Happy Firm-a-versary to me!
I need to send myself an anniversary card. May 1, 2022 was the day I officially went off on my own professionally and started Flat Fee Consulting. I spent 14 years playing Goldilocks, working for firms that were either too big, too small, or “just right”. After one year of calling the shots on my own, I’ve been reflecting on the biggest changes it’s had on my life.
NO TIME ENTRY
When I decided to go my own way, I knew I wanted to ditch time entry and leave the billable hour behind. It’s one of the best decisions I’ve made, and I can’t imagine going back.
At a high level, I’ve saved myself about 65 hours over the past year (52 weeks x 5 weekdays x 15 minutes per day = 65 hours). It may only be 15 minutes per day, but 65 hours is 65 hours.
The bigger impact on ditching time entry though is that my billing isn’t dependent on my billable hours. I charge clients a Flat Fee, and typically charge half up front and half at the completion of the job. From a cash flow perspective, it’s a huge benefit:
- Billable hour scenario – I get a new client on day 1 of the month. After day 30, I count up my hours, then send a bill. The client gets the bill, then pays me in 30-60 days. I get my first dollar after 60-90 days. While I’m waiting to get payment on my first monthly invoice, I work for another month and send another bill. I now have to track collections on two invoices.
- Flat Fee Scenario – I get a new client on day 1 of the month. The client pays me half my fee on day 1. If I finish the job on day 30, then I also bill the client for the rest of the agreed fee on day 30. The client is ecstatic that I wrapped up the job in 1 month.
So from a cash flow perspective, I get paid in part up front. And from an administrative perspective, I don’t have to track my time, my billing process is simplified, and my collections process is a lot easier. In addition to the 65 hours per year I save on time entry, I’m saving multiple hours per month on billing and administrative processes.
That’s a lot of time saved as a result of not tracking time. Ironic isn’t it?
BIG BROTHER ISN’T WATCHING
Work from home made it a lot easier to do a load of laundry during the middle of a weekday, which left for more free time on the weekends. However, those working from home while working for other firms are still keeping an eye on their Teams status and jiggling their mouse to continue to appear busy.
While being independent, I’ve had many days where I’ve finished all my crucial tasks for the day before lunch, or taken a guilt-free hour-long break during the middle of the day to go on a walk or read a book. Also, I don’t have to get to my desk by 8am, and as a result I don’t have to cram my gym-time in at 5am.
When I was working for a firm, I used to wake up a 5am just to have 1-2 hours to work on some new card designs before starting my “normal work day”. Now I have a weekly block of time I dedicate to new product development within my “normal working hours”. People think when you’re an entrepreneur that you must always be busy while working all hours of the day. However, I’ve come to realize that I’ve been able to make much more efficient use of my “9 to 5” time.
LESS STRESS, MORE SLEEP
Entrepreneurship is STRESSFUL…until you realize that the checks will still come in. Sure, it’s nice knowing that a deposit will always be hitting your account on the 1st and the 15th, but it’s even nicer knowing that as an entrepreneur your deposits are limitless.
The larger the firm, the harder it is to be compensated properly for your efforts. You could be the hardest worker and best employee in the world, but if that message doesn’t move up the chain to the right people, then you may be stuck with the same raise and bonus as some of your more underperforming peers.
As a solo practitioner, I have one primary KPI – deposits. And who gets the sole benefit of those deposits? Me. I’m not counting my hours, but if I have a month full of 80 hours work weeks, I’m not worried that my efforts aren’t going to be recognized. In fact, I’m ecstatic at being that busy, because that means I may be covering 6 months of pay for one month of effort. And I can sleep comfortably every night knowing I’m in full control of my financial destiny.
JUST DO IT!
Interested in starting your own professional venture? It’s easy for me now to say “JUST DO IT!”, but there was a lot of planning and preparation that allowed me to take the leap of faith more easily.
First off, just like a good accountant should, I had a clear understanding of our financial needs and communicated with my wife regularly about our finances. Two big financial decisions my wife and I had made a couple years in advance:
- We decided to pay off our mortgage early. Sure, with today’s rising interest rates, it may seem smart to keep a 3% mortgage for as long as possible. However, I was more concerned with having less financial pressure. With our mortgage paid off, we had to bring in $2,500 less per month versus if we still had a mortgage (no matter the rate).
- We decided to forego “30 years from now” money for “today money”. I stopped contributing to my 401K and instead applied that extra ~$19K to my mortgage. We used that money to make extra payments to our mortgage, then once the mortgage was paid off, we were able to fill our savings. Sure, that money would be worth more in 30 years if I had invested it in my 401K, but for the short-term it covered a few months of operating expenses as I went independent.
Talk to your spouse, be open and honest about your financials, and it’ll make things much easier. If you just say “I want to quit”, that’s terrifying! But if you can say the following it’s much easier:
“We need to make $A thousand per month after tax in order to maintain our status quo, and you make $B thousand per month, then I just need to make $C thousand per month for us to keep living our current lifestyle. I think I’m going to make much more than that, but in the meantime we have $D thousand in savings, which will cover my portion of the finances for E months.”
It’s all just simple accounting. And if you’re an accountant, your years of accounting has prepared you for this situation. So get your spreadsheet ready, and talk to your spouse!
So if you find yourself in this situation, you’re not alone! Since I went off on my own, I’ve talked to numerous individuals who have also expressed interest in leaving their current jobs to start their own practices. If you’re interested in chatting more about making the leap, feel free to contact me on LinkedIn or email me at firstname.lastname@example.org. Until then, every time you post your time entry, just remember there is an alternative! (and I don’t mean leaving for an industry job!)