Business models for service providers and tips for choosing the right model for you
Service experts like coaches and consultants rarely if ever give thought to one of the most important decisions they’ll make as they start their business as a solo practitioner.
Their business model.
Our thoughts are always on the service – what we’re going to do…the mission we’re on….the passion we have…the problem we want to solve – not with the “how we’ll make money” part.
And this one oversight can easily set us up for struggle and cause us to create glorified jobs that we actually hate.
Well we don’t really hate the work – we love what we do. It’s the whole getting clients thing we hate.
But the business model you adopt directly impacts the frameworks – the other models – that support how you’re going to generate revenue, deliver the work to the world, and scale the business to maximize your profitability.
Marketing – how you’ll build a brand, position yourself, and attract potential clients.
Sales – how you’ll invite prospective clients to take action and say yes to working with you once they recognize you’re the best solution provider for them.
Revenue – This is different from sales and relates to your offerings – what you’ll specifically offer to clients. It asks you to consider what lines of revenue you’ll offer – coaching, consulting, products, etc.
Pricing – This framework is how you decide on the price / value of your offerings and how you structure the price. You may offer flat, all-inclusive pricing. You may offer payment plans. Maybe you offer tiered services.
Product Creation – Most coaches and consultants plan on offering books, courses, audio recordings, and other things they can sell as both lead generating tools and as separate lines of revenue. Decisions have to be made about how to create the products, what you’ll create, etc.
I’ve found that when someone is unhappy with their business, at the core there’s a business model or framework that doesn’t fit them or their personality.
You’d be surprised at the number of business models out there and while the best one for you is likely to be a hybrid that combines elements from two or more models.
I’m going to focus on the primary business models a coach, consultant, or freelancer may choose. I’ll also talk a little about pro’s and cons with each model, and help you think through which one to pick.
Keep in mind, you won’t really know which one works for you until you try it out. The goal is to make the best decision for you knowing what you know about yourself, your offerings, and your targeted client segments.
In a future post, I’ll explain the supporting sub-models or what I refer to as frameworks. They support the achievement of the overall business model. These frameworks are tactical in nature but support the overall business model.
Basic Overview of Business Models
Retail – This involves selling products / services on a pay as you go / flat price strategy. Plumbers do this. Consultants or coaches can do this with courses, books, “pick my brain” sessions, or when you have packaged offerings that are clearly branded and targeted. But if you’re looking to start a coaching or consulting practice this is not the best model for you to follow.
I think it’s better to create additional lines of revenue as part of your revenue framework or consider a retail element as part of your pricing framework.
Expert Model – This is the essence of what coaches, consultants, and other skilled professionals are doing. We sell our knowledge, skills, abilities (otherwise referred to as KSAs). Everyone from doctors to lawyers to coaches and speakers follows some sort of variation on the Expert business model.
For example, an attorney model typically involves a free consultation where the attorney (or expert) listens to the problem and makes a decision whether to help the potential client or not. There’s a retainer to get started and retainer payments continue until the project is over.
Don’t confuse this with a Subscription Model which is explained below.
A doctor’s model is slightly different.
The patient — the person with the problem — comes to the doctor with the expectation the doctor is going to help. Sometimes the doctor has to refer the person to another specialist but the doctor still gets paid for the advice and treatment provided.
Instructor / info-product model. This is a common expert model where someone produces courses, books, or packaged programs and sells them on their own website or platform (like Clickbank, Teachable, or somewhere else).
Author / Expert model. In this variation of the expert business model, the person may use books as positioning and pre-selling tools to build their list of interested buyers who they can then nurture to sell deeper, more intimate solutions (like coaching, consulting, etc.). So this model is more of a marketing framework than a true business model.
Coach / expert. This is a person whose primary business model is built on coaching. Coaches may offer packages ranging from a one-off session to high-end private packages or some form of group work.
Consultants differ from coaches in terms of style and focus. Some consultants also coach and some coaches also consult. Some are very clear about the difference. (I’m more of a consultant than a coach but people tend to refer to me as a coach because it’s just easier to get your head around).
The Consultant Model. Pure consultants are paid for their Knowledge, Skills, and Abilities (KSAs) like other experts. They may work on retainer or other structured payment plan. There’s usually a quoting process as each project may be slightly different. And some consultants are paid for the results they bring (like a specific percentage of the increase in sales they deliver).
