensation and an administrative margin. If that team brings deeper expertise, broader capabilities or better outcomes, the value you deliver may have increased, too.
Even if your business has always had a team, its capabilities, costs and client results may have evolved while your pricing stayed put.
What Makes You a Profitable Authority?
I define Profitable Authority as turning proven expertise into recognized marketplace value that consistently produces revenue, opportunities and influence.
You become known for something valuable. The right buyers understand why your expertise matters. Your business gives them meaningful ways to purchase that expertise at prices that support profitable delivery.
My Profitable Authority System connects four drivers: Positioning, Profit, Productize and Publicize. Together, they connect your brand brilliance to marketplace demand, business assets and revenue opportunities.
But a full calendar and an impressive client list don’t tell the whole financial story. You also need to know what it costs to produce those results and what remains for your business. These four lessons below help you examine whether your profit strategy still fits your business and where your expertise could produce a greater return.
1. Put Payday First When You Set Your Prices
Your paycheck should be part of the plan from the beginning. Too many coaches and consultants pay contractors, cover their subscriptions and handle every other expense, then hope enough remains to pay themselves.
My Payday First approach is a different way of thinking about profit. Instead of hoping the bottom line will support you as the business owner, you start by planning your pay, business profit and tax reserve. Then you determine what the business can afford to spend on delivering services and administration.
Think of your revenue as money that must fill five buckets. (This is a planning process, not an accounting exercise. Check with the CPA first before changing operations based on this process):
- Your compensation: Your pay for running the company.
- Planned profit: Money you want the business to retain beyond paying you and covering its other commitments. This is what you carry forward for business expansion.
- Tax reserve: Money set aside for estimated taxes.
- Service delivery costs: Contractors, assessments, materials and other expenses involved in serving clients.
- Administrative costs: Marketing, bookkeeping, insurance, software and other expenses of running the business.
When Good Revenue Doesn’t Support Your Goals
Imagine a home-based consultant serving small businesses. Annual revenue is $200,000. The owner wants $100,000 in pay and wants the business to retain 25% of revenue as profit.
Here is the proposed budget:
| Bucket | Annual amount |
|---|---|
| Revenue | $200,000 |
| Desired owner take-home pay | $100,000 |
| Planned retained profit: 25% of revenue | $50,000 |
| Tax reserve | $30,000 |
| Cost of service delivery | $48,000 |
| Administration: 20% of revenue | $40,000 |
| Total needed | $268,000 |
| Shortfall | $68,000 |
At first, the revenue looked respectable but the plan doesn’t balance.
After reserving $100,000 for the founder’s pay, $50,000 for profit and $30,000 for taxes, only $20,000 remains for service delivery and administration. Those expenses currently total $88,000.
That gap is information you need before signing more contracts or committing to more expenses.
Make the Business Model Support the Payday
Payday First asks you to design a business that can support your financial goals. When the numbers don’t fit, here are a few choices to consider:
- Review pricing. Do your fees reflect the value and results you deliver today?
- Reduce overhead. Eliminate unused software, duplicated services and spending that produces little return.
- Improve delivery. Use repeatable processes, clearer contractor assignments and appropriate group delivery to lower costs while protecting quality.
- Test additional revenue streams. Explore paid workshops, assessments or resources built from existing expertise.
- Revisit the timeline for your goals. Your desired paycheck and profit may require changes that take time to implement.
Your solution is not just getting more clients. Remember that more revenue can bring additional delivery costs and taxes, so $68,000 in extra sales may not automatically close this $68,000 gap. Your pricing and spending decisions need to change with it.
2. Make Payment Plans Support Your Time to Profit
Payment plans can help clients buy. They also determine how much of the engagement your business finances.
Imagine a $12,000 coaching package paid over six months at $2,000 per month. Initial assessments, specialist work and onboarding cost $3,500 before the second installment arrives.
You have made a sale, but the first payment hasn’t covered that early delivery cost. If the client stops paying, your business carries the shortfall.
This is why I emphasize Time to Profit: examining how quickly an engagement recovers its relevant costs and starts producing a return. Map the payment schedule against the work. At each milestone, ask:
If payments stopped here, would the amount collected cover services already provided and costs already committed?
