The creative service business is, after all, a service business. You’re not collecting orders and shipping products, you’re delivering your expertise to people who need it. As with any service business, there is a great deal of communication involved—being a creative entrepreneur means engaging with clients. You’re often going to be on call, as you respond to urgent needs. If you structure your services carefully, this availability can become a source of ongoing revenue. If you don’t—it could mean death by a thousand cuts.
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If you’ve been following my advice from the last couple episodes—by starting to track all of your time—you’re going to want to add an important category to your time keeping system. Client communication needs to be a clear and measured category. If you do establish this category, and accurately track it, you’re likely to discover the common benchmark of most creative service businesses, namely that client communications can take upwards of 20% of a project’s budget. And if you factor in pre-sales communication it’s higher still.
What’s more, once a project or billable task is complete, your clients will continue to seek out your expertise—looking for insights and answers to questions. Perhaps it’s for a rough estimate on a potential future project, or a recommendation for the use of your work in other applications. Often these interactions are brief, maybe even just a few minutes here and there. But if you total up all of that support, it can become a significant part of your time expenditures. And if you’re not getting paid for that time, your profitability can get cut to shreds.
That’s why it’s so important for you to remember that in its essence, your business is a service business, not a product business. Your time and expertise, as well as project deliverables, are a part of your value. You need to value your own time, and more importantly you need to train your clients to value it as well. If you ever had to hire a lawyer you hopefully expected to receive a bill for all the time they spent talking with you and responding to your emails, as well as for the time they spent writing a contract. But do your clients respect your time in the same way? Do they expect to be billed for your client service time?
It’s extremely important to explain to your clients, right from the start, that you are a professional service, and that in addition to any project related fees, they should expect some costs associated with being an active client on your roster.
There are many ways to establish such compensation plans, everything from a minimum service fee, to active retainers, or simply billing for measured time. But whatever the model, you have to have some plan for capturing revenue for your client support time. If you don’t your bank account will look more like a leaky bucket than a growing asset.
As you consider how you might capture your service time, your billing practices matter a lot. Nothing will undermine your credibility as a professional than appearing to nickel and dime them by sending an invoice every time you get off the phone with them. That’s one reason many creative professionals prefer the minimum service fee, or retainer method. Alternatively, you could just track your service time, and group it up for invoicing only once a month, or even once a quarter if some clients aren’t very active.
However you decide to structure your billing practices it’s essential to establish clear expectations with your clients ahead of time, and find mutually agreeable terms for billing these services. Giving attention to this essential aspect of a professional service business can transform costly interactions that drain your profitability into regular contributions to your bottom line.
So until next week: don’t let the business of creativity overwhelm your creative business.