If we niche it right down, businesses come in two flavours: you either sell products or provide a service. Each has its own challenges but in this post I want to focus on service based businesses and in particular, a topic that many, many business owners face and struggle with on a daily basis.
To provide a service there is a catch, and that catch is that it involves time. The reason that is a problem is because there are only 24 hours or 1,440 minutes or 86,400 seconds in every day. Now if you are reading this and agreeing “hear hear” that’s probably because you’re working your guts out doing massive hours or maybe 7 days a week on the tools. This is something I like to call the “vicious time cycle” and I see so many businesses stuck here.
Another word for the amount of time we have available is “capacity”. Business owners commonly let this get out of control and that is why they are working long hours, back to back days and taking no holidays or spending no time with their family. This leads to burn out, poor health and failed relationships with loved ones. In many cases the business owners are working so hard and not even making much profit which begs the question, “is it all really worth it?”
On the flip side, I’ve worked with business owners who are working 24/7 and are making truck loads of cash and they also are unhappy because they have no time.
In a recent blog I discussed the number 1 goal for every business should be to increase revenue until you crack $1m. You can read it here. In many cases, a small business owner will run out of capacity (read: time) before they reach this level of revenue, so what gives? Well two things:
- Put your prices up: think of it this way, if you double your prices you can afford to lose half your clients but at the same time, you are getting 50% of your capacity back and you are still making the same revenue. Pretty sweet. Pricing is a whole series of blogs in itself but its also a concept a lot of business owner get wrong. The part they get wrong is not charging enough, but let’s save that can of worms for another day.
- Get more time: this can be gained by building a virtual or physical team. Either way, by bringing another team member on board you now have the ability to fill their capacity. Increasing your fees should be the first step because nurturing and leading a team is hard work and should not be underestimated. Building a team is key to growing an amazing business, but can easily be your downfall. Many businesses simply get busy, hire someone, get busier, hire someone, get busier etc. you see where I’m going but that fact is they very rarely make any real profits because any gains get eaten up in occupancy and employee expenses. Many times when I take on a new CFO client they’ll say something like “I made more money when it was just me!” And based on how they have grown their business, they’re right, but they have two options: scale back down to a sole practitioner (and forgo the luxury of having team members to do the ground work) or make a few tweaks in the business with your VCFO, usually around pricing and systems and financial management and you can have your team and make an honest income.
I recently heard the term, pruning the rose bush by James Schramko, a marketing and business expert whose podcast I love. You can find his website here. He was using the phrase in a different context but the analogy works great. If you know anything about tending roses, you’ll know that come winter (in Australia), you need to harshly prune them back to basically a few twigs if you want amazing flowers come spring. I’m showing my green thumb here but my point is sometimes we need to make tough decisions in our business, maybe even take a step back for it to flourish. It seems that many business owners are reluctant to change their prices, but who are they to dictate what their clients will pay. The market place should always tell you what they want to pay so if you quote your fee and the client says YES straight away, it wasn’t high enough.
You see sometimes we get stuck in a rut, be that making poor financial returns or working crazy hours. The easy thing to do is stay there and whinge about it, but that doesn’t fix anything and only makes the habit harder to break. If you’re in this boat, I want you to first look at your prices, then bump them up. This is where your VCFO should be guiding you with and monitoring the results.