“Integrity, the choice between what’s convenient and what’s right.
-Tony Dungy”
This is a tale of a crime that you must know as a service business owner.
This is a crime I have knowingly committed in the past, and I am coming clean about right here, right now.
Whether you’re aware or unaware, if you end up identifying with what I am about to share, you must also come clean for the sake of your business and your customers.
It’s funny how this is NOT often discussed as a "crime." But I'm calling it a crime because it's not the way to run a sustainable business.
So, what is it, you might ask?
Well... Let me tell you a story & give a few examples.
Once upon a time, my main business model was a monthly retainer model. Before that, I was charging hourly.
I thought, "I made progress!" Charging a flat rate on a monthly basis made me feel like a badass. In case you are still charging hourly for your service, check out “Still Trading Time for Money? Overcome These 5 Key Hurdles & Finally Stop Charging By the Hour”
But soon after, I started to question this model.
I thought, "Wait, there's only so many clients I can take on. And my sales cycle for getting them is long. The only way to keep going would be to make sure that I keep my current ones as long as possible."
Do you know exactly what I was thinking of as a “quick solution”?
I'll give you a min. I want you to think about what my immediate solution was.
OK, so my thinking was:
Do whatever it takes to keep my current clients feel like they needed to "RELY ON ME" so that I could "PROLONG" this working relationship with my existing clients.
This is the biggest crime in service businesses that no one wants to talk about.
“Creating dependency” for the sake of keeping them around.
Honestly, I don't even want you to tell me that this idea has never crossed your mind if your business model is a retainer model.
It's because I already know that you are lying. We all think about it at one point in our business journey. So, let’s come clean together because I want you to know that there are so many opportunities out there that I want you to tap into.
Hey! I’m Maiko.
Thanks for stopping by. If you are a visionary business owner with the desire to build a high-functioning, profit-generating machine of your dreams, let’s connect!
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Here are some examples to make my point:
· Web designers & webmasters making it impossible for their customers to make changes in websites without them.
· Financial advisors holding back on offering tools & educational pieces from their clients, saving it for higher-priced engagement and keeping them from becoming financially empowered, independent individuals.
· IT professionals not fighting hard enough to set up robust, hustle-free tech stacks because their clients failed to see the ROI for their investments.
· Coaches creating illusions that there are more secrets to be revealed down the road if they stick around long enough.
· Therapists sprinkling in the importance of his/her role in their patients' lives like a mantra during sessions...
You get the idea.
Let me emphasize that it's OK if you thought about it. I’m not here to bash anyone. Rather, I feel like it’s my mission to share my experience & make you feel safe to explore new things for your business for the sake of growth.
But what's not OK is you believing that creating codependency is the only solution to sustaining your business.
Believe it or not, this is something that is widely accepted, even at the midsize to large size consulting businesses. It’s because this sneaky motive is masked by the notion of, “We are partners, and we are here for the long haul.”
They think that they can get away with it, and many have.
But we are not going to be “that guy.”
Additionally, note that I listed "drastic" examples to make my point. I am not suggesting that all service business owners do this intentionally. There are many "subtle" ways we do this out of fear to create codependent relationships. That's why I said, "Don't deny it as if you've never thought of it."
When I caught myself thinking this way, I immediately felt "disgust."
Everything about it didn't feel right, but I also didn't know how to solve it at that moment. That made me feel even worse. I just wanted to vomit. Talk about drama…
This is a crime. Against people we serve. And, against ourselves.
The reason for the former is easily imagined, but the latter needs some explanation. That's why I'm here today.
The main purpose of this post is to help you nip it in the bud when this thought arises even for just a second, so that you can shorten the time it takes to improve your business model. I hope you are game. This is going to be a wild ride.
Dissecting the Reason I Wanted to Vomit
"Disgust" is one of the 6 basic human emotions that are closely tied to the primitive part of our brains, along with happiness, sadness, fear, surprise and anger.
Although I encourage business owners to "think from the higher part of our brains" to operate their businesses, I don't suggest ignoring our lower brains. Your lower brain is a good indicator that gives clues as to what you need to work on.
Because of this, when I experience somewhat of a raw emotion, I want to investigate.
Soon, I realized that the hopelessness I felt was from being trapped between guilt & shame, by thinking the unthinkable and the havoc created in my head that I would have to work twice as hard to solve this problem. Neither of them felt great, and I did not know where to go from there.
"How can I bring my business to a place where I don't have to worry about keeping any of my clients? What does that look like?”
At that time, this seemed like an impossible million-dollar question. And, for 3 years after discovering my own dirty secret--again for a good 3 years, not for 2 months or 11 months--I worked on shifting my business away from the retainer model.
You might ask, why did I allow myself to go on for that long. That’s a good question. The answer is, I wasn’t allowing myself to go on without taking action. It took many iterations to grow as a business owner with the new plan I had for my business.
