I was talking to a friend recently whose business is going very well. But in recent years his income has hit a plateau. He loves what he does and wants to grow his business, but is at a fork in the road. It is a very common scenario.
This plateau is something I’ve observed in my own writing business and many others, particularly amongst people who charge for their time.
It occurs in a few distinct stages:
Stage 1: Grow by raising prices
For the first few years you can keep raising your prices as you get more confident and capable and attract better clients, so your revenue increases accordingly.
However, you eventually hit a point beyond which it is uncompetitive to charge any more per hour. With only so many hours in the day, you soon reach your first income cap.
Stage 2: Maximise revenue with value-based pricing
At this point, many people will transition away from hourly rates, to ‘value-based pricing’ and charge fees based on agreed deliverables.
Typically, this involves packaging up your services into more profitable fixed-price bundles, and/or packaging up your intellectual property into information products such as books, guides, training or workshops etc.
In this way you make the most of your expertise, charge more overall and break free from direct hourly rates.
Stage 3: The plateau of success
Getting to this stage of a business is a great achievement. You are established, with a steady client-base selling profitable packages of products and services.
However, even at this level you are still integral to all aspects of the business, which means growth is usually limited to incremental increases over time.
Decision time: What’s your long-term goal?
At this point in your business journey it’s time to reflect on what you’re wanting to get from your business and how much you might be willing to sacrifice. While there are always endless choices and options in business, I see this as a fork in the road. There are a couple of questions to ask yourself.
Are you building your personal brand, with a business behind it?
For many, stage 3 is mission accomplished and can be happily sustained long term. You’re doing great work for ideal clients, earning a nice income and enjoying the freedom you’ve worked so hard to create. It’s a business that gives you the lifestyle you want. Living the dream!
In this case, it might make sense to become even more personally involved in your business and become known as an expert in your industry. Building your personal brand and becoming known as a specialist will be great for you and the ongoing success and profitability of your business.
- Do you want to be the face of your brand long-term?
- Do you want to be known as a leader in your field?
- Is your personal reputation valuable for winning clients?
- Is your intellectual property unique to you or your talents?
- Do you love creating articles, podcasts, videos or presentations and building a tribe of followers?
- Do you plan on always running your business rather than selling/exiting?
- Do you want to maximise your lifestyle?
Or, are you building a business, supported by your personal brand?
For others, like my colleague wanting to scale up, stage 3 eventually becomes a plateau of frustration. They want to build an organisation bigger than themselves and break through the next level of revenue.
In this scenario, it could be time to look at how to structure the business to run with less input from you, build a team around you, and even start developing a long-term exit plan. While your personal brand has no doubt helped you get where you are, over time you need to reduce the businesses’ reliance on your reputation as the founder/owner.
- Would you like to step back from the business and have it run without you?
- Do you plan on selling the business and exiting altogether one day?
- Would you like to hand over to a general manager, outsource your services and/or grow a bigger team?
- Are you happy behind the scenes outside the spotlight?
- Are you willing to take on the sacrifices, challenges and risk of significant growth?
- Are you driven to maximise your income?
It’s rarely a black and white decision and there will always be unexpected turns, but it’s important to ensure your decisions today move you closer to your long term financial and lifestyle goals.
Are you happily on the plateau or are you searching for scale?