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Why turning your knowledge into an asset as opposed to time-based billing is critical – or you will face extinction ultimately!
What's the problem?
One of the key challenges that all NEDs and Advisors face is "the natural limitations of time based fees". Put simply, your annual income has "time" as the primary rate-limiting step as opposed to a Knowledge Asset with potentially an in perpetuity, increasing yield.
Let me illustrate the problem:
- There were 261 working days in 2019
- Assume you have holidays, sick days and business development time of 61 days pa. That leaves 200 billable days
- Assume that you manage to achieve 50% billable time, i.e. 100 days; and that your blended rate as a NED/Advisor is £850 pd
- Therefore, your revenue for the year would be £85k
- By the time you have allowed for expenses, Corporation Tax and reserves, your Net Personal Income would be circa £34k pa, or £2,800 pm
There are clearly things you can do to increase revenue, i.e. increase your day-rate, increase your billable days, charge some jobs fixed rate, etc. But ultimately, even if you were in the top 20% of NEDs/Advisors, you would max-out at circa £200k pa of revenue. This equates to circa £80k pa or £6.5k pm of Net Personal Income.
If you are a "company of one" and over 50, it's a great life-style – in the short term. However, the day you stop billing is the day you stop earning – and you are likely to live into your 80s. A terrifying statistic from a recent pension survey is that 59% of the Baby Boomer generation (i.e. 55 to 75 years old) will face a pension saving's shortfall of >£200,000.
So, what happens when you stop billing and your pension won't cover your minimum/desired living expenses?
In the last 12 months, this question has been firmly on my mind – and I have done something about it. There is no guarantee that it will work, however, without this strategy, I would definitely be facing a bleak, long-term future.
The strategy I recommend is simple in concept, but less straight-forward to execute:
The solution for NEDs/Advisors
Package your knowledge/experience into assets, i.e. online courses and workshops to complement your time-based-revenue model.
Although not a new concept (online courses started back in the 1970s), new SaaS technology platforms have opened up the market dramatically. Platforms like Podia have democratised turning knowledge into long term sustainable income. An example of my online courses can be found here.
If you do decide to embark on this journey, there's a lot of new skills and tools to learn (e.g. finding your niche, creating your course, digital marketing, etc) – but I believe the commitment is definitely worth it.
I believe strongly that the development needs of today's entrepreneurs are very different to those of the recent past. They want access to knowledge/experience in ways (and times) that suit them. Traditional NEDs/Advisors want to predominantly deliver work face-to-face and charge by the day. The new world of entrepreneurs want a blended, multi-format, multi-channel model from Advisors.