We have talked about the different kinds of income that we can build into our business.
Let’s look a little closer at active income – and what we can do to make more money by focusing on it.
Active income is your one to one revenue stream.
Let’s look at your business right now.
How many clients are you working with right now? Call this A. For example, we’ll say you are working with 5 clients.
How much are you billing each month (include all billing by the hour, by project, by retainer, by month … however you charge)? Call this B. For example, we’ll say you earn $2000/month.
Divide your monthly billing (A) by the number of clients you have. For our example this would be $2000 divided by 5, which is $400.
So, on average, you are billing about $400 per client each month.
Are you billing as much as you want to right at this time? If not, how much more do you want to earn? For example, we will say $3000.
So how many more clients do you need at the active income level to meet that number?
Using our example, that means we need to earn another $1000 per month to meet our expectations. At an average of $400 per client being billed each month, that means we need to bring on 2.5 (so, 3) new clients.
Looking at your business model, is that a possibility for you?
This is an excellent exercise to do when you are trying to figure out how to increase your income in your business.
As we have discussed, active income is the most common type of revenue stream for most service businesses.
But we can see that active income has its limitations – maybe you can’t physically take on 3 new clients.
So then we have to look to increase our rates instead of increasing our clients.
Do the exercise above again. If you increased your billing per client to $600 per client (whether by providing new services or increasing your service rate), then you would be bringing in your expected $3000 per month without finding any new clients. Is that possible?
Do it one last time. If you increased your billing per client to $500 per client, then you would be making $2500 per month and you would need one new client. How does that look to you? Is that doable?
There are lots of ways to look at bringing more money into your business. Active income is the easiest way to make money in your business, but consider the possibilities of how to manage it by doing the exercises above!
What adjustments can you make to your rates or billing to increase your active income? Leave your comments below!