In other words, I HAD BEEN working on this consistently to get to the point where I am currently at.
To be 100% honest, I wish it didn’t take that long. But I choose to look at my experience as the required learning, and now I’m able to help business owners avoid going through the same thing. Because…let me tell you, there are things I could have easily avoided to speed up this process.
If you are genuinely interested in creating transformations rather than transactions, I know that this post will help you get to the other side. Sure, we won’t get arrested by making our clients rely on our services, but I still consider this to be unethical.
Once again, it is also detrimental to the well-being of our businesses. So why continue?
Why Is This Bad for Your Business?
If it's OK with you, I'm not going too deep into the reasons as to why doing this as a service business owner is unethical for your clients.
I trust you know why.
It’s apparent that unnecessarily extending your service to your customers for the sake of cash flow is a disservice to your customers.
Now, let's discuss why this is not optimal for your business.
I'm sure you've heard "operating yourself from the place of lack can push your business farther down the drain." This is a cold fact. Here are some examples of what happens if you let it go on without intervention:
1. Creating codependency prevents you from identifying opportunities to serve more people (or businesses) and stalls your growth as an entrepreneur as well as business growth.
2. Prolonging your engagements makes your working relationship with your customers too cozy or it may become the cause for developing unhealthy codependency.
3. Worrying about losing customers gives you permission to look the other way when your clients behave badly. Eventually, this becomes the source of resentment that you will feel about your business and your clients.
Now you can see clearly why you don’t want to go down this route for much longer.
If you feel nauseated by the thought of getting on the hamster wheel of chasing prospects as a solution to this, don’t worry. It does not have to be that way. I felt the same way when I was facing this challenge, and I am here to make a few suggestions that you can explore without grinding yourself into the ground.
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Understanding the Shift You Need in Order to Get Out of Codependency
Do you know what sets us apart from consultants as well as service professionals who are perfectly fine with intentionally prolonging their engagements for money?
It’s the endgame.
If you’ve read my other posts, you might know this already, but just in case you are new to my blog, I want to quickly touch on the 3 stages of service businesses.
They are: Transactional, Transformational & Transcending, in this specific order as the evolution of a service business.
Those who are perfectly fine with creating codependency with their clients “happily” belong to the transactional stage. Their endgame isn’t providing a transformational experience to their clients.
On the contrary, our endgame is to provide transformational experiences. For us, it matters whether our work is purposeful and impactful.
I am by no means being righteous. We all start from the transactional stage to learn how to run a business with a few exceptions, such as being in an NGO.
The dissonance, a.k.a. the feeling of wanting to vomit that I had experienced, happens when we find ourselves trapped in the transactional stage with the desire to be in the transformational stage.
When we are in this precarious place, for a lack of better words, we feel “stupid” when we continue doing things that “we know” are not helping in creating transformational experiences for our clients, who may not even care about putting in the work for transformation to begin with.
This is incredibly frustrating. I’m sure you agree.
Now, what kept me from finding solutions to getting out of the transactional stage was my scarcity mindset that I didn’t even know existed. My immediate thoughts included:
· This is not going to work.
· Whatever I will have to do is going to be hard.
· I have to take losses.
· What I want is unrealistic.
· I should be grateful for what I have.
Back then, I didn’t know anything about the Law of Attraction or the abundance mindset or limiting money beliefs. Because I didn’t know that these things existed, I was completely unaware that I was in a scarcity mindset. This made the situation a lot worse. I simply thought that I had screwed up something in my business.
Come to think of it, I bet my peers from business school would have laughed at me if I had asked their opinions about these concepts. This is probably why I didn’t even talk to them about it.
Regardless of whether or not you are aware of and/or choose to subscribe to these concepts, one thing is clear: none of the strategies I’m about to share will get you out of codependent thinking unless you are willing to reframe the beliefs you have about your current business and the changes you are about to make.
Before you do anything, what you want to focus on is shifting your belief from impossibility to possibility.
Read the bullet-points above again.
I had these thoughts for the longest time while I was actively trying to move forward with the changes I needed to make in my business. Imagine how difficult it would be to stay focused and motivated if these are the things you believed, right?
It’s extremely hard. It is the equivalent of swimming against the current like salmon do up the river to lay eggs. If I am to go through this process all over again, trust me on this one, I’m going to spend an ample amount of time shifting my mindset first.
So, instead of making the process extremely hard on yourself, do the following.
Embody, don’t just try understanding these logically in your head, but embody & embrace the fact that:
· You are in the process of transitioning your business from a transactional one to a transformational one.
· You will choose opportunities for growth over immediate financial goals.
· What you want is absolutely possible, and there’s nothing wrong with wanting it.
· You are fully committed to experiencing everything that comes with this process, especially failures.
· Your business is going to be aligned with your vision and values, and you’ll fall in love with your business all over again.