Agency / Hollywood model – In this model, you provide a broad range of services and likely call on other experts to support you in the delivery of the finished product or service. An example is the website developer who may bring in a copywriter, an SEO specialist (if the copywriter can’t do it), a branding specialist to create the color palette and visual identity if that’s needed, and maybe a coder to help with any special needs the site owner has.
Freelance model – This model tends to be project or scope-of-work based and the structure could be similar to a consultant model where you may need to put in a quote on the project. You may be paid in any number of structures including starting with a retainer with remaining payments based on deliverables. Some freelancers use very creative payment frameworks / structures including being paid for results. This is very common in the area of direct response marketing consulting and copywriting.
You hear a lot of knocking of freelance models.
Gurus talk about the “mistake” of using a business model that requires too much of your time or a “trading for dollars” model.
I know plenty of people who follow a freelance model who have very successful, profitable businesses, and who enjoy nice lives.
Don’t let someone else make you feel your business model is wrong. That’s a conclusion you have to come to on your own.
Speaker model — Lots of people use speaking as a positioning and marketing strategy. To use this as a business model means speaking is your primary activity. Gurus who use this model include people like Jack Canfield and James Malinchak. It’s their primary source of revenue. They maximize their earning potential by selling products in the back of the room and they may also offer some type of coaching or training as an additional line of revenue.
Subscription model – You’re familiar with these in your daily life. You pay a flat fee on a recurring basis (weekly, monthly, or annually) and receive a set of products or services / benefits. Your gym is one example of a subscription model. This model is being adopted by other experts (even physicians) because of the consistent revenue it offers. The key is to provide high value during the membership period so when the bill comes the person doesn’t cancel because they don’t see value on a recurring basis.
Franchise / certification model – You can buy (or create) a system to provide goods or services. The franchisor (you) receives royalties from each franchisee (those who buy your system). The franchisor usually has some way to receive revenue through franchisee payments for other things like marketing materials, advertising, logo’d supplies, etc. The amount of support the franchisee receives from the franchisor or the certificatory agency / business varies.
Be very careful about certifications and people who promise you they have a blueprint that will bring you success. No one can guarantee that.
Also, while certifications can be useful in positioning you as educated and trained in a methodology, sometimes it’s just you getting caught up in believing you’re not enough as you are.
Hybrid model — Hybrid models are much more common today as businesses have evolved and as solo professionals and entrepreneurs embrace a “multiple streams of revenue” mindset. Hybrid models typically have a core model that is then built around. For example, the speaker who sells recordings and packaged training is using part of a Retail model. And if they then offer coaching or training they’re using part of a Coaching model. You can also customize your Frameworks so they fit you and your vision and goals.
When I first went out on my own, I followed a consulting business model and I hated it.
A consulting model typically comes with the expectation that you’re going to submit a proposal (which will take you hours to complete if not days). You then submit the proposal, wait for what feels like forever, make a presentation, and then deal with pushback on your price.
Did I mention I hated it? It’s why I have my own hybrid model built around a marketing framework I call pre-selling.
There were two reasons I hated (and still hate) the consulting model.
I wasn’t good at the whole negotiating thing and was riddled with self-doubt that made me question if I was good enough to do the work or if I deserved the rates I charged.
Actually, you should read them anyway.
If Oren Klaff comes across too strong for you just water down a bit of his investment banker swagger. Definitely use his structure and processes because they really work to position you as the expert and trusted solution provider you want to be seen as, rather than someone who’s desperate and will cut their prices or worse – work for free.
Pia Silva’s approach to positioning your offers is super smart and perfect no matter what variation of the expert business model you follow.
All models – including hybrid variations on those mentioned above – require you to build a strong brand that positions and presells you as the sought after expert you are and command excellent rates you deserve.
If you’re unhappy with how things are going with your consulting or coaching practice or you’re busy plotting your escape from corporate life and thinking about starting a coaching or consulting practice, be sure to think long and hard about the structure of your business model and the frameworks that will support it.
It means the difference between building something you love because it leverages your gifts and creating something you hate and struggle to be successful at because it doesn’t fully leverage your strengths.
Is your business model working or is there a problem with one of your frameworks?