My Low-Overhead Business Model
I decided years ago that I never wanted to grow my consulting business too large. I’ve seen other consulting agencies come and go. While many have had a lot of success and growth with the standard business model, having top-down management, employees, and generally even an office to call home, I knew I didn’t want to deal with the hassle of raising capital to fund the expansion of my business so that I could open a brick & mortar office and hire full-time employees.
For the first several years I operated independently, taking on all projects and completing them myself. Being a solo-preneur was perfectly fine by me. As I’ve gotten older, I’ve learned that working with a team of people generally is better, but I still didn’t want to hire employees. So what I started to do instead was work with subcontractors. This model has worked really well for me and I plan to continue with it going forward.
The way I’ve structured my business leaves me free to pursue other interests so I don’t always have to focus on work all the time. I still negotiate all contracts and statements-of-work with clients, but then I decide which projects I will involve myself directly in, and which I will hand off to subcontractors to complete. I have been fortunate to get some top talent to complete projects for me over the past few years and I think my revenue sharing model has been a big part of that. On every project, they earn 80% of the revenue my clients have paid, for the work that they have completed. The 20% I keep covers my time for managing contracts and projects with the client and coordinating efforts between the clients and my subcontractors. That way my subcontractors just have to focus on the projects and not have to deal with any of the other paperwork.
The nice thing about this revenue-sharing model is that my subcontractors get paid when I get paid, so I never have to worry about not being able to cover employee paychecks like other businesses do. Now you might wonder, “what if a client doesn’t pay?” Well, I’ll admit I’ve been very, very lucky that I’ve never had a client not pay me. I do vet my clients very closely so I think that has been a big part of the equation. I also have an agreement with my subcontractors that they get paid within 10 business days of when I get paid by the client. If I don’t get paid, no one does, which greatly motivates me to make sure every client pays.
With no employees and no office outside of my home, naturally, my business overhead is extremely low. Because of this I’ve also been able to keep my prices reasonable compared to other agencies. Larger agencies may be more agile and have the ability to take on far more clients at the same time than I can, but I can charge less because I just don’t have all the overhead they do.
Overall, this business model has really turned into a win-win situation for me, especially when I had to take several steps back from my business in 2016 to deal with being the executor of my late husband’s estate. This allowed me to focus on the personal crisis I was going through, while still keeping my business up-and-running. I will always be grateful for the extra work my subcontractors took on in 2016 for me.