Embodying new beliefs is easier said than done. It’s so easy to tell others to…“believe in yourself,” you know? The problem is that we don’t know what that looks or feels like once you get there. On top of that, it takes skill to call yourself out for not fully believing your new beliefs without being counterproductive.
So, what I suggest is what I call “renewing the vow every day.”
I don’t care what that means for you—journaling, or reciting the above while you are taking a shower or meditating with these before bed. Whatever works, and, whatever it takes.
By simply repeating new beliefs with the genuine intention of fully embodying them with your whole being, your brain will develop new neuropathways & start actually believing the new beliefs.
Keep in mind, though, a dense person like myself takes much longer to accomplish this. So, adjust your expectations and do not give up until the new beliefs become a part of you. It will happen, but it may not happen in 3 days.
If you are tempted to say, “This is stupid. I won’t do it.” Understand that you are scared (just as I wanted to vomit out of fear) and let that be OK. Resistance shows up when we face new knowledge, concepts, environments, challenges, etc. Sit with the feeling of resistance and digest it slowly.
What you will find after sitting with the honest feeling of resistance with a willingness to be OK, is it starts dissolving away instead of consuming you.
It’s also fine if this does not come naturally to you. I have a piece that you can read up on that covers how to deal with resistance to change.
3 Actions You can Take to Get Your Business Out of Codependency
Here, I want to start with one thing that I will NEVER recommend unless you are super committed to it: start firing all of your unfit clients. The reason is obvious – you might not be mentally ready for the financial instability that this action may bring to the table.
I recommend that you check out “Clients from Hell: 51 Ideas You Can Implement When Your Top Paying Clients are Ruining Your Life.” This post will prep you for the transition period.
But before you do, finish reading this post so that you can pick & choose which actions are fit for your overall plan of righting the ship.
By the way, this post is not just about getting rid of unfit clients. This post is about improving the way you work with your current clients to create a win-win ecosystem by firmly believing that you can liberally drop any engagement if it no longer serves you.
Depending on your situation, you may be able to keep all of your clients and the only thing that’s required to change is the way you think about your business model.
Here are 3 things I suggest you explore as a starter:
1. Break up your engagement with shorter sprints and a simple & clear scope. When each phase is over, give both parties a chance to assess & decide if you and your client want to continue working.
2. Conduct time & value audits. This will reveal how much time you are spending on sustaining a healthy pipeline with incoming leads as opposed to low value activities.
3. Assess the profitability of each service offer your business has. Then modify or create offers that are designed to avoid getting into the codependency problem.
Let’s dive into each a little deeper.
Break Up Your Engagement with Shorter Sprints
If your normal engagements are a year-long, break it up into 4 quarters and conduct a review with your clients.
I know what you are going to say.
“Our work requires longer engagement until we start to see any results.”
I get it. But even then, I would say break it up. It is going to be your job to make your clients understand that they will start to see results over time.
The biggest benefit this format offers is giving both you and your client a chance to renew your commitment to continue working together actively & regularly. You no longer have to be concerned about finding the right timing to bring up your grievances to your clients if you are conducting a review 4 times a year and vice versa.
This also holds both parties accountable for any milestones you collectively set up.
All in all, this will force your working relationship with your clients to be much, much more transparent. Emotionally, however counterintuitive this may sound, this practice will bring you the feeling of peace and freedom.
Conduct Time & Value Audits
This does not have to be complicated. The purpose of this to find out what you are spending your time on & how much value each of those tasks carries.
As for me, I just use GCal to track my business activities. This is already a habit of mine, so I do this daily. However, if you only want to track intensely & intentionally then all you need to do is to track for 2 or 3 weeks.
This is because each week can look different, and what you want is to identify what you consistently spend your time on week in and week out on a regular basis. In other words, you want to find a pattern in your activities.
If you find using a calendar is a bit cumbersome, try Clockify (www.clockfy.me). A few people from one of the communities I belong to raved about this recently. I haven’t used it, but I know it’s free to create an account.
Once you obtain data, make up a list of tasks you spend the most time on. Next, put a monetary value on each task.
For example, let’s say you found that you spend 70% of your working hours on your clients. That’s a chunk. In this case, what you want to do is to break it up further by specific tasks. Say your client work on average consists of 5 different tasks. Then you put a price on each task.
How do you know how much to price each task?
Let me walk you through it by using another example. Let’s say that 20% of the time you are creating content and posting them on social media. These are important activities as you are investing your time in future leads. But can scheduling posts be done by someone else? What’s the monetary value of scheduling posts?
If the answer is yes, figure out how much you would be paying someone to do those tasks as opposed to how much your time is worth, meaning how much you would be billing to your clients. If you can save your time by delegating some tasks that cost far less than you doing it yourself…what are you doing? Right?
