Early Exit #32: February Finance Update

Plus thoughts on what’s working for my consulting business, what's not, and what’s next.

Mar 05, 2024

You’re reading Early Exit Club — a newsletter about leaving the 9-5 workforce to build a $20k/month solo business by Nick Lafferty.

Last time: Creating peace of mind for your clients

Next time: Growing an SEO agency to 18 employees

Welcome back to my monthly finance update, where I transparently share my income dollars and sources to help unmask what it takes to build a $20k+/month business.

This month we bounced back from the negative growth last month to once again cross the $30k threshold.

I’m going to skip the individual channel breakdowns and zoom out to my high level thoughts on what’s working for my consulting business, what isn’t working, and what’s next.

Here’s a quick look at my finances before moving onto that.

What’s Working

Client Retention

My average client retention is 10 months and growing. To date, I’ve only stopped working with two clients and I’ve retained everyone else.

I’ve had many clients since the beginning of my freelance journey. We’ve grown through the first three phases I outline in most agreements:

Audit & Research
Test & Iterate
Scale & Optimize

This is a huge milestone because it proves I can add long-term value to each of my client’s businesses and it’s validation that what I’m doing is working.

My Niche Offer

100% of my current operational clients are on my newly refined consulting offering that I outlined in my newsletter on personal positioning.

Having a niched offering helps me focus on doing my best work, minimize context switching, and retain more of my clients.

It also supports my pricing structure.

My Pricing

After signing my first two consulting clients on an hourly pricing model, I quickly pivoted into a flat monthly retainer pricing model which gives me guaranteed, expected income every month.

Retainer or project-based pricing is better in many ways, but the primary benefit is that it doesn’t punish you for efficiency. On hourly billing, if a task that previously took you two hours now only takes you 30 minutes then you lose 1.5 hours of billed time.

I talk to a lot of other consultants, and when I bring up retainers they always ask me how I back the retainer into a set amount of hours that I allocate for that client every month.

There are two answers to this question:

Meticulously track your time for current clients and use that to benchmark your retainer prices
Wing it and give yourself plenty of buffer

In full transparency, I opt for #2 with a few guardrails in place:

I raise my rates for every subsequent client
I set limits on the things that take up most of my time

As a freelancer, you can setup your contracts exactly how you want them. Here are some things that are completely negotiable for you:

Meeting cadence (you could agree to only bi-weekly meetings)
Communication platform (you could charge a higher retainer if clients want you in their Slack channel)
Who can communicate with you (you can define how many people can communicate with you, and charge higher rates if the client needs 3+ people to talk to you)

Experienced freelancers are doing these things because they know the pain of not doing them and having clients overstep the boundaries.

From my experience, it is very easy for clients to start treating you like a full-time employee. It’s not uncommon for clients to ask me for same-day turnaround times or to attend daily stand-up meetings. It’s up to you how to deal with these and it’s much easier if expectations are clearly defined in the contract before you start.

If you have concerns on building a retainer pricing structure, put your concerns in the agreement. Protect your downside.

I interviewed the founder of a successful 18 person SEO agency a few weeks ago, and this was one piece of advice he gave me:

Charge enough so that when you learn a lesson, you learn it while getting paid well.

Even though I’ve stopped working with two clients, and I’ve stopped doing specific types of marketing work, I set myself up for financial success by wrapping those engagements in a pricing model that works for me.

It’s also never too late to raise your rates or even completely restructure your deal.

What’s Not Working

Too much consulting

I’m spending too much time on the consulting side of my business, which takes away time I want to spend on creating content like:

What you’re reading right now
My LinkedIn posts
Interviews and content collaborations
The community I continue to tease :)

The content is part of my longer term revenue strategy. It’s important and not getting enough of my time right now.

My goal is to slowly trim my client roster while increasing my prices so I can maintain a similar level of consulting income with fewer clients. Much like my goal of taking the entire month of December off, this is a work in progress with a lot of uncertainty around how I’m going to get there.

I’m building the plane as I fly it 🛫

Too much networking

I opened my calendar up to people who were recently laid off and many people took me up on my offer.

I started working through those people this past week and I had some amazing conversations.

But my calendar is so booked that I don’t have any availability until April.

So I’m going to stop booking these types of calls. This could take two forms:

Decline every networking opportunity
Charge a fee to turn this into an income stream

The idea of charging for these calls feels weird to me and it creates a lot of pressure on both sides, but I’ve also learned that for the right person I can provide enough value in 30-45 minutes to charge for my time.

I’ll commit to experiment with this and report back in a future newsletter.

What’s Next: Moving

My wife and I are in the final stages of a major move that has been in the works for over a year. We’re uprooting our life in Austin, Texas and headed for Brooklyn, New York by July/August of this year.

We have a very busy next few months that involves spending an entire month in NYC while we house hunt, putting our Texas house up for rent, and downsizing the frankly amazing amount of stuff we’ve accumulated over the years.

But this move, and all of the worry and stress that comes with it, is exactly why I’m doing this. We are building the kind of life that we want to live and our self-employed careers are enabling us to do it.

Tomorrow is not guaranteed. We may never have a chance to do this again.

We only have one life so let’s make it count.

See you all next week for my interview and insights with someone who went from solopreneur to 18-person agency owner in only a few years.

Cheers,

Nick

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