Last week we talked about the fastest way to make a million dollars. This week I wanted to talk about something more attainable: making 6-figures as a consultant.
While the amount you can make varies based on skill level, it’s very possible to make $100,000 USD per year (or more) as a consultant.
Is it possible to make $100,000 or more as a consultant?
Yes! If you are an experienced, full-time professional with skills that are in demand, there is no reason that you can’t make a six-figure income in the US market as an independent consultant.
This is a bold statement, but it is also a statement that I can back up with more than 10 years of experience as a six-figure digital marketer. Here is what it takes to get to that income level as a consultant (drawing from my experience in the field of digital marketing).
First, let’s look what it takes to make $100k per year
Let’s start with a standard rule of 2,000 working hours per year:
40 hours per week X 50 weeks a year (allowing two weeks off for vacation).
To generate $100,000 of revenue, you would need to charge $50 an hour:
$100,000/2,000 hours = $50 per hour
Simple math, right? Charge $50 an hour and work a normal work-week and you have achieved your goal. Of course, it’s not quite that simple.
Where this assumption breaks down is that if you work the entire 40 hours a week, you don’t have any time dedicated to business development. You fill every hour cranking out work and you have no time to find new clients.
Outside of a $100,000 salaried job, you will need to develop a pipeline of customers to make your revenue goal, and building the pipeline takes some time.
That’s why many consultants I know target $100 an hour, a rate that produces a margin of error for hitting their salary goals.
At $100 an hour, you only need to work 1,000 hours and hit that $100k a year mark.
Say that you land two clients who buy 500 hours of your time at $100 an hour. You can achieve your mark, while filling up the rest of your time by doing non-billable work like business development or community leadership.
Your first clients aren’t always the right clients
The first thing you need to do when you go out on your own is to attract clients.
When I went out on my own, I basically told every single person that I know professionally, personally, family, friends, that I was starting this business. All that I talked about was this business!
This ranged from gently asking for business referrals all the way to begging for help.
“Hey, I started my web design business and I would love it if you could refer clients to me.”
My first clients were a mixed bag. They were family. They were friends. They were previous associates I had worked with.
At first, I took any client I could find. I would take a $500 job from a person who was going to nickel and dime me on every task. It didn’t take much time to learn that these were the wrong clients.
In contrast to the bad clients I took on, there were also some solid, easy-going clients who were willing to pay me a $1,000 to $2,000 per month retainer. These are the type of clients that allow businesses to scale.
To understand why you should not waste time on those $500 clients, think about it this way: If your goal is to make $100,000, you need to have 200 projects at $500. Nobody in their right mind can ever make $100k that way!
No individual can attract and manage 200 clients in a single year.
For many, the temptation is to bring in other resources who will help you save time and generate profit. This could be a junior resource or a business partner with a similar skill set.
But what these business owners forget is that they need to take on twice as many clients to make the same amount of money! Now, instead of 200 clients, they would need 400 clients to achieve their goals.
Now think about how ridiculous that is. You are going to be working your butt off AND you are going to pay someone else. The math just doesn’t add up.
In contrast, let’s go back to that client who pays you a $2,500 a month retainer. To achieve your $100,000 revenue goal, you only need FOUR of those. That’s more reasonable to think about, isn’t it?
So put it in that perspective: all you need is four people to pay you $2,500 a month or eight people to pay $1,200 a month and you’re there.
This is much more achievable.
Can you find eight people? Can you look at your LinkedIn contacts and find 8 companies who might need your services? Do you know people who work for small or medium businesses who need marketing help?
Sure you do!
Be a specialist, and be very good at it.
How did we arrive at charging $100 per hour in the first place? This number is based on market rates for digital marketing consultants in the United States. But $100 per hour is just the beginning.
To charge more for your time, it pays to specialize, or “niche down.” Instead of being a marketing generalist claiming expertise in all areas of digital marketing, focus on an area where you can apply a common methodology and process to multiple clients.
Say “I’m focused on only strategy” or “I’m focused only on development” or “I’m focused only on analytics,” for example.
To grow my own consulting practice, I had to niche down. Even though I’m skilled in many areas, such as PPC, SEO, analytics, email marketing, and all kinds of other cool stuff, I only take on one specific type of consulting project. I really only do analytics consulting and only for the Google Analytics platform.
Why? Because I realized that there is no efficiency gained in doing an SEO project one day, an analytics project another day, then PPC a third.
While you can have many professional skills, it’s difficult to market yourself as expert in everything. Focus allows you to charge more. Efficiency allows you to do the same projects in fewer hours.
