Stability vs. steady income

aesopAs a child, I read Aesop’s Fables avidly; I like getting my life lessons from animals rather than humans, I suppose. One fable that caught my attention way back then was The Dog and The Wolf, the TL;DR version of which is a well-fed dog offered to help a scrawny wolf get regular food from his master. The wolf listened but noticed a bald spot on the dog’s neck where the collar sat. Goodbye, said the wolf. There is nothing worth so much as liberty.

I often talk with coaching clients who have worked for years — often decades — as employees and who are learning how to look at the world differently. One of the biggest shifts is having to give up the idea of a steady, predictable paycheck in exchange for being self-employed. (And I’ll pause here to note that there are some situations in which a steady paycheck is more important than the liberty of self-employment. In that case, keep your day job!)

Often, new solopreneurs seek out retainer clients who will guarantee them a predictable revenue, usually in exchange for a lower hourly rate. They look for clients who, in essence, need to slot a contractor into their work process — like an employee but without the benefits or job security. They are looking for a client who looks like their last employer. (And look… there’s that bald spot on your neck, caused by the collar.)

I know what that feels like. When I launched my business, I had a retainer client who paid me for 15 hours a week at half my usual hourly rate. After six months, I realized that my nice, steady client was actually holding me back from building a stable, profitable business. I would never be able to expand my client base when so much of my time, mental energy and focus was already committed to work at an hourly rate that wasn’t going to sustain me. I took a deep breath, gave my client several months’ notice that I would need to double my hourly rate, and then helped her find someone else to take my place.

It was one of the scariest things I have done, but my next (full-hourly-rate!) client called me out of the blue the next week… and I have never looked back. I realized that having a regular stream of clients would make my business stronger and more stable than having one big client. I am better off having ten clients who use me periodically and refer me to others than having one client who could end my contract at any time. While I may not know exactly where my income will be coming from in six months, I know that, with consistent marketing and outreach efforts, clients will be calling me for projects. My business is more stable because it is based on the income from multiple sources.

Yes, there are months with thin cash flow, which I cover from the months when I am busier. I put up with the challenges that a variable cash flow present, because I’ve learned that the higher value we provide, the less likely we are to find steady clients who need to slot us into their work flow. We make a trade-off between having a predictable but lower income stream and getting paid significantly more per hour but not knowing exactly which client will be paying that high hourly rate. I don’t know about you, but I sure appreciate the extra hours in the day that I have gained by focusing on higher paying and higher value work rather than predictable but lower value work.

feed-usAnd while my own two dogs appreciate their steady and predictable paycheck of kibble every day, I’m glad that’s not how I earn my dinner.