When you're just starting out in business, it's a safe bet that you need more clients. But what if you have been up and running for a while, and you're still not making as much money as you would like? You may be in the habit of thinking that attracting new clients is the answer, but this isn't always the case.
There are many reasons why a professional services business might not be earning enough, but they typically fall into four categories: not enough revenue, not enough profit, not enough customers, or not enough time.
Start by looking at your gross revenue -- the total amount your customers pay you over the course of a year. How does it compare to others in the same line of business? Ask some trusted colleagues or check with your professional association for any statistics they may have.
What percentage of your gross revenue remains after you cover cost of sales? This is your gross profit. As a service business, you may have no cost of sales. If, however, you are selling books, tapes or software, or accepting credit cards, your inventory cost and credit card fees need to be deducted from your earnings before making other calculations.
Now deduct your business expenses from your gross profit. What percentage of gross profit remains? Is this a typical percentage for your industry? If you can't gather comparable data from colleagues, your professional association, or a published source like Dun & Bradstreet's "Industry Norms & Key Business Ratios," compare your profit margin (net income divided by gross profit) to a desired goal of 70%.
LOW REVENUE - If your gross revenue seems low for your industry, your profit margin is at least 70%, and you have about as many customers as you can comfortably serve, concentrate on increasing your revenue, rather than trying to improve your profit margin or bring in new customers.
Consider raising your rates, which may mean finding a market that is willing to pay more. Look for customers who will give you higher dollar volume contracts or place larger orders. Think about hiring more administrative help, which would free up more of your time to charge out at professional rates. You should also work to increase your passive income by selling products created by you or others, reselling some of your existing work, or licensing a process you have developed.
LOW PROFITS - If you are spending more than 30% of your gross profit on overhead and marketing, work on improving your profits. Look for ways to cut expenses by reducing your overhead, or focusing on your most profitable line of business.
In addition, if more than 15% of your gross profit is spent on marketing alone (assuming you are not a start-up business), consider cutting back on advertising or mailings, and using more referral-based marketing strategies. Seek out customers who will give you repeat business or long-term contracts.
TOO FEW CUSTOMERS - Low revenue combined with not enough billable work to keep you busy means you really don't have enough customers. If you don't have a marketing plan, it's time to create one. Focus your plan on the most attractive service you have to offer and the most lucrative market, rather than diffusing your energy by marketing several different service lines to more than one type of customer.
If you already have a marketing plan, but it's not paying off, you may need to break into a new market, look for a more appealing way to package your services, or form an alliance with someone who can send a steady stream of business your way.
TOO LITTLE TIME - It's possible that you simply don't have enough time to earn more money. When you are consistently spending over 25 hours per week serving clients, with more potential customers in the pipeline than you can realistically serve, it's time to hire an employee or bring in a junior partner. If you're not ready to take that step, think about subcontracting work to a trusted associate, and keeping a percentage of their billings.
In reading the suggestions above, you may have discovered that you don't have enough information to diagnose your earnings problem. There are six statistics every service business owner should know: revenue, expenses, profit margin, number of customers, average sale amount, and billable time. If you don't have the answers, start tracking these measurements today.
About The Author
C.J. Hayden is the author of Get Clients NOW! Since 1992, C.J. has been teaching business owners and salespeople to make more money with less effort. She is a Master Certified Coach and leads workshops internationally. Read more of her articles at www.getclientsnow.com
Revolutionary ideas have always been the mark of mankind. It's... Read More
As a massage therapist, your income is usually limited by... Read More
What effect are the baby boomers having on the economy... Read More
"Make money for taking surveys"," Cash for your opinion", "Make... Read More
It's a sunny morning and you're sitting in your office.... Read More
Are you getting referrals from you customers? If not, you... Read More
Have you ever heard the saying, "Give and you shall... Read More
If you've got a mailbox, you're no doubt aware of... Read More
Want to learn how to lose a billion dollars?Just follow... Read More
"How to Earn the Right..."Marketing your professional services is a... Read More
With the continued proliferation of the Internet, the meaning of... Read More
As a business owner, you know how valuable being good... Read More
Market research is a critical component of any marketing strategy.... Read More
A business card makes a statement about who you are... Read More
You've had one thousand of the finest, most eye-catching business... Read More
While success with any internet marketing program falls on the... Read More
"There are those who get things done and those who... Read More
There's no such thing as a captive audience--any of us... Read More
As a small business owner, you are grateful for all... Read More
A simple answer to that is: Yes, Marketing Miracles happen!... Read More
Use these powerful yet simple tips from the national best-seller,... Read More
Guerrilla Marketing is using time, energy and imagination to market... Read More
Have you ever left a seminar thinking: "I could have... Read More
If you're a business owner, you probably spend quite a... Read More
In direct mail, the offer is the incentive or reward... Read More
If the promotional items you give out end up in... Read More
There seems to be a never ending argument among marketing... Read More
When a prospect responds to your lead generation sales letter,... Read More
Market research specialists have discovered a new tool which enables... Read More
Famous quotes that keep you thinking.Have you ever listened to... Read More
Over the years as I have attended trade shows, networking... Read More
A step-by-step guide to creating a growth strategy... Read More
The N-word! We all know the value of networking and... Read More
We all know the saying, "Failing to plan (prepare) is... Read More
In today's highly competitive business environment it is critical to... Read More
Having a marketing strategy and marketing approach is very important.... Read More
Research shows that the gay and lesbian market is worth... Read More
Postcards can drive a huge amount of traffic to your... Read More
What?!? Sabotage your own success? Who would do that? Well,... Read More
Who says scientists can't market? Here are 10 easy marketing... Read More
In the past, purchasing ad space was the solution to... Read More
6 Secrets to Stellar Sales PresentationsEvery sale is won or... Read More
Have you ever left a seminar thinking: "I could have... Read More
Simply put the marketing people and the sales people depend... Read More
The Mail Order business is not a business of itself,... Read More
Lots of people get confounded when attempting to exchange links,... Read More
Unless your company has absolutely no competition now or in... Read More
Since the human brain seems to be able to focus... Read More
You want your prospect to make the decision to buy... Read More
A white paper on how companies should analyse customer data... Read More
In direct mail lore, there's a rule stating that you... Read More
Thousands eyes were fixed. Hearts were beating hard against the... Read More
Your customers don't know what they want. And to assume... Read More
After 11 years in sales, I've put together and delivered... Read More
Marketing can be expensive. It doesn't have to be, but... Read More
Universal principals are those "self-evident" truths that have guided brilliant... Read More
Writing an effective print ad, particularly a classified advertisement, requires... Read More
In just one month three California vineyards have introduced new... Read More
My mother used to tell me, tongue in cheek, that... Read More
This list has been compiled as a result of years... Read More
In my view, nearly all government statistics about reasons for... Read More
Expanding your subscriber list, whether it be for your ezine,... Read More
With the continued proliferation of the Internet, the meaning of... Read More
A great way to gain more local sales is to... Read More
"Necessity is the mother of invention!" The first time I... Read More
Direct Mail . . . Newspaper . . . Radio... Read More
Marketing |