The Paycheck Gap: Why Your Biggest Client May Pay You the Least

On Friday, October 9th, I had a calibration call with a new client, and she told me about the best August she has ever had. Five big jobs in one month, all for the same client, and she was home for five days of it. The rest of the month she was on site, on the road, and in a hotel room at night building the next job, because the next one started in three days.

She told me this with pride, and she has every right to it. She runs big, complicated projects for some of the biggest companies around, and they hire her because she takes the whole headache off their plate. She is excellent at what she does.

Then I asked about margin.

That one client is 80% of her revenue. The margin on their work was negotiated when she first became their vendor, and it sits at 8%. She and her bookkeeper have started going through her numbers every month, and across the business she should be closer to 15 or 20.

So we pulled up a small job she had just finished, the size of work she has been trying to move away from so she can chase bigger clients. It paid her about 22%.

She ran the math out loud, stopped, and said:

"So I guess I'm sitting higher than I'm thinking. This is where I get confused sometimes."

Read that again. The biggest client in her business, the work that fills her calendar and keeps her away from home for most of a month, is paying her the least. The small work she was planning to leave behind is carrying the margin.

A few minutes earlier she had said something I hear from almost every owner at this level. She can put a project together for a billion-dollar company without blinking, and then she sits down with her own numbers and feels lost. She was hard on herself about it, and she should not be. She is the only person in her business with no one above her telling her it matters, and she has never once been the client.

This is the Paycheck Gap. You have a revenue number you are proud to say in a room and a paycheck number you would not say anywhere, and the space between them is hiding somewhere specific in your business. For her it was hiding inside the account she was proudest of.

You cannot get yourself out of the operation without margin, because margin is what pays the people who are going to run it. I told her that on the call, and I tell every owner at this level the same thing. An 8% job is a job only you can afford to do.

So the Paycheck Gap closes when you look at your business through the four pillars, starting with the money.

I learned this one in my own franchise. In the fall of 2016 we did $303K in a single month out of a small territory, and in the end the business was doing $3.3M a year on 16 of my hours a week, run remotely, in the top 9% of the network by revenue while I worked the least of anyone in it.

When I sold in 2017 it went at the highest multiplier, and the buyer looked at three numbers: revenue, profit and my hours. A business that relies on its owner is a liability. It becomes an asset when the owner is out of the operation, and you cannot get out without the margin to pay the people who replace you.

The Scale Strategy Session is complimentary, and it is one on one with me. In 30 minutes you will walk away with:

• Where your margin is hiding, by client and by type of work
• Whether one client or one kind of work is holding your paycheck hostage
• The first system to build, the one that makes you money

This is your room if your best month this year was also the one you were home the least. If one client is a bigger share of your revenue than you would want a buyer to see. If you are excellent at this for everyone else and you have never once been the client.

Remember to live your one life!
♥ Sailynn...

P.S. My new client is not behind. She built something big enough that its numbers outgrew how she was looking at them. Her homework this week is a time study and one question for her bookkeeper: where are my three biggest leaks? If you would like to ask that question with me, that is what a Scale Strategy Session is for.