Why A Soloist Expertise Business Can Out-Earn Many Boutique Firms
- October 24, 2023
- Posted by: Rochelle
- Category: Monetizing
Last week, when I spoke about positioning at a conference for creative business owners, a soloist approached me.
Turns out they’d had a multi-employee business for many years, but the pandemic brought their client work to a halt. They pivoted to a soloist model and now bring in contract help only when they need it.
They said something like this: “I’ve never had more money in my bank account or felt freer in my life.”
They seemed pleasantly surprised that such a simple pivot could bring them more money, more free time and more joy.
It got me thinking about the top and bottom lines of soloist businesses vs. boutique firms with employees.
We tend to think that the riches come from building a firm that leverages (many) employees.
First off, it is true that a well-positioned boutique firm with the right mix of employees can bottom-line out-earn many soloists (plus you’re building an asset with potentially saleable value down the line).
But…the devil is in the details:
Precious few firms have niched into the tight authority positioning that will deliver a steady flow of leads.
Maintaining the “right” balance of employees to contractors is more art than science (and you’re subject to key employees departing for greener pastures).
You must be willing and able to spend a not insignificant chunk of your time selling and leading/managing employees (including firing the bad fits).
Cash flow is king—you need enough to staff up for big projects and to cover payroll when clients go dark.
Soloists have an easier road: your top line might be smaller (although not always), but you get to keep more of what you earn:
No cash flow diverted to office space, complex network/technology systems and salaries that don’t flex with revenue.
Plenty of attractive options to stash cash for retirement and defer taxes.
If you use contractors, you can tie their pay to the performance of a project so that exceeding budget never happens.
Dramatically reduced risk of lawsuits and far lower ongoing legal fees.
You’ll need a smaller cash cushion to protect you in lean times.
Anecdotal evidence tells me that while we soloists pay ourselves salaries roughly equivalent to our boutique-owning counterparts—our net bottom line is often significantly higher.
For example, soloists earning in the mid-six figures are taking home 50%+ (before taxes) of their top-line in salary and business earnings.
Those with W-2 employees serving clients need to hit twice or sometimes 3X the revenue to make the same dollar amount.
They get sucked into “investments” in growing or don’t trim payroll/expenses fast enough when revenue softens (optimistic and kind-hearted, they often wait too long to reduce fixed costs).
Of course, going solo is no guarantee you’ll create a highly profitable business.
But your odds are definitely better. 😉
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