TexasDesign.com

You really have no business starting a business and not making good money, eventually. Money itself is just a tool, for good or bad, but when you start a business you’re declaring your intent to be profitable (after paying yourself a fair wage). Hopefully you’ll make money in an ethical manner, fully understanding the power (for good) that it can have.

Why Making Money is Important

You’ll have your own list of why this is important to you personally, but let me suggest a few things.

First, money is the currency of respect, and it’s just not enough for your marketing advice to be good advice. If you don’t also charge ridiculous amounts of money for it, you’re just a replaceable, marginalized commodity without much impact.

Second, it takes money to keep a good business healthy. You can spread it around for employees, equipment, facility, selling your services, retirement, etc.

Third, money is a very useful tool for your own personal use in changing the world. When I come across a client that is already making lots of money, I try to help them see how they could start a foundation to have even greater impact.

Fourth, you’ll eventually go through a healthy transition where you understand that “life” is better chased outside of the business, and money makes that easier.

So if you aren’t satisfied with the financial performance of your firm to date, how would you go about determining the root causes? I want to make some very specific suggestions later, but right now it might be helpful for you to see yourself in the lies that I hear principals tell themselves every day. If you’ll quit holding onto these as excuses for your situation, you’ll probably be more open to the real solutions.

The Lies You Tell Yourself

If you aren’t making money in a small marketing firm, it could be from a combination of reasons. But it’s not primarily because any of these lies are true.

“I need to give away a lot of our time on just one more significant project in order to demonstrate sufficient category expertise or proficiency in a practice area.” Quit already and work with what you have. This is one of these endless excuses for which there should be a Twelve Step program.

“We’re working hard, but our hourly rate is too low and all we need to do is raise it and the money would come pouring in.” An hourly rate is a positioning tool, not a financial one, and if you have a positioning problem, maybe you do need to raise it, but most people who think they need to do that are considering it for the wrong reasons.

“I think there just aren’t enough good clients in our city. It’s too small and a bit unsophisticated.” There may be precious few good prospects in the immediate vicinity, but who cares. Start looking at who needs you the most and forget about where they are. The more local your clients, the less of an expert you are to them.

“Our employees are unusually young and some are even incompetent.” Again, they might be, but it’s quite unlikely. And even if they are, whose fault is that? Employees are generally similar from firm to firm, so look to the management environment instead. What kind of people are you hiring, what are you asking them to do, and how serious are you about having them take leadership roles?

“We aren’t working hard enough. Why is it that I can look around at night and everyone else is gone?” This perspective is nonsense. Hard work never killed anybody, but it never did much good, either. Start doing different things instead of trying to figure out how to do the same things more efficiently. And if nothing else, quit measuring loyalty by how late people stay.

“We serve a unique industry that’s really quite different from the others you might be familiar with. The way it should work is not the way it will work in our niche.” I can tell you that usually this is just an excuse to ignore good management advice, but in the rare cases where it happens to be true, make it work and quit whining, or get into another niche.

Real Reasons You Aren’t Making Money

There’s probably a little bit of truth in each of those lies, but not much. The real reasons you aren’t making the kind of money you should are these:

Your own internal standards for “doing it right” have more influence than what the client will even notice, much less what they are willing to pay for. The work required to meet your own standards is easily covered by what your best clients pay, but your unqualified clients won’t pay what it takes. Your response? Do the same level of work anyway, claiming some deep internal standard that must be obeyed.
You have so little power in client relationships that you are knowingly underestimating the costs of doing the work because you don’t think the marketplace will accept the true cost and you’re secretly terrified that they’ll just hire the next firm in line.
You think you’re in a service business when in fact you’re really in the expertise business. You haven’t fully grasped that the real power you have in client relationships is withholding your expertise from a critical client issue. So you mask your poor positioning with extraordinary customer service.
You’re letting client longevity cloud client profitability, thinking that there’s some moral obligation to keep over-servicing favorite clients who in reality you have outgrown through the additional expertise you’ve developed.
Your positioning is largely interchangeable with the other tens of thousands of firms out there.
You’re utilization rate is low, perhaps hovering around the national average of 42% of all the time worked in the firm (billable and unbillable), but you aren’t aware of the extent of that issue since pretty much everyone is working hard and it’s difficult to fathom the possibility of actually giving away that much time (and money).
You keep solving client issues instead of employee issues. At a certain size, the only way to make your firm work is if you take care of employees and they take care of clients. Otherwise they’re just helpers and your firm will never rise to what it could be.

Finally

If you’re making money, you’ve probably got these things figured out and as a result you probably have a more sustainable firm. Otherwise, don’t lie to yourself. The cold, hard truth will set you free.