If you are to hire a VA from the Philippines, scheduling posts can be done between $4 to $7/hr by him or her. Once again, what’s YOUR RATE? If you are billing roughly $75/hr or whatever it may be, you are wasting your time on a $7/hr task a.k.a. a low value task.
See what we are doing here? We are identifying how much time you are NOT spending on high value business activities. Once you identify some of the low value tasks that you have been doing, you may want to conduct a full audit by listing everything that needs to happen in your business & start reallocating some responsibilities to others.
What you will achieve by doing this is gaining deeper insights on what you do with your time and valuing your time more. This will allow you to reorganize your business so that you will have more time to work on activities that can bring in more leads.
If you are able to bring in more leads, there is no need to create codependency with your current clients. See how this all comes together?
Profitability Assessment on Each Engagement
Product players have it slightly easier when it comes to identifying their profit margin. It’s because they have hard costs of materials, manufacturing, warehousing, labor, and distribution that they can track rather easily. Then they decide how much to mark up at a wholesale level & what a suggested retail price might be.
The marking up part is their profit margin.
OK, I know, I know, I won’t bore you with this much longer. My intention of mentioning this is to provide a contrast between goods businesses and service businesses.
For service businesses, the majority of the cost of delivery is labor & some overhead costs. There are no raw materials or manufacturing or even storing that you have to pay for your service businesses, right? See the stark difference?
When I chat with service business owners, often times, they do not know what their profit margin is, and it’s a tragedy because the beauty of service businesses is to be able to claim high profit margins.
This is fascinating to me, as I know that people love to talk about revenue but a lot of them don’t even know what they are truly netting.
No business is equitable when the total expenses exceed the total revenue. It doesn’t matter how impressive your “revenue” number is. All I care to know and all you should care to know is what you are netting.
So, if you haven’t thought about this much up to this point, let’s change that.
There are 2 different ways I recommend business owners assess their profitability:
1) Project-based profitability
2) Overall profitability (a business as a whole)
By the way, I plan on dedicating one full post to just covering how to do this. Here, I’m going to touch on this briefly so that you can get started with thinking about this concept.
What you want to do is to only work on #1. Say you have a few retainer projects. You can pick one and find out how much time is spent by whom on the work each month. If you’ve done your time and value audit already, it should be easy for you to figure it out.
The next step is to subtract your time and your team’s time (converted to the currency of your choice) from your monthly retainer. What’s left is profit. I recommend you convert that number to a %.
Here’s a caveat in case you are in accounting & ready to leave me a comment saying how inaccurate this is:
I’m intentionally not having you consider all “other” expenses such as overhead – rent, insurance, SaaS subscriptions, bank fees, etc., to simplify this exercise so that it is less intimidating & you will actually do it.
Also, I don’t get to see your detailed expense data. There is no way for me to generalize how much % to deduct out of what’s left. It could be 7% or 23%. Simply, I have no way of knowing. So, all accountants out there reading this, hold your horses.
What this exercise does is help you assess whether it makes sense to continue making these offers. There’s no shame in admitting that you came up with your price based on what your competitor charges or based on standard market prices.
The danger of going with “other people’s prices” is ignoring whether you are actually generating profit. Your competitors may be by outsourcing all the low-value tasks associated with the offer. On the other hand, you may not be.
I’m curious to know if you’ll be surprised by the outcome after doing this exercise. It could be just as you imagined or surprisingly low or high. My hope is that, by doing this exercise, your mind will be flooded with new ideas to improve your offers or create new offers to attract more leads based on your clearly identified niche.
Final Words
After writing this post, it occurred to me that I could have titled it “The #1 Silent-Killer in Service Businesses that No One Talks About.”
I would have been totally fine with this. The point isn’t whether you want to call it a silent-killer or a crime, creating codependency with your clients creates a vicious cycle that you don’t want to be sucked in to.
At the same time, I am not here to tell you that there is no real work involved in getting out of clinging onto codependency. Doing this requires both a lot of mental work as well as the assessment work I’ve shown you earlier.
Is it worth it?
Absolutely. If you follow my blog consistently, you will get enough how-to’s and resources for you to avoid all of the mistakes I made along my own journey. So, be sure to sign up for my email list so that you’ll know when my next post is coming up.
Also, by just being on my email list, you will be privy to invitation-only events, offers and/or subscribers-only exclusive materials.
Trust me when I say this, I know what it’s like to be bombarded by emails each day. I’m keenly aware of how annoying it is. So, I am super intentional about what I send to my list. You will not be disappointed. This is a promise.
Until then, stay current & relevant!
Can you guess what’s the biggest crime in service business no one wants to talk about? This might be the reason your business isn’t growing as fast as you want it to… Find out what it is today!
I was guilty of committing this crime in my business, and I realized why this was holding me back from growing my business. Find out if you are doing the same. I share my tips on how to get out of it.