To grow a service-based business, you probably follow the standard formula: execute projects brilliantly, win new business, gradually increase fees for new clients. Rinse and repeat. But it’s tough because you continually need more staff and more resources to service your growing number of clients and their larger projects. And this creates a lag between when operating expenses go up and when the additional revenue begins to come in.
All of this makes it hard for a service business to grow profitably. So, what’s the best way to become more profitable? The short answer is to focus on intelligently scaling the business rather than just on bringing in additional revenue and new clients. Follow these six steps for advice that minimises expenditure and maximises income so that you can scale your business profitably.
1. Evaluate Systems and Processes
Review your internal processes, systems and workflows with a view to maximising efficiency. Inefficient processes are those that take your staff too long to execute. Time that they are spending on internal work is time that they are not billable and it’s here that they are costing you money and inhibiting your ability to scale.
Look at any operational inefficiencies you have and determine how you can eliminate them. Improvement may come from just a small simplification or perhaps a complete revision of the workflow. Automating repetitive, low-level tasks is extremely effective because software systems typically have helpful dashboards that show your performance at a glance and provide detailed insight into improvements over time.
Financial factors are central here. Are your invoices being issued promptly – and are they being paid on time? Are you monitoring and managing employee expenses? You should make sure all internal metrics are up to scratch, so don’t forget to measure billable time and evaluate the performance of your sales teams.
With your software systems, check that you have everything up to date and that all settings are optimised. For example, we provide a system health check service for our NetSuite customers that audits their solution and optimises it so that it continues to deliver value for their business. If they are not using it to its full potential, then it is not delivering a good return on their investment.
Tweak anything across the business that gives you a better return for the same resource commitment and it will all add up to substantial efficiency improvements.
2. Standardise Client Projects into Programmes
If you run disparate projects for clients, you might be able to combine them into programmes – which can be standardised and applied repeatedly for new clients.
Not every client will want the same work, of course. And there are always customisations to be made for any project. But if you can streamline the workflows and processes across several projects and wrap them up into a programme, this reduces inefficiencies. You won’t have to start from scratch for each new client, meaning you will eliminate much time and resource.
What might initially be a contract for a simple project can be upsold into a programme that benefits the client across its entire business, rather than solving just one aspect or dealing with a single issue. If you then package this new programme into a saleable service, with defined and marketable benefits, your salesforce can sell it to similar clients, giving you efficiency gains that make you more profitable.
3. Expand Your Consulting Offering
If you’re not already a purely consulting based operation, then introducing or ramping up the consultation part of your business can be a lucrative move.
If you’re a business that implements technology installations, for example, then you are familiar with deploying software for your clients. But the consultation side of things can be a money-spinner for many businesses. If you can advise your clients, then not only will this bring in extra revenue, but it could also lead to new projects and deeper partnerships with your clients. Through adding value, you are able to develop ongoing relationships with clients, rather than simply interacting with them on a transactional basis. For many businesses, adding or expanding consultative services is key to being able to profitably scale their business.
4. Consider Adding a Recurring Revenue Stream
The model has good growth prospects and makes scaling simpler. Even if you only choose one service to repackage in this way, it gives you a certain amount of predictable future revenue. This makes it easier to forecast and plan for your future resource requirements, eliminating unnecessary costs.
5. Relentlessly Cross-sell and Upsell
It’s accepted wisdom that it costs more to acquire a new client that it does to retain an existing one, So, to achieve incremental revenue, you should focus on upselling or cross-selling to your existing client base.
Gaining a greater share of each client’s wallet embeds you more successfully into their operations, producing stronger relationships. If you supply a range of diverse services, and your existing contact isn’t right for all of them, ask for introductions to other departments. They all offer potential new revenue streams for you.
6. Use Your Best Asset Wisely
It’s a false economy to underpay your staff or make them work harder in an effort to minimise costs. In a service-based business your staff really are your product and engaging them in the business is the best way to maximise motivation and productivity.
Staff retention schemes, team-working initiatives and excellent in-house communications are all good places to start. Aim to build engaged teams of people who are invested in your business, its priorities and its ethos.
It’s not enough to measure employee satisfaction, though. You can have dozens of happy staff, but only when they are engaged will they be passionate enough to deliver a superior quality of work and higher levels of customer satisfaction.
The most suitable approach to scaling your business isn’t always about moving into a new market or producing a brand new service. Using these tips, you can scale what you already have – getting bigger and better all the time.
You’ll stem the outflow of cash, increase revenue, simplify and automate your processes, improve your services, boost customer retention levels and build a better team.
If you’d like to scale your service-based business, NetSuite is an affordable, comprehensive business tool that can scale with you. Get in touch today for more information, a demonstration or a free quotation.