The worst vanity metric of them all

My guess is that one of the reasons you started your own business was to make better money than you were making before.

Not the only reason, but one of them.

As fundamental as it is to a business, money can still be quite a trickster.

Because what counts is not how much money you make…

…it’s how much you keep.

Quick story:

I worked for a creative studio years ago that would source suppliers for web, video, print, photography etc, and anyone that provided a service outside of our capabilities would invoice us directly.

We’d add that amount to our invoice with somewhere between a 10-50% markup, depending on the service and amount.

A simplified version looked like this:

• The Photographer would invoice us $10,000
• We’d mark that up by 25% (+$2,500)
• Then invoice the client $12,500
• Pay the photographer their $10,000
• And keep the $2,500

It’s a common agency practice that I carried over to my creative business when I went solo, because why not? Every supplier encouraged it, so I built it into my contracts.

Aside from burning me more than once (stories for another day), it was an administrative NIGHTMARE especially for someone like me who hates admin, accounting, invoicing, maths, and basically anything needing a spreadsheet.

It didn’t last long with me.

Did it feel AMAZING to be getting 4 or 5-figure invoices paid out to me on those months? Geez yep it did.

Did it feel AWESOME to pay the lions share of that to a third-party supplier when the client could have just paid them directly and saved me hours of headache? Yeah… no it didn’t.

I’m sure there are benefits for an agency using this practice… I wouldn’t know, I don’t own an agency.

But one of the major drawbacks that no-one mentions, is that by invoicing on behalf of the supplier, you’ve indirectly made yourself responsible for their work… at least as far as your client is concerned.

You’re stuck in the middle, especially if you’re all handing out 30-60 day invoices.

Listen, the bank account looked so great some days that I actually took screenshots. Screenshots still aren’t legal tender so they didn’t do me much good… and therein lies the message for today.

What I did instead (tip if you deal with third-party suppliers) was to have a conversation with all of my clients to say basically this:

• I’ve switched from the markup model to a management model
• Meaning, if you’d like me to source and liaise with suppliers for you, that will be billed at a flat fee of $X per project
• Each supplier will then invoice you directly for their service

The admin vanished, my bank account was a more accurate reflection of what I earned, third-parties were responsible for their own blunders, and life got a little bit simpler.

It’s not what you make, it’s what you keep.