An appropriate initial payment and subsequent payments aligned with delivery can reduce your exposure. The objective is to collect enough along the way to cover costs and support profit, rather than relying on the final installments to make the engagement worthwhile.
3. Price for the Outcome Your Client Values
Your current offer could be leaving money on the table because it addresses only part of the client’s problem.
Consider a consultant selling a three-hour teambuilding workshop for $5,500. During the discovery conversation, she learns that disagreements between two departments are causing missed deadlines, repeated work and hours of management intervention.
The client needs more than a good afternoon together. A workshop may start the conversation, but lasting improvement could require assessment, practice and follow-up.
That gap creates an opportunity to offer a more complete solution.
Before proposing it, the consultant helps the client quantify the cost of the discord:
- How many employee hours go into repeated work or resolving misunderstandings?
- How much management time goes into settling disputes?
- What additional expenses result from project delays?
- Have these problems caused canceled contracts or lost customers?
For illustration, suppose eight employees each lose two hours a week to avoidable rework. At an employer cost of $60 per hour, that represents $960 a week. Add three separate hours per week of management intervention at $100 per hour, and the estimated cost reaches $1,260 a week, or $15,120 over 12 weeks.
Those are hypothetical figures, but they show how a conversation about “team friction” can become a discussion about business impact.
The consultant could then offer two options:
- $5,500 workshop: A focused session to identify friction and establish initial working agreements.
- $30,000 team-effectiveness engagement: Confidential interviews or assessments, the workshop, a practical action plan, manager coaching and follow-up sessions over 90 days. The expanded engagement gives the team support to put new practices into use. The investment of this option would be covered in 24 months.
These illustrative prices would still need to support profitable delivery and fit the buyer’s needs and budget. The estimated $15,120 problem cost provides context for the investment; it does not guarantee that the engagement will eliminate those losses. For the client, it does help them fully recognize the problem and its impact.
And, it could result in increased revenue either now or in the future. The issue is that the consultant has planted the seed for an expanded opportunity and helped the client justify the cost.
4. Use a Strategic Book to Strengthen Your Pricing Power
Raising your prices also requires helping the right buyers understand why your expertise is worth the investment. A strategically written book can support that work by strengthening your credibility and visibility.
Your book gives prospective clients a substantial introduction to your thinking. It explains your framework, addresses problems they recognize and demonstrates how you approach solving them. Before they speak with you, readers can begin to understand the value you bring.
Consider the team-building consultant. A book about reducing the hidden costs of team discord could position her for conversations with leaders responsible for productivity, retention and business performance. Those buyers may be looking for a broader solution than a standalone workshop.
Bring Your Framework Into the Sales Conversation
Profitable authorities bring their book into the sales conversation. It helps you explain and defend the value of your offer when negotiating with prospects. You can refer to your framework to show how the work fits together, why certain steps matter and what a shorter engagement would leave unaddressed.
One approach I like is sending a prospect a copy of my book with my business card placed in a highlighted section that speaks to their pain or aspirations. Or if I send it digitally, I tell them to check out the highlighted section on page xx.
It gives the prospect a specific place to begin. It also shows that I listened and can connect my expertise to what matters to them.
Done well, a strategic book helps attract better-fit customers: people who value your approach, recognize the importance of the problem and can invest in an appropriate solution.
Through our Profitable Authority Accelerator, we connect book creation to those business goals: the audience you want to reach, the authority you want to establish and the offers you want to sell.
Your Next Stage Deserves a Fresh Look
You don’t have to be struggling to benefit from revisiting these foundations.
A profitable business can still contain outdated prices, payment plans that create unnecessary exposure or expertise that could support additional income streams. The question is whether your current strategy rewards the value your business delivers now.
Join Us December 3rd for our next Lunchtime Brilliance Webinar Series, “Profit Strategy for Coaches and Consultants: Four Lessons You Can’t Afford to Ignore.”
I’ll interview Sabrina Melendez of Evergreen & Sage, a bookkeeping and back office support business, about the financial foundations behind a growing expert business. If your business has grown, this is an opportunity to revisit the math behind that growth.
Want to examine what these concepts mean for your business? Schedule a complimentary Profitable Authority Analysis with me. Our Profitable Authority System examines your positioning, profiting, productize, and promotions to build authority, visibility, credibility and greater revenue.
