Are you concerned about how to increase profits for your consulting business? What am I saying – we entrepreneurs are always concerned about increasing profits! Well, take a seat, grab a journal and prepare yourself. Because we’re about to go over 22 ways you can increase the profit in your business.
Hi entrepreneurs, I’m Vicky Brown. And you’re in the right place if you want to engage your team, boost your business, and grow your leadership muscle.
Alright – we have a lot to get through; and in fact I’ll tell you right up front, we won’t get to all of it in this episode. So today we’ll do half, and get to the back half in next week’s episode.
So, let’s jump right in.
Number one – well, it’s get more clients of course. Come on, that can’t be a surprise. It’s the very first thing that comes to everyone’s mind when they’re thinking about – and fretting over – bringing in more cash for the business.
So, take a look at how you got the clients you already have – and do more of that. Did they come through online marketing – well then, step up those efforts. Did they mostly come from word of mouth (like the majority of my clients); well then formalize that referral program. In fact, I just did an episode on referral programs.
Number two – revisit the dead. No I don’t mean go poking around cemeteries. I mean dead prospects. You know – those ‘almost clients’; the ones that got away. Well, just because you weren’t the right fit with that service offering at that particular time – it doesn’t mean things haven’t changed.
And don’t lock yourself into thinking that the only outcome you’re going for is to sell them on what you tried to sell them on last time. Absolutely not – the goal here is to reconnect; give them something of value; remind them you’re here to help solve their problems – even if they aren’t a paying customer.
And actually that can go a long way in growing your referral program. After all, how stellar are you that even though you didn’t get the gig – you’re still providing value. Believe me – that will definitely make you stand out.
Number three – you’re charging what? Honestly, we small business owners get this wrong most of the time (and yes, I absolutely include myself in this group). We undercharge for our services.; or we’re guilty of number four (the twin sister of undercharging) not reviewing our fees on a regular basis.
Listen, the price of things generally goes up – your rent goes up, the price of your internet service goes up, the salaries for your employees goes up – as time goes on, things just cost more.
But, if you never review where you’ve locked your fees, then you’ll end up paying more for your business expenses, and taking in the same old amount. And that means – less profit. So put a schedule together so you can review what you’re charging and paying out, on a regular basis (I would say at least twice a year).
And while we’re on client fees ..take a look at how you set your prices. First of all, how long ago was it when you did set your pricing? And what was it based on. Are you charging by the hour (i.e. time for money), or is it outcome based or value based, or flat fee. Whatever it is – is it working for you. You might find that the hourly charge isn’t doing you any favors, and a flat fee would make more sense and better reflect the value you’re providing. I can’t tell you – only you will know, but you won’t know if you don’t take a look at it and do an evaluation.
Charge combat pay. I know for a fact that you know this client. The one that’s difficult, the one that has a million demands, and is always requesting something special at the very last minute. The one you have difficulty getting the information you need from, but they insist that you constantly alter, customize and revise what and how you do what you do.
Sure, it’s easy for me to say – TOXIC. And tell you to head for the nearest exit. But I understand that you may be in this relationship for specific reasons – maybe they were referred by a trusted partner; or maybe their profile is helping you in other ways. And yes, I absolutely say, as soon as it’s reasonable you need to get out! But in the meantime – charge them for the aggravation. We have to get out of the mindset that our prices are locked in, but the service is fluid.
Customized solutions call for customized fees. Immediate turn around times mean extra charges for a rush projects.
Now, I bet you’re thinking – but I have the fees in the contract, and besides, they started out nice. How could I know they would be the zombie client. Well you’re right – you wouldn’t know at the very beginning (although sometimes they do show their zombiness a little bit during opening discussions). But most times you may not see anything amiss. That’s why you need an optional honeymoon clause in your agreement. Oh, you may not need to use it in every case, but for clients you don’t’ know, think about it.
So, let’s say your agreement is a 12 month term; why not give them a initial 6 month agreement, and then have it renew for a year starting on month 7. Sure, it means you aren’t guaranteed the business for a full year either, and that can feel less wonderful than you would like. But the upside is, if you have to jettison Frankenstein, you can easily do it at the end of 6 months.
“… We undercharge for our services.; or we’re guilty of the twin sister of undercharging – not reviewing our fees on a regular basis.“
And before you knock it, just try it. We forget that those clients that suck up all our resources, are taking capacity out of the business – capacity that could be used for a more valuable partner.
Now, on the flip side take a hard look at your best clients and figure out how you can offer them even more value. Can you package their services, or upsell them an additional service. Think about it, they’re the very clients you love to work with, and they love working with you. So why not expand that relationship.
Next up (I think we’re at #7) – create a budget.
Having a clear budget allows you to actually see where you’re planning for your money to go, and where it actually is going. A budget, along with a cash flow forecast can give a really valuable overview of what is actually going on with your money.
Once you have that, it’s time to clear out some of the low hanging fruit.
What’s happening with your accounts receivables? Are people paying you on time. Well, let me back up – do you even know if people are paying you on time. If you’re anything like me, in the beginning of my business I was so clueless that I wasn’t properly following up on open invoices. To tell the truth, I shouldn’t have been doing accounting for the business anyway – but if I was going to do it, I should at least have done a good job of it!
There were times I had clients that were 4 months past due! There is absolutely no excuse for that – what, was I opening the Bank of Idomeneo?
You must get, and keep, your accounts receivables house in order. And again – get bookkeeping off your plate and give it to someone who can devote the proper time and attention to the task.
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Are you getting preferred pricing from your vendors? If not, let’s figure out why not, and fix that. Maybe you’re not using them enough; or maybe you just haven’t asked. Do they have some sort of referral fee that you can take advantage of because you’re giving them business? These are the types of questions you should be asking all your vendors. And you should also take a good look at them and figure out where you can double down. After all, the more business you have with a vendor, the more impactful your relationship with them. And that can pay big dividends in the long run, certainly relationship dividends, and sometimes even cash dividends.
I’m going to circle back to your agreement for a moment – there are two other important things to keep in mind. Auto escalation, and 3rd party chargebacks.
Your agreement should outline an automatic fee increase at standard intervals. Maybe it’s 3% per year; or maybe it’s 10% every two years – whatever it is, you need to get it into your agreement. That way you won’t find yourself either 5 years down the road, charging that client the same thing you charged them 5 years ago. Or, facing the hard conversation that you need to raise their rates.
Skip all that headache, and put it in the contract right up front, so there are no surprises. Oh, and once you have it in the contract…track it and actually raise the fee at the appointed time.
And finally, 3rd party chargebacks. Listen, don’t be shy – if you are using 3rd party services or vendors for the client, charge those fees back. Charge for excessive postage, charge for that special software application you use, charge for whatever makes sense for your business. Just be sure to put a clause in the agreement that you’ll be charging those things back.
OK – now sit tight – because next week, we’ll land the plane with the final 11 ways you can increase profits for your business.