The key here is to deliver great work. You need to deliver good work to retain the client you worked hard to land; repeat business is usually easier to close and more profitable than going after new business. You may be able to get by doing mediocre work for a while, but eventually it will catch up with you and your reputation.
Earn more than $100 an hour with value-based pricing
When you have expertise and a well-tuned process for producing deliverables for your clients, you will be able to start charging on the value of the work, rather than an hourly rate.
For example, you might start charging $5,0000 to complete a project that only takes you 10 hours to get done. Now you are not billing the client $500 an hour (no customer in their right mind will want to pay you $500 an hour), but you are making $500 an hour, because you are pricing based on the value that you deliver.
Your efficiencies make it possible for your rates to go higher.
This is where I am at in my own business: for almost every project that I work on, I get paid an effective hourly rate of between $300 and $500 an hour (without actually charging an hourly rate).
And guess what? When you charge based on value, you don’t even need to take on 10 clients. You might be able to make your revenue with just four clients.
Plus, at $500 an hour, you only have to work 200 hours to make $100k per year. That’s where it really starts to get fun.
Make more by selling less
Now you can see the math behind making six figures in marketing. Smart business owners can achieve their goals while working a lot less and selling fewer projects.
More clients do not always mean more profits.
But what if I told you something even more crazy. What if I told you that you that winning every deal is a recipe for disaster?
I know that this sounds counter-intuitive, but what if you sold less often?
What if you targeted a 30% close rate (sales percentage) on any new business opportunity?
Your business would be healthier than ever.
Instead of trying to land every deal, why don’t you look at that as the biggest advantage you have is that you don’t NEED every client?
Let’s use my business as an example. I receive about 50-100 leads a year on my website (1-2 per week).
Fifty leads a year sounds like a lot, but one lead a week sounds like nothing.
If you are hungry, you can get at least one lead a week, right?
Now, to be conservative, let’s say half of those leads are a waste of time. That leaves you 25 solid leads a year — or about 2 per month.
Let’s also assume that you are looking for just 8 clients per year to achieve your revenue goals, using the math we defined above.
Some of these 25 leads will balk at paying you $1,200 per month. Others will want you to work on a project that is outside of your core skill area. Many of these leads will be soliciting quotes from three different consultants.
Rather than spend all of your time courting each of these opportunities, aim for a 30% close rate:
30% x 25 leads = approximately 8 clients per year.
To make your goal of 100k goal, you need to find 8 clients willing to pay you somewhere between $10k to $20k per year.
By focusing on the greater good of your organization (and not on winning every deal), you have built a healthy business development pipeline that is feeding a healthy and profitable business!
Six-figure pipeline on less than six hours per week
To attract the right clients, you need to work your inbound marketing strategy so people are lined up to talk with you.
Now this might sound like it’s a dream, but it is the reality for many of the top digital marketing consultants. My web site gets weekly inquiries from companies who need help with analytics.
I am introduced to around 100 companies a year who are interested in analytics help. Now I can’t work with all of them, so that’s where I experiment with pricing.
I focus on closing deals with the 10 who are willing to pay me what I am worth. When you have more potential clients than you can handle, your time becomes more highly valued and coveted. When you are more valued, you can charge more. It’s as simple as that.
If you find that you are too busy, you find that you are not charging enough. And you can keep on adjusting. The market sets itself.
Work smarter, not harder
This formula for building a $100k marketing business is based on working smarter and not working harder.
“Hard-working” is not the same as “successful.” You need to work smarter and you need to specialize to command a premium for your time.
From there, you can build in efficiencies and have the discipline to turn down bad clients. You can use this extra time to build a sustainable pipeline for new projects and clients.
Align all of these elements to develop a six-figure income in digital marketing. It might take a year or two to get there, but if don’t give up (and a lot of new consultants do), there is no reason you won’t be able to succeed.
I have seen many marketing consultants fall into the trap of shiny-object syndrome. They want to take on every client. They go after every dollar they can find. The harder they work, the unhappier they become.
These are the hard lessons I have learned in my 12 years as a digital marketing consultant and agency owner. These are the keys to making your target income and achieving success for years into the future.
Thanks Excellent post about ramping up in consulting. There is so much wisdom in this post. I realized a major issue that had been blocking me from going back into consulting more vigorously. Lack of a niche focus. In my earlier years I dabbled in some consulting but to both consumer and businesses markets. Basically, anyone with a few dollars would have all my attention. This post clears up why I had such a hard time running around, both taking any nickel and dime client and doing work in more than one area of expertise. Thanks for this post today. Now it is time to develop my business model in a way that meets the market and my own demands.
Great article, Jeff! Super eye-opening when you broke down the numbers in the article! Really have been enjoying your Friday emails, so look forward to them! Thanks again!